Keith Uthe Difference Between Fixed & Variable Rate Mortgages  |  Keith Uthe Tips For Being Pre Approved For A Mortgage  |  Six Tips To Ensure You Have The Right Documents For Mortgage Financing

Understanding The Basics Of A Mortgage: How It Works, The Different Types Of Mortgages, And The Terminology Used In The Industry.

Author: Keith Uthe Demystifying Mortgages | | Categories: Business Financing , Certified Real Estate Investment Adviser , Commercial Financing , Construction Mortgage , Debt Consolidation , First Time Home Buyers , Home Mortgage , Licensed Mortgage Agent , Lowest mortgage rate , Mortgage Associate , Mortgage Broker , mortgage interest , mortgage preapproval , mortgage prequalifying , Mortgage Rates , Mortgage Refinancing , Mortgage Specialist , Rental Property Financing , Second Mortgage


A mortgage is a type of loan used to purchase a property, and it's a common way for Canadians to finance the purchase of a home. Mortgages can have a significant impact on a borrower's financial situation. To make informed decisions when buying a home in Canada, it's essential to understand the basics of a mortgage, including how it works, the different types of mortgages available, and the terminology used in the industry. In this blog, Keith Uthe Demystifying Mortgages will discuss five key points by to help you demystify mortgages.


1. How mortgages work
A mortgage is a loan that is used to purchase a property. The borrower makes a down payment (usually a percentage of the home’s purchase price) and agrees to repay the remaining balance, plus interest, over a specified period. The property being purchased is typically used as collateral for the loan. Mortgages in Canada are typically long-term loans with repayment periods that can range from terms of 1 - 10 years. After the term of the loan is over, borrowers can choose to renew their mortgage or pay it off in full.

2. Different types of mortgages
In Canada, there are two main types of mortgages: fixed-rate mortgages and variable-rate mortgages. Fixed-rate mortgages have a set interest rate that does not change over the term of the loan, providing stability and predictability in monthly payments. Variable-rate mortgages have an interest rate that can change based on market conditions, which can result in lower initial payments but also carry more risk. Other types of mortgages in Canada include open mortgages, which allow borrowers to make extra payments without penalty, and closed mortgages, which have penalties for early repayment.

3. Mortgage Terminology
There are several terms used in the mortgage industry that borrowers should be familiar with, including amortization, prepayment privileges, mortgage insurance, and debt service ratio. Amortization refers to the length of time it takes to pay off a mortgage, while prepayment privileges allow borrowers to make additional payments toward their mortgage without penalty. Mortgage insurance is often required for borrowers with a down payment of less than 20%, and the debt service ratio refers to the amount of debt a borrower has compared to their income.

4. Qualifying for a mortgage
To qualify for a mortgage in Canada, borrowers must meet certain criteria, including having a good credit score, a stable income, and a down payment of at least 5% of the purchase price of the property. Lenders will also consider the borrower's debt service ratio and may require mortgage insurance if the down payment is less than 20%. In Canada, borrowers can also use the Home Buyers' Plan, which allows first-time homebuyers to withdraw up to $35,000 from their Registered Retirement Savings Plan (RRSP) to use as a down payment.

5. Mortgage costs
In addition to the principal and interest payments on a mortgage, borrowers will also be responsible for other costs, including closing costs, property taxes, and home insurance. Closing costs can include legal fees, appraisal fees, and title insurance, and they can add up to several thousand dollars. Property taxes are based on the assessed value of the property and can vary depending on the location, while home insurance is required by lenders to protect the property in case of damage or loss. In Canada, there are also mortgage default insurance premiums that are required for mortgages with less than a 20% down payment, which can add thousands of dollars to the cost of the mortgage.


If you’re looking for a mortgage broker, consider reaching out to Keith Uthe Demystifying Mortgages. Unlike an agent in the bank, I represent you the client to many different lenders to find you the best terms for your mortgage and make sure you understand what those terms mean. This should be as important as the rate when making your borrowing decision. As a home buyer, this is the single largest investment and borrowing decision you will make at any one time and you should have someone independent of the lender in your corner looking out for you. This is why you need to be considering more than just the mortgage rate ensuring your mortgage offers you flexibility and freedom at minimal cost for those unexpected moments that happen in life. 

Whether you are a First-Time Home Buyer, Buying your next home or seeking to Refinance our Calgary Mortgage Broker has many Mortgage Solutions to consider. Serving clients across Calgary, Red Deer, Lethbridge, Edmonton, and Medicine Hat in Alberta.

Get in touch with us today!
To learn more about our services, please click here. To get in touch with us, please click here or call us at (403) 614-8843 or email us at