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Financing Your Home: What Are Your Mortgage Options?

Posted by Justin Havre on Tuesday, September 5th, 2017 at 1:04pm.

Home Mortgage Financing Options for Canadian Home PurchasesFor those who live in Canada and are looking into financing a home, they may be surprised to find that they are limited to just a few options. For example, unlike some other locations throughout the world, Canada does not offer the 30-year mortgage. That may seem perfectly normal to people who have lived here all their lives, but for those who have moved there from another country it may be surprising to find that they have to look at finances differently when they decide to buy a house. So, what options are available? Fortunately, there are still choices when it comes to loans for first time home buyers in North Calgary and buyers across Canada.

Most Homes Are Bought On Five-Year Loans

Just five years to pay off a house? That may seem impossible, but paying the entire loan off in five years is not really necessary. Instead, the loan is set up to be refinanced in five years, and amortized at 25 years. So when a borrower gets this loan they are making a payment the size it would be if the loan was for 25 years. They simply have to refinance before five years is up. Then they will do this again, until they eventually pay off the loan, or until they move and sell the house to someone else, at which point the loan would be paid off.

The Government Is Not Going to Buy Your Loan

The kinds of programs that some countries have available for the government to buy loans from banks, or for other banks or lenders to buy loans from banks, are not available in Canada. The bank that makes a loan on a house is not planning on selling that loan to another company or entity. Instead, it will be strongly encouraged to keep that loan on its books. Because it will be servicing that loan, and because there is a risk for lack of repayment, Canadian lenders are typically very careful about whether a borrower is a good risk. As such, it is difficult to get the best home loans in Canada for many borrowers.

There May Be Other Options

There are still options for interested parties who may not be able to go through a standard lender. Some families pool their resources to buy a home, because it allows them to avoid the struggle of finding a lender who will work with them. This can be especially valuable to borrowers who may not make a lot of money, who have recently changed careers or started their own businesses, or who have other challenges that banks and other lenders may feel uncomfortable with. Exploring these other types of options, including looking for lenders who are outside of the traditional system or saving up a larger down payment can help buyers find and purchase homes more easily.

So, What Is the Best Choice?

The best choice for home financing when it comes to buying a house in Canada depends on you. Whether you choose a traditional lender or not, or work with a family member to put something together, there are options to consider. Additionally, some buyers select smaller houses or save up and pay cash, so they can avoid the worry of getting a mortgage altogether. Buying a home in Canada has a few loopholes to be wary of. Speak to a local real estate agent to learn more about the market and to get the best home-buying experience possible.

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