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Financing - FAQs

Get Educated!

There are many options when it comes to choosing a Mortgage, and deciding on the right Mortgage for you can be confusing. We've composed a list of some of the most frequently asked questions we hear from our clients.

What is the difference between a fixed interest rate, and a variable (or adjustable) interest rate? 

Fixed Rate Mortgage: A mortgage for which the rate of interest is fixed for a specific period of time (the term).

Variable (Adjustable) Rate Mortgage: A mortgage for which the rate of interest changes as money market conditions change. The interest rate is based on the ‘Prime Rate’ of the lending institution. The payments may change every month or be consistent as per the choice of the borrower. When the payments remain consistent the amount applied toward the principal changes according to the change (if any) in the rate of interest.


What is the difference between an Open and Closed mortgage?

Open Mortgage: A mortgage in which you can repay the loan, in part or in full, at any time prior to maturity without penalty in most cases.

Closed Mortgage: A mortgage agreement that cannot be prepaid, renegotiated or refinanced before maturity, except with compensation or breakage costs.

NOTE:  Maturity Date - Last day of the term of the mortgage agreement.

What options do I have in terms of how frequently I can make payments on my mortgage?  

Are monthly payments the only option?  You can make monthly, bi-monthly, bi-weekly, accelerated bi-weekly, weekly, or accelerated weekly payments. By increasing the frequency of your payments, you are able to save interest on your mortgage as you are borrowing money for a shorter length of time between payments. The more frequently you make payments, the less time interest has to accrue on your mortgage loan. 

Furthermore, by making ‘accelerated’ payments, you pay off your mortgage quicker, and it saves you a lot of money in interest in both the short-run, and long-run. A comparison of the different payment frequencies can be found below.

Payment Frequency:  An example of a monthly payment of $1000 is used.

Monthly

Payments are made once a month.
Example – Payment of $1000 is withdrawn on the same day of every month
Total yearly mortgage payments = $12,000

Semi-Monthly 

Payments are made twice a month. Payments are one-half of the monthly amount
Example – Payment of $500 is withdrawn on the same 2 days every month (usually the 1st and the 15th)
Total yearly mortgage payments = $12,000

Bi-weekly 

Payments are made every two weeks. Your monthly payment is multiplied by 12 and then divided by 26.
Example – Payment of $461.54 is withdrawn every two weeks on the same day (i.e.: every second Friday)
Total yearly mortgage payments = $12,000 .

Accelerated Bi-weekly 

Payments are made every two weeks. Payments are one-half of the monthly amount.
Example – Payment of $500 is made every two weeks.
Total yearly mortgage payments = $13,000. The additional $1000 goes towards the principle of your mortgage, therefore you pay off your mortgage quicker, and save interest.

Weekly  

Payments are made every week. Your monthly payment is multiplied by 12 then divided by 52.
Example – Payment of $230.77 is made on the same day every week (i.e.: every Friday)
Total yearly mortgage payments = $12,000

Accelerated Weekly 

Payments are made every week. Payments are one-quarter of the monthly amount.
Example – Payment of $250 made the same day every week.
Total yearly mortgage payments = $13,000


What is a Conventional Mortgage?

A mortgage that does not exceed 80% of the appraised value or purchase price of the property whichever is less. Additional mortgage insurance fees are not incurred in this situation. 

What is a High Ratio Mortgage? 

A mortgage which exceeds 80% of the appraised value or purchase price of the property whichever is less. This type of mortgage must be insured against payment default by CanadaMortgage and Housing Corporation (CMHC) or an approved insurer. This insurance fee is added on to the mortgage amount.

What closing costs can I expect to pay?

TYPE OF COSTAMOUNT 
Legal Fees (Solicitor) - includes title insurance$1800 (approx)
Land Transfer Tax
Based on price of home (Ex: $2,225.00 on a $250,000 home)
High Ratio Insurance PremiumBased on mortgage amount and percentage of down payment *typically added on to mortgage 
HST on High Ratio Insurance PremiumPaid on closing
Property Tax AdjustmentPay any pre-paid property tax paid by the current property owner. Always budget for 3months worth.
Appraisal Fee$300 (approx.) – If putting down less than 20%covered by the High-Ratio insurer unless purchasing a private sale.

What other costs can I expect?

  • Utility set-up fees

  • Moving van or Moving company costs

If a New home:

  • Utility Hook-up fees ($750 - $2000)

  • Ontario New Home Warranty Plan ($325-$1000)

  • Tree Planting ($250-$500)

  • Driveway paving (from $500)

  •  Subdivision security deposit ($500-$1000)

  • GST on price of home (included in purchase price, added to mortgage)

NOTE: All the figures above are estimates

For more information on financing, please contact:
Champion Mortgage Inc.
235 Starwood Dr #5, Guelph, ON N1E 7M5
(519) 341-1299

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