Buying a home in Ontario is a big step, and with over 450,000 homes projected to be sold across Canada this year, you are definitely not alone in your search for the right fit.
With so many mortgage loans out there, though, how do you know which one is right for you? This guide explains the main types of mortgages in Canada. We will also discuss your mortgage options to help you feel more confident about your next move.
Why Knowing That Your Mortgage Options Matters
Choosing the wrong mortgage can cost you thousands over time. Ontario home buyers face a maze of mortgage types in Canada. For example, a 0.5% mortgage interest difference on a $500K mortgage means $150+/month in savings (or costs).
If you are a first-time buyer or renewing, an understanding of home loan types will help you dodge penalties and leverage equity. You also stand the chance to snag lower mortgage interest rates.
Your mortgage options aren’t just loans; they are also long-term financial tools.
Main Types of Mortgages in Canada
Below are the major mortgages in Canada:
- Fixed-rate mortgages lock in your mortgage interest rate for the entire term, so your payments stay predictable even if market rates rise.
- Variable-rate mortgages have rates that move with the Bank of Canada’s policy changes. These types of mortgages typically offer lower initial rates than fixed-rate options. However, they can also switch to fluctuating or static payments, depending on shifting principal/mortgage interest splits.
- Blended mortgages combine your current interest rate with today’s lower rate, splitting the difference to give you a new, middle-ground rate. They are ideal if the mortgage interest rate drops mid-term, enabling you to avoid breaking your mortgage while still lowering costs.
Mortgage Types by Down Payment
- High-ratio mortgage types in Canada (insured) are for buyers with less than a 20% down payment. You will pay mortgage insurance (2.8% to 4% of your loan), but these home loan types have lower interest rates and are easier to qualify for with good credit.
- Conventional mortgage types in Canada (uninsured) require 20% or more down, so there are no insurance costs. However, you will need stronger savings. While conventional home loan types may have slightly higher interest rates, they save you thousands upfront.
Special Mortgage Options
Not all mortgage loans work the same way. Canadian home loan types include niche options for specific needs. Here is a breakdown of lesser-known mortgages in Canada:
- Open mortgages: Pay off anytime (higher mortgage interest rates).
- Closed mortgages: Lower mortgage interest rates, but penalties for early payoff.
- HELOCs: Borrow against home equity (No monthly payments).
- Reverse mortgages: Seniors can access equity (no monthly payments).
- Second mortgages: Extra long on your home (higher home loan interest rates).
- Halal mortgages: Interest-free (profit-sharing models).
- Vendor take-back: The seller acts as the lender.
How a Mortgage Broker Helps You Find the Right Fit
Beyond doubt, choosing the right mortgage loans can be tough. However, a mortgage broker makes the process much easier.
Similar to a tourist guide, a mortgage broker explains the housing market and connects you with many lenders. This gives you access to a long list of mortgage loans and rate types you might not find on your own.
If you are buying, renewing, or refinancing, Northwood Mortgage is your optimal choice. We are one of the leading mortgage brokers in Ontario, with strong lender connections and competitive mortgage rates.
We help first-time buyers secure the best mortgage loans, provide renewal options, refinancing, and even offer alternative investment options for experienced investors.
We are your best guide for mortgage loans! Call Northwood Mortgage today at 888-495-4825 or contact us online to get expert advice and more mortgage options.
