In Canada, when calculating your monthly payments and mortgages, you have to consider various regulations, taxes and fees. However, some of these factors vary, depending on the province in which you want to purchase your home. Also, the mortgage brokers and lenders charge different interest rates depending on the province. In Ontario, for instance, the buyer will bear the following:
- Ontario mortgage rates
- Pay the PST on CMHC insurance
- The Ontario land transfer taxes.
If you want to find the best mortgage deals in Ontario, you have to consider the terms and conditions. You have to know the difference between various types of mortgages: closed or open, fixed or variable and methods of prepayments.
Closed mortgages have lower interest rates and most people opt for this. However, the amount in which you can prepay is restricted. You will incur interest penalties if you overpay. On the other hand, in an open mortgage you can pay as much prepayment principal as you can in a year. You can do this if you are anticipating a large sum of money in the near future.
Fixed mortgages are the most preferred mode of financing, because most customers have a fixed budget. It has a set interest rate that stays constant during the mortgage term. Variable mortgages have a lower interest rate but fluctuate during the mortgage term, because they are tied to the market rates.
In Ontario, to purchase a home, you are required to pay a down payment of 5% minimum. You should note that there is a maximum price restriction. To obtain a mortgage, you are required to produce a proof of your income, have a good credit rating, a verifiable down payment and an online approval application. You are required to meet other costs such as legal fees, survey certificates and appraisal fees.
For the down payment, you are allowed to pay using either, your accumulated savings, a gift from your immediate family, proceeds from selling of previous home, or your registered retirement savings plan. The retirement savings plan, is not taxable if paid within the designated period of time.
In Ontario, mortgage brokers guide you on the recent mortgage deals in the market, information about home purchases, lenders and mortgage solutions. To qualify as a mortgage broker, you need to be licensed by the Financial Services Commission of Ontario (FSCO) and designated by the Canadian Association of Accredited Mortgage Professionals (CAAMP). You should be a Canadian resident above 18 years and meet a certain education level.
The lowest mortgage interest rate in Ontario is 2.15% for a period of 5 years for closed variable, and the highest rate is 7.25% for fixed open mortgage, payable for one year. For the repayment of the mortgage, you can choose to increase your monthly payments, which is based on your current payment to decrease your amortization period, or you can pay in lump sum, which is based on your initial capital. The lenders set out the terms and conditions for the repayments.
Acquiring a home is one of the major accomplishments in life. However, before you settle for a mortgage, you have to evaluate different factors like, how the mortgage will affect your cash flow, whether you want varied or fixed, open or closed plan, whether the mortgage is portable and the amortization period.