Mortgages 101
How to choose a mortgage type.
New to mortgages? We break down the basics to help you understand how mortgages work and what choices you’ll need to make. For personalized advice on choosing the best mortgage for you, meet with a mortgage specialist or find one in our directory.
What makes a mortgage?
There are three key components to every mortgage:
- Term
A mortgage term is the length of time covered by your mortgage agreement, which can be anywhere from 6 months to 10 years. Terms can be fixed, closed or open. - Rate
Rates can be fixed or variable. A fixed rate stays the same over your mortgage term, while a variable rate may fluctuate. Your rate will determine your mortgage payment. - Amortization
Amortization is the length of time you can take to pay your mortgage in full, usually 25 to 30 years. Depending on the duration you choose, your amortization may consist of multiple terms.
Term options.
Mortgage terms refer to the length of time covered by your mortgage agreement. With a shorter term, your monthly payments will be higher.
Fixed term
Purchase price: No maximum
Term: 6 months to 5 years, 7 years, or 10 years
Prepayment privileges: Prepay up to 20% of original balance once per mortgage year with no prepayment fee
Open term
Purchase price: No maximum
Term: 6 months to 3 years, or 5 years
Prepayment privileges: Can be made anytime with no prepayment fee
Rate options.
Your mortgage rate will determine your payment.
Fixed rate
Interest: Stays the same for the entire term of your mortgage, even as the prime rate goes up or down.
Term: Open, fixed or closed. Term lengths vary depending on type.
Variable rate
Interest: Can go up or down over the course of the term. With our variable interest rate (called Homeprime), your payment stays the same, but the amount paid towards your principle could change. We recommend updating your payment to reflect rate changes to keep amortization on track.
Term: Open or fixed for 5 years
Amortization options.
The amortization period is the length of time you can take to pay your mortgage in full.
Up to 25 years
Maximum amortization for high-ratio mortgages (where your down payment is less than 20% of your property value)
Up to 30 years
Maximum amortization for conventional mortgages (where your down payment is at least 20% of your property value)
Explore the products.
Insured mortgage
For those with less than 20% down payment.
Fixed-term
Count on making the same payment your entire term.
Fixed-term
If you’re comfortable with a fluctuating rate, with the option to convert to a fixed rate later.
Open-term
Best for buyers who want a mortgage for up to 95% of the value of their home.
Open-term
When you plan to pay off your mortgage very quickly with a lump sum.
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