Mortgages 101.

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:

1

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.

2

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.

3

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.

Part 1

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

Best if you’d like the peace of mind that comes with a fixed rate in a fluctuating market.

Purchase price: No maximum

Term: 6 months to 5 years, 7 years, or 10 years

Closed term

Best if you’re looking for competitive rates and don’t need to use your home equity.

Purchase price: Less than $1 million

Term: 5 years

Open term

Best if you think you’ll be paying off your mortgage in full quickly.

Purchase price: No maximum

Term: 6 months to 3 years, or 5 years

For example

If you expect to receive some cash soon — through an inheritance, a bonus, the sale of your home or other means — an open-term mortgage may be the right fit. But if you prefer to make regular payments over the long term, you’ll probably save more money with a fixed-term mortgage because you’ll pay a lower interest rate.

Part 2

Rate options.

Your mortgage rate will determine your payment.

Fixed rate

Best if you’d like a set payment for your entire term.

Interest: Stays the same for the entire term of your mortage, even as the prime rate goes up or down.

Term: Open, fixed or closed. Term lengths vary depending on type.

Variable rate

Best if you’re comfortable with an interest rate that fluctuates over your term.

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

Part 3

Amortization options.

The amortization period is the length of time you can take to pay your mortgage in full.

Up to 25 years

Higher monthly payments, but less interest paid over the life of the mortgage.

Maximum amortization for high-ratio mortgages (where your down payment is less than 20% of your property value)

Up to 30 years

Lower monthly payments, but more interest paid over the life of the mortgage.

Maximum amortization for conventional mortgages (where your down payment is at least 20% of your property value)

For example

Let’s say you have a mortgage of $350,000 with an interest rate of 4.00%. To keep this example simple, we’ll assume the rate stays the same for the length of your mortgage, but keep in mind that this isn’t likely in a real scenario. With a 25-year amortization, you’d pay only $1,841.07 per month, but your total interest paid over that time would be $202,321.32. With a 20-year amortization, you’d pay $211.86 more per month, but your total interest paid would be just $157,567.44.

Put it all together

Find the right combination.

Explore our product offering based on the term and rate combination that is best for your homebuying needs.

Fixed term

Great if you’d like the option of securing a fixed rate in a fluctuating market.

Purchase price: No maximum

Term: 6 months to 5 years, 7 years, or 10 years

Rate: Fixed or variable

Amortization: Up to 30 years


Other features:

  • Prepayment privileges Prepay up to 20% of original balance once per mortgage year with no prepayment fee
  • Property type: Revenue or primary residence
  • Access to home equity: Yes

Closed term

Great if you’re looking for competitive rates and don’t need to use your home equity.

Purchase price: Less than $1 million

Term: 5 years

Rate: Fixed

Amortization: Up to 25 years


Other features:

  • Prepayment privileges: Can be made once per mortgage year with no prepayment fee
  • Property type: Primary residence only
  • Access to home equity: No

Open term

Great if you think you’ll be paying off your mortgage in full quickly.

Purchase price: No maximum

Term: 6 months to 3 years, or 5 years

Rate: Fixed or variable

Amortization: Up to 30 years


Other features:

  • Prepayment privileges: Can be made anytime with no prepayment fee
  • Property type: Revenue or primary residence
  • Access to home equity: Yes

Now you’re ready to explore the products.

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