A mortgage is a loan provided to you with your property used as security. Most people that are purchasing a home in Canada do not have the cash to pay the full price of the property upfront. Therefore, mortgage lenders exist to help those individuals take advantage of owning their own home. Think of a mortgage as the difference between the price of a property and the down payment used by the home purchaser. A mortgage loan essentially covers the shortfall between the purchase price and the amount of money someone is putting down to purchase it. Canadian mortgages must have mortgage default insurance when a home purchaser's down payment is between 5% and 19.99% of the price of the property. This insurance protects lenders in the case of a default from a homeowner. The amount of default insurance that a homeowner must pay is a percentage of the mortgage amount. This percentage is based on a sliding scale, so the bigger the down payment, the less is the percentage. As added flexibility, the total default insurance payable by the home purchaser does not have to be paid upfront and can simply be added to the total mortgage amount. When a home purchaser has less than 20% down their mortgage can be referred to as a High Ratio Mortgage. When the homebuyer makes more than a 20% down payment, their mortgage can be referred to as a conventional mortgage.

When selecting a mortgage, the mortgage term is the length of time your mortgage terms and conditions are in effect. Once your term expires, you normally have the option to renew the mortgage with the same lender with a new (or same) term, pay it off completely, or obtain mortgage financing with a different lender. Mortgage terms in Canada generally range from 6 months to 10 years with a 5 year mortgage term being the most common. The amortization period also plays an important role in your mortgage financing. The amortization is the length of time over which your mortgage will be fully paid off.

The longer the amortization period, the smaller are the resulting mortgage payments. Therefore, choosing a longer amortization period can sometimes result in an easier mortgage approval. However there are restrictions on amortization. While the maximum amortization period tends to be 35 years, it is only 25 years on High Ratio Mortgages. Since the mortgage term is usually smaller than the mortgage amortization, a homeowner will usually have to enter into more than one mortgage contract before the mortgage is fully paid off.

Mortgages can also have a fixed rate or a variable rate. A fixed rate mortgage has a rate which stays constant throughout the term of the mortgage. Regardless of whether mortgage interest rates are on the rise or the decline, your monthly payment will stay the same with a fixed rate mortgage. On the other hand, a variable rate mortgage will fluctuate with the prime lending rate set by the specific lender. With a variable rate mortgage you will be better off if rates start decreasing, or worse off if the rates start increasing. Of course, it is very difficult to predict future interest rate changes. Therefore, variable rate mortgages will generally have lower rates compared to fixed rate mortgages to compensate the homeowner for the interest rate risk. It is often useful to input the rate for both a variable as well as a fixed rate mortgage into a Payment Calculator to figure out the difference in the mortgage payments.

A typical mortgage is closed, meaning that the homeowner would incur a penalty for deciding to end the mortgage contract (i.e. pay it off completely, refinance, switch lenders etc.) before the end of the term or pay off more than the allowed limit for the year. Depending on the mortgage amount and lender this penalty can be quite significant. The alternative to a closed mortgage is an open mortgage, which gives the homeowner the flexibility to end the mortgage at any time and make payments of any amount. However, this flexibility means a higher interest rate charged on the open mortgage. A Home Equity Line of Credit is another form of mortgage lending and option for someone who wants payment flexibility with their mortgage loan.

As mentioned in the previous section, typical closed mortgages have limits on how much of the mortgage can be paid off every year. This usually includes limits on how much the mortgage payment can be increased by (as a percentage of the regular mortgage payment) and limits on the annual lump sum payment (as a percentage of the outstanding mortgage amount). The higher these limits, the more payment flexibility you would have. Compare pre-payment privileges across products on Rates.ca and determine whether you are likely to take advantage of these privileges.

When comparing mortgages on Rates.ca it is important to compare the ratehold period across products. The ratehold period is the length of the take out period for which the specific lender/broker will guarantee the mortgage rate upon approval, regardless of changes in interest rates. The ratehold period normally ranges from 30 days to 120 days. A longer period provides for better interest rate protection.

Mortgages can be purchased from two main sources outlined below:

• Lenders - Banks, credit unions, trust companies and even certain private companies/individuals all sell mortgages. Banks make up the bulk of mortgage lending in Canada.
• Brokers - A mortgage broker is licenced individual who sells mortgages on behalf of lenders. Brokers can offer the homebuyer a variety of different mortgage products.

Availability of the Rates.ca mortgage rates comparison service
The Rates.ca mortgage rates comparison service is currently available only in Ontario. Therefore if you live in Toronto, London, Ottawa, Windsor, Oakville, Mississauga, Brampton, Hamilton, Kitchener or any other city in the province of Ontario we are able to offer you quick and free Ontario mortgage rates. We do have plans to expand our mortgage lending comparison service to the rest of Canada in the near future to meet the needs of all Canadians across our great nation. Compare the lowest mortgage rates today!