When shopping for a mortgage you should keep in mind that there are many different types available. They can range from fixed rate mortgages where the interest rates never change, to variable rate mortgages where interest rates are pegged to the Bank of Canada rate, allowing them to rise or fall over time as the economy changes. Between these two extremes are a variety of other products that attempt to blend the advantages of the guaranteed interest rates of fixed rate mortgages with the interest rate flexibility found in variable rate mortgages. The length, or "term" of a mortgage, is also an important factor to consider. You can choose between short-term mortgages that need to be renegotiated every year and long-term mortgages where you lock your loan in for up to 25 years.

1. Conventional Mortgage
   With a conventional mortgage the purchaser has to have saved at least 25% of the purchase price as a down payment. You are allowed to borrow up to 75% of the purchase price or the appraised value of the property, whichever is less. Whenever a mortgage exceeds 75% of the value of the property it must be insured, thus becoming a high-ratio mortgage.
2. Insured or High-Ratio Mortgage
   With a high-ratio mortgage the purchaser has less than a 25% down payment. These mortgages are often referred to as NHA mortgages because they are granted under the provisions of the National Housing Act. You can borrow up to 95% of either the purchase price or the appraised value of the property (whichever is less) but are required by law to insure the mortgage and pay a one-time insurance premium based on the total value of the mortgage. For insurance you can either use the Canada Mortgage and Housing Corporation (CMHC) or a government approved private insurer.

Mortgage loan insurance premiums range from 1.25% to 3.75%, depending upon the size of the down payment. The general rule of thumb for high-ratio mortgage premiums is...

This insurance premium may be either paid up front or added to the mortgage. If added to the mortgage, a $150,000 mortgage with a 5% down payment would translate into a $155,625 mortgage ($150,000 mortgage + 3.75% insurance premium). The extra insurance premium increases the mortgage payment by about $35 per month at a 7% interest rate.

There are additional criteria to be considered when applying for a high-ratio mortgage such as minimum loan terms allowed, maximum amortization periods, allowable purchasers' debt levels, source of the down-payment if less than 10%, use of the property (single family/duplex/investment), plus many more. There is even a maximum purchase price allowed with a 5% down payment. It can range from $125,000 to $250,000 and depends on which Canadian City you are purchasing in. Feel free to ask your REALTOR or mortgage lender for a more in-depth explanation, or visit the large and detailed Canada Mortgage and Housing Corporation site.

Most mortgages are very similar to one another and have common features such as...

• They are portable:
  You can sell your home and move the mortgage to another property without breaking it and having to pay a penalty. This feature is very attractive if your mortgage has a good interest rate and you want to take it with you to your new home.

• They are assumable:
  The new purchaser can take over your mortgage and assume the payments. Usually the lender's approval is required before this is allowed.
• They have pre-payment privileges:
  Such as up to 10% extra payment against the principle on the yearly anniversary date or monthly double-up payments. All prepayments are deducted from the principal amount owing and do not go toward accrued interest.
• Automatic renewal privileges:
  You don't need to re-qualify financially when the mortgage term is up in order to renew the mortgage. This could be very important if your financial situation changed or if your debt load increased and you don't re-qualify under current rules.
• Allow weekly, bi-weekly or monthly payments:
  By switching your payment schedule from monthly to weekly or biweekly you are able to shorten the mortgage amortization period and save a substantial amount on interest payments.