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Mortgage information for buy a home in Ontario

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When you are looking to buy a home in Ontario, Canada there are several steps you need to take in order to get a mortgage loan pre-approval.

The first thing you need to realize is that getting a home loan in Canada is not the same as in the United States or anywhere else.  The first big difference is that Canada does not have the standard 30-year fixed mortgages that the United States does.  This is a true statement; even though Canada does not have 30-year mortgage finance terms, this is no quite the only difference between Canadian and American mortgage terms.

The Differences between Canadian and U.S. Home mortgages

The standard mortgage term in the United States being a 30-year fixed term, but the mortgage terms in Canada are five-years, due to be remunerated every five years over the course of a twenty-five-year term.  This requires the balance on the mortgage to be re-calculated and financed at the end of each five-year period.  This five-year re-financing requirement gives the buyer the possibility of having their interest rates increased according to the current interest rate.  If the buyer has the plan to prepay their mortgage at the end of this prepayment timeframe, they face the chance of very high penalty rates.

A mortgage in Canada is portable—meaning if you relocate to another home within the five-year term, you can request to use the prior mortgage from the other home for the new home. However, if the new home is more expensive than the prior residence, you will have to take out a second loan to cover the deference.

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In Canada, the interest you pay towards your mortgage is not tax deductible as it is in the U.S.; illuminating the incentive to over-borrow.

Probably the most significant difference between Canadian and U.S. mortgages is that the Canadian banks supervise mortgage terms in a sounder manner than the U.S. does.  The mortgage system in Canada is more similar to the way the U.S. handled mortgages during the 1970s.  The Canadian banking regulations necessitate that banks keep loans on a balance sheet, which discourages any loss due to underwriting standards.

What Motivates Canadians to buy homes?

There are basically three things that are making Canadian’s enthusiastic about wanting to become a homeowner.  These three items are:

  1. The fear of missing out on the chance to get a good deal on a home and become a homeowner
  2. The fear that the foreign market will increase, decreasing their chances of becoming a homeowner and
  3. The possibility that the market will spike upwards making their dream home “out of reach.”

Whatever your motivation is regarding buying a new home in Canada is, be certain you talk with a qualified lending agent or mortgage broker regarding your qualifications.  If you are not qualified due to some poor past credit obligations that did not go quite the way you anticipated, do not despair.  There are many credit repair organizations available that can work with you in getting everything back on track to become a homeowner.