A Canadian mortgage is one of the largest financial commitments most people will ever make. Understanding these basics before you shop for a home can save you tens of thousands of dollars.
Fixed vs Variable Rate Mortgage
| Type | Rate Stability | Risk | Best When |
| Fixed Rate | Locked for term (1–5 yrs) | Low — predictable payments | Rates expected to rise, you want certainty |
| Variable Rate | Moves with prime rate | Higher — payments can change | Rates expected to fall, comfortable with variability |
Key Mortgage Terms
- Amortization: Total length of the mortgage (typically 25 years in Canada; up to 30 years with 20%+ down)
- Term: The length of your current rate agreement (1–5 years). You renew at the end of each term.
- Stress Test: Qualification at higher rate (contract rate + 2% or 5.25%, whichever is greater)
- CMHC Insurance: Required if down payment is under 20% — costs 2.8–4% of mortgage amount
- Prepayment Privileges: Most mortgages allow 10–20% lump sum payments annually without penalty
The Down Payment Math
| Home Price | Minimum Down | CMHC Insurance | Insured? |
| Under $500K | 5% | 4% of mortgage | Yes |
| $500K–$999K | 5% on first $500K + 10% on remainder | Varies | Yes |
| $1M+ | 20% minimum | None required | No — conventional mortgage |
Getting Pre-Approved
Pre-approval locks in your rate for 90–120 days and tells you exactly what you can afford. Get pre-approved before house hunting — it strengthens your offer and prevents wasted time viewing homes outside your range.
- Required documents: T4s, NOA, bank statements, employment letter, ID
- Lenders to compare: Big 6 banks + credit unions + mortgage brokers (brokers access 50+ lenders)
| Disclaimer: This article is for educational purposes only and does not constitute financial advice. All investments carry risk. Please consult a qualified financial advisor before making investment decisions. |
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