Mortgages 101
We are here to make financing your new home a simple and enjoyable experience. As with any financial decision, it is important that you feel comfortable with the process and part of that is educating yourself so you feel prepared. Please feel free to reach out to us at any time with questions.
Here are some basic mortgage terms that we recommend you become familiar with.
Pre-Approval: An official document that we provide which states what you can afford. Many sellers require proof of financing as a condition of the sale - this document is your proof. It is best to get before you shop!
Amortization: The overall length of time it will take to pay off your mortgage entirely (commonly 25 years).
Term: The length of time you agree to adhere to specific options and to pay a specific rate - a contract length. At the end of each term, you may renegotiate the mortgage and choose options.
Types of Interest Rates:
Pre-payment Options: Allows you to make extra payments, increase your regular payments or pay off your mortgage early without having to pay a penalty charge. Most Carpathia mortgages offer an annual 20% pre-payment privilege.
Open Mortgage: Allows you to pay off your mortgage in part or in full at any time without penalty.
Closed Mortgage: Offers no (or defined) options to pay off your mortgage in part or in full at any time. Usually has a lower interest rate because of the payoff conditions.
Conventional Mortgage: You borrow equal to or less than 80% of the value of the home because you can provide a 20% down payment.
High-Ratio Mortgage: You borrow over 80% of the value of the home because your down payment is less than 20%. You will likely be charged for mortgage loan insurance (CMHC or Genworth) which is added onto your total borrowed amount and does not need to be paid up front.
Portability: Allows you to transfer or switch your mortgage to another home with little or no penalty if you change homes during your term length. Carpathia mortgages offer portability.
Pre-Approval: An official document that we provide which states what you can afford. Many sellers require proof of financing as a condition of the sale - this document is your proof. It is best to get before you shop!
Amortization: The overall length of time it will take to pay off your mortgage entirely (commonly 25 years).
Term: The length of time you agree to adhere to specific options and to pay a specific rate - a contract length. At the end of each term, you may renegotiate the mortgage and choose options.
Types of Interest Rates:
- Fixed Rate: The rate stays the same for the length of the term.
- Variable Rate: The rate may fluctuate dependent on market rates.
- Protected (Capped) Variable Rate: The rate may fluctuate, but will not rise over a predetermined maximum.
Pre-payment Options: Allows you to make extra payments, increase your regular payments or pay off your mortgage early without having to pay a penalty charge. Most Carpathia mortgages offer an annual 20% pre-payment privilege.
Open Mortgage: Allows you to pay off your mortgage in part or in full at any time without penalty.
Closed Mortgage: Offers no (or defined) options to pay off your mortgage in part or in full at any time. Usually has a lower interest rate because of the payoff conditions.
Conventional Mortgage: You borrow equal to or less than 80% of the value of the home because you can provide a 20% down payment.
High-Ratio Mortgage: You borrow over 80% of the value of the home because your down payment is less than 20%. You will likely be charged for mortgage loan insurance (CMHC or Genworth) which is added onto your total borrowed amount and does not need to be paid up front.
Portability: Allows you to transfer or switch your mortgage to another home with little or no penalty if you change homes during your term length. Carpathia mortgages offer portability.
This section is coming soon! Thank you for your patience.
Our Mortgage Products
We have a variety of mortgages with options to suit your needs. Please feel free to contact us with any questions.
This mortgage is perfect for when you need a little help reaching a 20% down payment.
You provide 5% of the property value or purchase price (whichever is greater) as a down payment on the home.
An immediate family member*, the donor, will pledge 15% of the property value or purchase price (whichever is greater) into a non-registered deposit instrument with us. This pledged amount, which remains in the donor's name, is used as collateral on the home, acting like a down payment.
Now you have a 20% down payment!
Your mortgage will be fixed for a 5 year term, with a maximum amortization of 25 years.
The Savings
The K2K Mortgage® is a great way to save money. As the home buyer, you save the insurance premiums that would have otherwise been charged by the mortgage insurance company, which could be as high as $8,000 on a $200,000 mortgage.
As the donor, you are not only helping a family member save thousands of dollars, but you are also earning interest on your pledged funds which is 100% guaranteed by the Deposit Guarantee Corporation of Manitoba.
What happens after 5 years?
After 5 years with continuous mortgage payments the principal amount of your mortgage should have decreased by the same amount as your donor has pledged so the pledged money is released. This means the donor can use their pledged money as they wish and your mortgage continues to decrease.
Using the example above, an immediate family member as a donor can save the purchaser over $8,000 on a $200,000 purchase over 5 years (example based on rate of 3%).
