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 Types of Mortgages A conventional mortgage requires a minimum down payment of 25% and has a total amortization period over which the mortgage amount is to be repaid. Typically, the amortization period ranges from 15-25 years, but recently longer periods up to 40 years are being offered. Longer amortization periods mean smaller monthly payments, but the total cost of borrowing increases substantially. To see how different amortization periods and frequency of payments changes the cost of borrowing, check out the mortgage calculator using the link below. The amortization period can easily be confused with the term of the mortgage but they are very different. The mortgage term indicates the length of time the interest rate is applied. Terms range between 6 months to 10 years. When the term is over, the mortgage is renewed and a new interest rate is applied. This process continues until the mortgage is paid off. A high-ratio mortgage is one where little or no-down payment is made. On top of regular payments the borrower must also pay a mortgage premium, based on the amount of the loan. Some financial institutions also require borrowers to include a portion of their property taxes in their regular mortgage payment. Under both types of mortgages there are various products which give the borrower options in terms of pre-payments, portability and rate variability. Over the past couple of years a new mortgage product has hit the market – the umbrella or wrap-around mortgage. This product means that there is one document that covers any mortgage on the property. So for example if you have an umbrella mortgage of $350,000 but have paid off $75,000 – that amount is made available to you in an equity line of credit. Be careful in this situation because if you are not diligent in paying off your equity line you can end up never owning your home. In some products you can split your mortgage up into more than one type; so you can have a portion of your mortgage in a 5 year term, some in variable and the remaining in a 3 year. No matter what type of mortgage you are interested in – it pays to do your homework and talk to your financial advisor. Your mortgage is the biggest debt you will likely ever incur and it is important that you make the best choice for your financial health. Useful links Mortgage Calculator Homeowners Property Insurance Insurance Bureau of Canada Homeowners Title Insurance
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