Bringing Homeownership Within Reach: Your Key to Residential Mortgages
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Stress-free Home Buying
Are you looking to put down roots and build equity in your own home? Maybe you are looking to buy a vacation home or purchase a residential investment property? Buying a home is one of the biggest purchases you’ll ever make, and it can be both a very happy and stressful time.
Benson Mortgages experts will help make the experience of getting a residential mortgage quick, easy, and hassle-free. Our focus is on getting you approved for the best rates and terms as quickly and simply as possible so that you can focus on enjoying your new purchase.
The down payment is the amount that you will need to pay to secure your mortgage. You will be expected to come up with a minimum of 5% of the cost of the home if the price of your home is below $500,000. For homes that are priced between $500,000 and $999,999, the down payment is 5% of $500,000, plus 10% of the remaining amount. Homes over a million dollars, require a 20% down payment.
These are the minimum down payments to qualify for a mortgage, and anything below 20% requires you to have mortgage default insurance. This insurance protects the lender in case you default on payments. Your mortgage loan insurance can be paid for upfront or added to your monthly mortgage payments.
You can choose to make monthly or bi-weekly payments. Paying bi-weekly will accelerate your mortgage payoff. By the end of each year, you will have paid the equivalent of 13 monthly payments instead of 12. This can cut years off your mortgage repayment and save you thousands of dollars in interest.
With a residential mortgage agreement, your property is put up as collateral in exchange for the loan. If you cannot maintain the monthly payments, the lender has the power to seize your home and sell it to repay the debt.
Should you ever find yourself in a situation where you are having difficulty making monthly payments, contact us to discuss options to access additional funding such as a Second Mortgage or HELOC.
An interest rate is a percentage of how much you’ll pay your lender each month as a fee for borrowing money. There are two types of mortgage interest rates: fixed rate and variable.
If you want to rely on consistent mortgage payments and not have to worry about an increase to your monthly payments should interest rates rise, then this is the best option for you. Your payments and interest rate will remain the same for the full term of your loan.
Variable rates are lower than a fixed-rate mortgage, which makes it a good option if national interest rates remain low. However, should interest rates increase, your monthly payment amount will increase and could end up costing you more than if you had a fixed-rate mortgage.
A variable-rate mortgage does not have a set repayment amount and will fluctuate based on the national and posted interest rates. The initial interest rate offered by these mortgages is lower than fixed rates because of their potential to be unpredictable.
The mortgage term is the length of time your mortgage contract is in effect. This consists of everything your mortgage contract outlines, including the interest rate. For example, you might get a 5-year fixed mortgage at an interest rate of 4.39%, which means your interest rate will remain the same for 5 years.
At the end of the 5 years (term), unless you have the funds to cover the entire remaining balance, you will have to renew your mortgage. You also have the option to refinance or switch lenders.
When it’s time to renew your mortgage, it’s best to compare interest rates and renew it ahead of time. If you don’t complete the paperwork to renew your mortgage before the due date, it will renew automatically as a 6-month open mortgage. Open mortgages can be paid in full at any time, however, it will end up costing you a lot more.
The amortization period is the length of time that your mortgage payments are broken up over the life of the loan. A typical mortgage in Canada has a 5-year term with a 25-year amortization period. Longer amortization periods will reduce your monthly payments however, you will pay more interest over the life of the mortgage.
Pre-payment privileges are the additional payments your mortgage will allow you to make on top of your monthly payment requirements. With a closed mortgage, you won’t be able to pay your balance in full before the end of your term without incurring penalties. Most mortgages allow you to make some additional payments throughout the term. The sooner you pay down the balance on your mortgage, the less interest you will pay overall.
Contact us if you have any questions about mortgages.
Residential Mortgage
What is a residential Mortgage?
A residential mortgage is a loan, typically for a fixed amount of time, given to finance the purchase of a residential property. Residential property is a property that is zoned for single-family homes, townhomes, apartments. Rental properties with up to 4 units are considered residential. Rental properties with five or more units are considered commercial property.
A mortgage has three basic parts:
- Down Payment which could be provided as a deposit with your Agreement of Purchase and Sale
- Monthly payments
- Interest fees
How much of a down payment will you need for your residential rental property?
