Amortization period: The length of time it takes to pay off a mortgage in full. The longer the amortization period, the lower your payments will be. If your down payment is less than 20% of the purchase price of your home, the longest amortization you're allowed is 25 years, otherwise 30 years is permitted.
Mortgage term: The length of time that the options and interest rate you choose are in effect. It can be anywhere from 6 months to 10 years. When the term is up, you can renegotiate your mortgage and choose the same or different options.
Payment frequency: Payment frequency refers to how often you make your mortgage payments. You can also choose an accelerated payment schedule. Accelerated payments allow you to make the equivalent of one extra monthly payment each year. This can save you thousands, or tens of thousands of dollars in interest over the life of your mortgage.
Types of interest rates:
Open and closed mortgages:
Conventional and high-ratio mortgages:
Prepayment options: The ability to make extra payments, increase your payments or pay off your mortgage early without incurring a penalty. The more interest rates rise, the bigger portion of your monthly mortgage payments will go toward the interest versus the principal. Pre-payment privileges can help you pay down your mortgage faster.
Portability: An option that allows you transfer or switch your mortgage to another home with little or no penalty when you sell your existing home. Mortgage loan insurance can also be transferred to the new home.
Mortgage stress test: The stress test exercise ensures that you can afford payments at a qualifying interest rate that is typically higher than the actual rate in your mortgage contract. This helps ensure that homebuyers won't take on too much debt and will have the means to make their mortgage payments if interest rates rise or their income decreases.
Consider choosing a broker vs. a bank. A Bank of Canada study found that using a mortgage broker could result in getting a lower mortgage rate than using the big banks. Why? Brokers have access to multiple lenders - therefore having access to even more competitive quotes.