* "Immediate Family" includes the following relatives:
You provide 5% of the property value or purchase price (whichever is greater) as a down payment on the home.
An immediate family member*, the donor, will pledge 15% of the property value or purchase price (whichever is greater) into a non-registered deposit instrument with us. This pledged amount, which remains in the donor's name, is used as collateral on the home, acting like a down payment.
Now you have a 20% down payment!
Your mortgage will be fixed for a 5 year term, with a maximum amortization of 25 years.
The Savings
The K2K Mortgage® is a great way to save money. As the home buyer, you save the insurance premiums that would have otherwise been charged by the mortgage insurance company, which could be as high as $8,000 on a $200,000 mortgage.
As the donor, you are not only helping a family member save thousands of dollars, but you are also earning interest on your pledged funds which is 100% guaranteed by the Deposit Guarantee Corporation of Manitoba.
What happens after 5 years?
After 5 years with continuous mortgage payments the principal amount of your mortgage should have decreased by the same amount as your donor has pledged so the pledged money is released. This means the donor can use their pledged money as they wish and your mortgage continues to decrease.
| K2K® | High Ratio | |
| Property | $200,000.00 | $200,000.00 |
| Purchaser's Down Payment | $10,000.00 | $10,000.00 |
| Insurance Premiums | $5,985.00 | |
| Total Mortgage | $190,000.00 | $195,985.00 |
| Monthly Payments | $899.07 | $927.49 |
| Balance after 5 years | $162,401.52 | $167,517.42 |
Using the example above, an immediate family member as a donor can save the purchaser over $8,000 on a $200,000 purchase over 5 years (example based on rate of 3%).
* "Immediate Family" includes the following relatives:
-
current spouse; married or common-law of the opposite or same sex or foster parents
-
children; own child, step-child, grand child, foster child
-
sibling's; bother, sister, including step or half
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sibling's current spouse; brother-in-law or sister-in-law
-
sibling's children; niece or nephew
-
current spouse's sibling's; brother-in-law or sister-in-law
-
parents; stepparents, grandparents, great grandparents
-
spouse's parents or grandparents
So, you want to buy a house but don't have a 20% down payment on hand...
Canada Mortgage and Housing Corporation (CMHC) or Genworth mortgages are attractive options when saving a 20% down payment is just not feasible. These mortgages allow you to borrow up to 95% of the appraisal value or the purchase value (whichever is less) of a residential property.
Mortgage insurance is required for this and the cost will vary depending upon the amount financed and the percentage of the down payment.
To find out if this is the right option for you, give us a call and we will walk you through it.
Canada Mortgage and Housing Corporation (CMHC) or Genworth mortgages are attractive options when saving a 20% down payment is just not feasible. These mortgages allow you to borrow up to 95% of the appraisal value or the purchase value (whichever is less) of a residential property.
Mortgage insurance is required for this and the cost will vary depending upon the amount financed and the percentage of the down payment.
To find out if this is the right option for you, give us a call and we will walk you through it.
We educate our members at the beginning of the builder mortgage progress and keep you informed every step of the way to avoid unexpected surprises.
During the construction, mortgage interest only is due. The interest will be calculated on the advanced portions. Interest payments may be maintained on a scheduled frequency or can be deducted from the amount disbursed to the solicitor on the next advance state. Payment will continue to be interest only until mortgage is fully advance or 6 months into the contract; whichever occurs first. At this point, payments will commence with regular scheduled principal and interest payments until end of term.
All advances will be made to the solicitor on file with the solicitor maintaining a 7.5% lien holdback. Advances are based on inspections at each stage.
Advancement Stages
During the construction, mortgage interest only is due. The interest will be calculated on the advanced portions. Interest payments may be maintained on a scheduled frequency or can be deducted from the amount disbursed to the solicitor on the next advance state. Payment will continue to be interest only until mortgage is fully advance or 6 months into the contract; whichever occurs first. At this point, payments will commence with regular scheduled principal and interest payments until end of term.
All advances will be made to the solicitor on file with the solicitor maintaining a 7.5% lien holdback. Advances are based on inspections at each stage.
Advancement Stages
- Basement, foundation, framing and roofing are complete and applicable or city services are roughed in.
- Plumbing, heating, and electrical are roughed in and basement floor and exterior is complete.
- Drywall and taping complete, finished fixtures (plumbing and electrical) and cupboards are installed.
- Painting, flooring, and landscaping are complete and occupancy permit is obtained.
