A mortgage is a loan that is only given by an institution to specifically fund the purchase of a property. The property itself is insurance for the money, and the financial lender holds the deed to the property, depending on the type of lend, until you have repaid the amount, plus all of the acquired interest.

   There are lots of different types of mortgages available to you. Ranging from a fixed rate mortgage (where the rate never changes) to variable rate mortgages where interest rates are set to the rates of the Bank of Canada, which will fluctuate as the economy changes. And between these types of mortgages lay a mix of other types that mix the stability of a fixed rate mortgage with the flexibility found in variable rate mortgage. The term of a mortgage is also a consideration in deciding the term of the type of mortgage you need. Short-term mortgages are good and can be renegotiated annually, long term mortgage give you the ability to make a steady payment for up to 25 years.

   It is important to visit a financial institute before you make a decision on a loan type. Most professional institutions will have booklets to help you better understand your options. Meeting with a financial professional to speak on your option will is also advisable before you decide on which type to choose.

The Mortgage Three - The 3 Mortgage Formats

• The Conventional Mortgage -
     A conventional mortgage, you must have at least 25% of the mortgage as a down-payment, and you are allowed to borrow up to 75% of the price of the property. If the mortgage exceeds 75% of the total value of the property it must be insured, making it a 'high-ratio mortgage'.
  
• The High-Ratio Mortgage
     With a high-ratio mortgage, you may put less than 25% as a down payment. You may borrow up to 95% of the property value, but as lawfully required, you must insure your mortgage and pay a premium based on the total value of the finance. Insurance is handled by agencies like CMHC or a legitimate and professional private insurer.
  
• The Pre-Approved Mortgage
     A pre-approved mortgage is less a mortgage, as a preliminary approval for the mortgage by the lender. It is usually set at the maximum amount allowed, with an interest guarantee for up to 2 months. The property must be appraised and a credit review of the buyer is preformed. It is advisable that any property bids be made conditional upon financing.

The Performing Mortgage

While there are many different types of mortgage, they all have some characteristics in common:

• Portability:
  Since buying a home is so personal, you may find you have grown attached to your mortgage. Don't worry, if you sell your home, you can take it with you to your next property. This is very attractive if you have a good mortgage rate.
  
• Assumability:
  If approved by your lender, a new purchaser can take over your mortgage and all of the remaining payments.
  
• Pre-Payment:
  You may pay up to and extra 10% of your yearly payment, or double monthly payments. All payment are credited to the principal amount, but do not go to interest payments.
  
• Auto-Renewal:
  After your term has ended, you do not need to re-qualify. Very handy if the rules have changed, of if your financial situation is different.
  
• Payments:
  There are weekly, bi-weekly, or monthly payment periods which allow you to shorten the amortization period and save you money on interest payments.