7. Choose your financing solution

Choose from many mortgage possibilities

Before deciding on the mortgage that's best for you, you need to know about the general features of this type of loan.

An insured or uninsured mortgage?

Depending on your down payment, there are two types of financing available to you: a conventional mortgage or a mortgage insured by Canada Mortgage and Housing Corporation (CMHC) or by Genworth, a private insurer.

With a down payment of 20% or more, you are eligible for a conventional mortgage. If your down payment is less than 20% of the value of the home, you must have an insured mortgage. The insurance premium can be added to the mortgage amount

An open or closed mortgage?

The term of your mortgage covers a specific period of time. At the end of the term, all the conditions must be renegotiated.

• A closed mortgage cannot be repaid before the end of the term, which varies from three months to 10 years. However, a number of prepayment options are offered to give you more flexibility at no charge.

• An open mortgage, from six months to one year, allows you to repay all or part of your loan at any time without charge. Even though open mortgages have higher interest rates than closed mortgages, you may want to consider one if you are thinking of selling your home in the near future or if you expect interest rates to drop.

A 15-, 20-25 or 30 year amortization period?

You can take up to 30 years to pay off your mortgage. The longer the amortization period, the lower your monthly payments. However, you will pay more interest in the long run.

Weekly, biweekly or monthly payments?

You can choose the payment frequency that best suits your budget. By choosing weekly or biweekly payments, you will end up repaying the equivalent of an extra month every year (if that frequency is available for the product you have selected). Your total interest payments will therefore be considerably less at the end.

Life, critical illness or life and disability insurance?

For a few dollars more a month, you can have your mortgage insured if you should die, become critically ill or disabled. It's a small price to pay for peace of mind. And to make it easier, the insurance premiums are added to your mortgage payments.

Determine your optimal mortgage solution

You can determine your optimal mortgage solution in less than five minutes when you use the Optimal Solution Mortgage Guide. Simply answer the following questions to help you choose the mortgage product that meets your most important needs.

The first step is to determine the priority need that you want to fulfill. The second step allows you to identify the solution best suited to your needs, depending on what you can afford. Then it is up to you to decide.

1. Start with your preselection

   Write down your loan amount and the maximum payment calculated for you by the National Bank. Check this information against your own budget and determine your comfort zone. Use these two amounts as your minimum and maximum parameters. For instance, I want $600 and the Bank authorizes $800.

2. Identify your financial objectives

   Very often an attractive mortgage rate can make you forget your financial objectives. Avoid committing yourself to a longer time than necessary, as it increases your total interest costs and takes away from your priority needs.

   Which of the following is your priority need with respect to your financial and mortgage objectives?

• Payment stability - You don't want any variations in your family budget;
• Payment security - You want to take advantage of rate fluctuations without exceeding a predetermined limit;
• Leeway to realize your future plans, if you have an irregular income or want to renovate or sell your house;
• Accelerated mortgage repayment - You want to pay off your mortgage over a specific period of time; i.e., before your retirement or a particular project, or because you have a proactive financial attitude.

3. Determine the optimal solution based on your needs and your repayment capacity

If you opted for payment stability and security, could you absorb up to a 10% change in your mortgage payments? For example, your target payment is $600, but could you go up to $660?

• If so, choose a Variable-Rate Mortgage.
• If not, select a Capped-Rate Mortgage or a Fixed-Rate Mortgage.

Does your down payment or your equity in the property amount to more than 20% of the price?

• If so, choose the All-In-One Banking^TM1, or refinance your existing mortgage with the Revolving clause.
• If not, select a short-term mortgage that expires at the same time that you would like to start your project, or refinance your existing mortgage for up to 85% of your property value.

If you opt for accelerated repayment, does your down payment or your equity in the property amount to more than 20% of the price?

• If so, choose the All-In-One Banking^TM1.
• If not, reduce the amortization period for your loan on renewal and consider the possibility of increasing your mortgage payment by up to twice its amount without penalty. During the year, you may also make principal payments of up to 10% of the borrowed amount, without penalty.

For complete information about our mortgage products, see the Financing Solutions section.

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