If you are purchasing a multi-unit property, whether you live in one of the units or not, will impact how much down payment you will need to make. If you do live in one of the units, your property is considered owner-occupied, if you don’t, your property is considered non-owner occupied.
The following chart shows the minimum down payment that is required for both owner and non-owner occupied investment properties.
| Units | Owner- Occupied |
Down Payment |
|---|---|---|
| 1-2 | Yes | 5% |
| 1-2 | No | 20% |
| 3-4 | Yes | 10% |
| 3-4 | Yes | 20% |
Mortgages for Rental Properties
Most buildings with 1-4 units are zoned residential. Buildings with 5 or more units are zoned commercial, so you will need to take out a Commercial Mortgage.
If you plan to rent your second home or vacation property when you are not using it, it is considered an investment property and will require a minimum 20% down payment. If you or a family member plans to live in the home, on a rent-free basis, you can get a mortgage for less than 20% down payment.
Rental pool or timeshare properties are not eligible for mortgage financing. Cottages fall into two categories: Type A all-season cottages and Type B seasonal cottages. Most lenders do not finance Type B cottages.
- Must be intended for occupancy at some point during the year by the borrower or relative on a rent-free basis (otherwise it is considered a rental).
- Winterized home with year-round access.
- The property is accessible by municipally plowed road.
- Potable running water, central heating, plumbing and electricity.
- A permanent foundation below the frost line is a requirement.
- The property is located in an area with demonstrated, reasonable resale demand.
- Seasonal access is okay.
- A permanent heat source is not required.
- Has running water.
- Sits on the temporary foundation: concrete blocks or pilings.
Second Home or Vacation Property Mortgage
What is a Second Home?
A second home is a residence that you intend to occupy for part of the year in addition to having a primary residence. A second home could be a lake-side cottage, a condo in the city, or a home for your child away at school.
Not to be confused with a Second Mortgage, a second home mortgage is a home loan that is used for the purpose of purchasing a second property.
Frequently asked questions that can help you start your mortgage journey with us.
Contact Benson Mortgages specialist.
We offer a broad range of services to cater to different financial needs. Our services include residential mortgages for those looking to buy a home, refinancing for those who want to take advantage of better interest rates or terms, and transfers & HELOC for homeowners who want to leverage their home equity. We also provide private mortgages, 1st, 2nd & 3rd mortgages, reverse mortgages for seniors, commercial financing for businesses, and construction & land financing for developers.
A residential mortgage is a financial product that allows individuals to purchase residential property. The property is used as collateral for the loan, which is repaid over a specified period up to 40 years or interest only. The borrower makes regular payments to the lender, including the principal amount and interest.
A fixed-rate mortgage has an interest rate that remains the same throughout the loan term, providing stability and predictability for your payments. On the other hand, a variable-rate mortgage has an interest rate that can change over time based on market conditions. This means your payments could increase or decrease. The choice between the two depends on your financial situation, risk tolerance, and market expectations. There is also a variable rate mortgage with a fixed payment.
Refinancing a mortgage involves replacing your current mortgage with a new one, often with different terms or a lower interest rate. Refinance can be a good idea if you can secure a lower interest rate, and want to change the term length of your mortgage. You might need to access equity in your home in order to pay out debt, buy investment property or any other investments, pay for your kids' school or to renovate your home.
Secured Line of Credit is a type of loan that lets you borrow against the equity in your home. It works much like a credit line, where you have a credit limit and can borrow as much or as little as you need up to that limit. You only pay interest on the amount you borrow. It can be used for various purposes, such as home improvements, debt consolidation, or even to fund a business venture.
A private mortgage is a loan provided by a private entity or other financial institution, such as an individual or a business, rather than a traditional bank. People often choose private mortgages when they have unique financial circumstances that make it difficult to qualify for a traditional mortgage, such as being self-employed or having a less-than-perfect credit history. Private mortgages offer flexibility and can be customized to meet the borrower's needs. Private mortgages are used for the properties that do not meet banks criteria: land, properties under construction, agricultural properties, sub-divisions, etc
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