1. What is a mortgage? A mortgage is a loan used to purchase real estate, where the property serves as collateral. Borrowers must repay the loan over a set term while paying interest.
2. What types of mortgages are available in Canada?
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- Fixed-rate mortgages: Interest rate remains the same for the entire term.
- Variable-rate mortgages: Interest rate can fluctuate based on market conditions.
- Open and closed mortgages: Open mortgages allow for extra payments or early repayment without penalties, while closed mortgages typically have restrictions.
3. What is the typical mortgage term in Canada? Most mortgages have a term of 5 years, although terms can range from 1 to 10 years, with longer amortization periods.
4. What is the minimum down payment required?
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- For homes under $500,000, the minimum down payment is 5%.
- For homes between $500,000 and $999,999, the minimum down payment is 5% on the first $500,000 and 10% on the portion above that.
- For homes over $1 million, a minimum down payment of 20% is required.
5. What is mortgage default insurance? Required for down payments of less than 20%, mortgage default insurance protects lenders in case borrowers default on their loans. It can be added to monthly payments.
6. How can I improve my chances of getting approved for a mortgage?
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- Maintain a good credit score.
- Save for a larger down payment.
- Reduce existing debts.
- Provide proof of stable income and employment.
If you have more specific questions or need clarification on any topics, feel free to ask!