Mortgage Terms Refresher
If your down payment is greater than 20% of the purchase price or valuation of the property, you may qualify for a conventional mortgage. This means that you would not need to pay for mortgage default insurance.
High Ratio Mortgage
If you downpayment is less than 20% of the purchase price or valuation of the property, your mortgage must be insured against payment default by a mortgage insurer, such as the Canada Mortgage and Housing Corporation (CMHC) or Genworth Canada. The premium rates for the high ratio mortgage insurance can go from 0.60% to 3.60% based on the the Loan to Value ratio for the mortgage.
An open mortgage allows you to do prepayment at any time, it gives you flexibility to pay any amount towards your mortgage without having to pay any prepayment compensation or penalty for doing so.
This type of mortgage requires you to pay set payments at set times and pay prepayment compensation if you want to pay more, renegotiate, refinance or transfer your mortgage before the end of your agreed term.
Terms of Mortgage
This generally refers to the length of your current mortgage agreement with the financial institution, it generally goes from 6 months to 10 years. When the term expires, you can pay the remaining balance, or a renewal of the mortgage can be offered by the bank at the current prevailing rates or you can negotiate with another bank and continue the mortgage.
Mortgage Amortization Period
It is the length of the time it takes to pay your mortgage, assuming the same interest rate and payment amount. Common period is 25 years but could be different based on the agreement done with financial institution. Shortening the Amortization Period helps in reducing the overall cost of borrowing but would in turn increase your periodic payment amounts.