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How a mortgage works

​A mortgage is a loan used to buy a property. How much interest you pay depends on 3 factors:

  1. How much you borrow (the principal)
  2. The interest rate on the loan
  3. How long you take to pay it back (the amortization period)
Shop around and compare interest rates. You also may end up with a better rate if you negotiate with your lender. Use this Mortgage calculator to see how different rates affect your mortgage payments.

Your down payment

The bigger your down payment, the smaller your mortgage and the less interest you'll pay. Aim for a down payment of at least 20% of the purchase price.

If you can’t afford to put down 20% of the purchase price, you’ll need to apply for a high-ratio mortgage. You will have to buy mortgage default insurance with this type of mortgage because there is a greater chance you may default on your mortgage payments.

Where to get a mortgage

  • Banks
  • Mortgage companies
  • Insurance companies
  • Trust and loan companies
  • Credit unions.

Consider a mortgage broker

A mortgage broker has access to a number of lenders and may be able to get you a better deal. And it costs you nothing – most lending institutions will pay the broker’s fee.

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