Mortgage Questions, Answered

Getting started

1. What does a mortgage broker do?

A mortgage broker helps you understand your borrowing options and compares suitable lenders and mortgage products for your situation. The goal is not simply to find a rate, but to find financing that fits your income, plans, property, and comfort with risk.

2. How much mortgage can I afford?

Your affordable mortgage amount depends on income, existing debts, down payment, credit, property taxes, heating costs, condo fees where applicable, and the mortgage stress test. A pre-approval gives you a more reliable starting point than an online calculator alone.

3. What is a mortgage pre-approval?

A pre-approval is an early review of your income, credit, down payment, and debts to estimate what you may qualify for. It can also hold a rate for a limited period, but it is not final approval. The property and your documents still need to be approved.

4. Does a pre-approval guarantee my mortgage?

No. Final approval depends on the property, appraisal, lender review, and confirmation that your financial situation and documents still meet the lender’s requirements. A well-prepared pre-approval reduces surprises, but it is not a guarantee.

5. What is the mortgage stress test?

The stress test checks whether you could afford payments at a higher qualifying rate than your actual contract rate. For many federally regulated lenders, the benchmark is the greater of your contract rate plus 2% or 5.25%. This rule can change, and lender policies vary.

Down payment and first-time buying

6. How much down payment do I need in Canada?

For homes priced up to $500,000, the minimum is generally 5%. For homes between $500,000 and $1.5 million, it is generally 5% of the first $500,000 plus 10% of the remaining amount. Homes priced at $1.5 million or more generally require at least 20% down.

7. What is mortgage loan insurance?

Mortgage loan insurance is usually required when your down payment is under 20%. It protects the lender if the borrower defaults, not the borrower personally. The premium is normally added to the mortgage balance.

8. Can I use my FHSA or RRSP to buy my first home?

Eligible first-time buyers may use a First Home Savings Account and the Home Buyers’ Plan, subject to CRA rules and timelines. The FHSA has an annual contribution limit of $8,000 and a lifetime limit of $40,000. The current Home Buyers’ Plan withdrawal limit is $60,000.

9. What costs should I budget for besides my down payment?

Plan for legal or notary fees, appraisal, inspection, moving, property tax adjustments, insurance, and possible lender fees. BC buyers may also face Property Transfer Tax, although exemptions may apply. Alberta has land-title and mortgage-registration fees.

10. How much should I save before making an offer?

Beyond the down payment, it is sensible to keep a separate closing-cost and emergency reserve. The right amount depends on the property and your income stability, but you should avoid using every dollar available just to complete the purchase.

Choosing the right mortgage

11. What is the difference between a fixed and variable mortgage?

A fixed-rate mortgage keeps the interest rate the same for the term, which makes payments more predictable. A variable-rate mortgage changes with the lender’s prime rate and may offer more flexibility, but payments or the portion going toward interest can change.

12. Should I choose a fixed or variable rate?

There is no universal best answer. The right choice depends on your budget, risk tolerance, expected time in the property, need for flexibility, and how important payment certainty is to you.

13. What is the difference between a mortgage term and amortization?

Your term is the length of your mortgage contract, such as three or five years. Your amortization is the total time planned to repay the mortgage, such as 25 or 30 years. A longer amortization can lower payments, but usually increases total interest paid.

14. Is the lowest mortgage rate always the best option?

Not necessarily. A slightly higher rate can be better if the mortgage has stronger prepayment privileges, lower penalties, portability, better renewal options, or flexibility for a move, refinance, or sale.

15. Can I make extra mortgage payments?

Many mortgages allow annual lump-sum payments and payment increases, but the limits vary by lender and product. Review the prepayment privileges before signing, especially if you expect bonuses, commissions, inheritance, or a future sale.

Renewals, refinancing, and equity

16. What should I do when my mortgage is coming up for renewal?

Start reviewing your options several months before the maturity date. Compare your current lender’s offer with other options, and look beyond rate at term length, payment, penalties, prepayment privileges, and your plans for the next few years.

17. Can I switch lenders at renewal?

Often, yes. A straight switch may be possible if you are not increasing the mortgage amount or extending the amortization, although lender and insurer rules apply. Depending on the situation, legal or appraisal costs may apply.

18. When does refinancing a mortgage make sense?

Refinancing can make sense to consolidate high-interest debt, access equity, fund a renovation, buy out a partner, or improve cash flow. It should only be done after comparing the benefit against the interest cost, possible penalty, and new mortgage terms.

19. How much home equity can I access?

It depends on your property value, existing mortgage balance, income, credit, debt obligations, and the lender’s policies. A refinance or home equity line of credit requires lender approval and may involve an appraisal.

20. What is a HELOC?

A HELOC is a home equity line of credit secured by your property. It allows you to borrow, repay, and re-borrow up to an approved limit. It can be useful for flexible access to funds, but it should be used with a clear repayment plan because rates are usually variable.

21. What is a mortgage prepayment penalty?

A prepayment penalty may apply if you break a closed mortgage early. For fixed mortgages, it is often the greater of three months’ interest or an interest-rate differential. For variable mortgages, it is often three months’ interest. Your actual contract and lender calculation always control.

Borrower situations and next steps

22. Can I refinance if I have bad credit or past credit issues?

Possibly. Alternative and private lenders may consider situations that a traditional lender will not, including bruised credit, recent income changes, or complex debt. These options can cost more, so the focus should be on a practical exit plan back to conventional financing where appropriate.

23. Can I qualify if I am self-employed?

Yes, although self-employed files need more careful preparation. Lenders may review tax returns, notices of assessment, business financials, bank statements, industry history, and how consistently income can be documented.

24. Can I get a mortgage as a newcomer to Canada?

Many lenders offer newcomer programs, but requirements vary. Your residency status, Canadian income, international credit history, down payment source, and employment will all matter. Starting early helps identify the strongest path.

25. What should I do before making an offer on a home?

Get a thorough pre-approval, confirm your available down payment, understand closing costs, and know your comfortable monthly payment. Before removing financing conditions, have the property, financing terms, and any appraisal requirements reviewed carefully.

General education only. Mortgage rates, insurer rules, provincial taxes, and lender policies can change. For advice tailored to a specific purchase, renewal, refinance, or credit situation, book a consultation before making an offer or signing a mortgage commitment.