Part 1 - Termilology and Types
Part 2 - Down Payment and Amortization
Part 3 - Deciding on a Term and Options

Part 3 - Down Payment

A minimum cash down payment from your own resources is required because mortgage lenders won't advance the entire purchase price of a property. Your minimum down payment would normally be 10%, however, a recent government program has lowered the minimum to 5% for qualified first time buyers. Another temporary program allows first time buyers to use funds from their RRSP for their down payment. It's to your advantage to aim for a down payment of 25% or more, so you'll qualify for a conventional mortgage and avoid paying the mortgage insurance premium. The larger your down payment, the easier it will be to arrange a mortgage and carry it comfortably. The smaller your loan, the lower your interest expense will be, and the more equity you will have in your home. Equity is equal to the value of home minus the amount of your mortgage.


Part 4- Choosing an Amortization Period
 

Once you're settled on the type of mortgage that fits your financial circumstance, you are ready to start considering the various options available. Amortization refers to the number of years it will take to repay the loan in full - most commonly 25 years. Longer amortization periods result in lower payments, but increase the total amount of interest paid. If you can handle a shorter amortization period, you'll achieve tremendous savings on the interest cost of your mortgage and live mortgage free sooner! Each mortgage payment consists of interest plus repayment of part of the principal. In the early years of a mortgage, a higher portion of your payment is used to pay interest. By the time you reach the last years of your mortgage, almost all of your payment will be applied against the principal. Each mortgage payment consists of interest plus repayment of part of the principal. In the early years of a mortgage, a higher portion of your payment is used to pay interest. By the time you reach the last years of your mortgage, almost all of your payment will be applied against the principal.