Conventional and High Ratio Mortgages

To qualify for a conventional mortgage, you require a 25% down payment of the purchase price, with the mortgage not exceeding 75% of the appraised value.

 

If your down payment is less than 25%, you can qualify for a high-ratio mortgage. This type of mortgage requires loan insurance, which can cost an additional 0.5% to 3.75% of the mortgage amount.

 

 

Second Mortgage

If you cannot add to your existing mortgage, you may consider a second mortgage. Each mortgage uses your home as security and gives the mortgagee the right to take your home if you default on your loan. The first mortgagee gets paid first in cases of default and has the best chance of recovering all of its money. Therefore second, or subsequent, mortgages usually come with a higher rate of interest.

 

 

Mortgage Features

Every lending institution is different, and each will have its customizable mortgage options. When you're shopping for a lender consider the following features:

 

 

Prepayment

This is a wonderful option if you receive regular bonuses or if your income fluctuates throughout the year. With a prepayment privilege, you have the right to make payments toward the principal portion of your mortgage over and above the monthly payments. A mortgage with a prepayment option is closed. An open mortgage means you can pay the entire principal sum at any time.

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Portability

If you still have time remaining on the mortgage loan you negotiated, portability is one option you'll want to discuss with your lender. It means transferring the balance of your current mortgage at the existing rates and with the existing terms and conditions to your new home.

 

 

Assumability

Let's say that the seller has negotiated an excellent mortgage. With an assumable mortgage, you, the purchaser, can assume the mortgage obligations of the seller. This is an excellent feature, especially if the terms are more favourable than the existing market conditions would allow.

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Expandability

If you need additional funds down the road, will your mortgage terms allow you to increase the principal amount? Usually, your new rate will be blended between the initial mortgage and prevailing rates. It's a great option to discuss with your lender if you foresee significant expenses in your future, like renovation or education costs.