Fixed Rates Compared to Variable Rates

Video #4 – Should You Select a Fixed or a Variable Rate When You Obtain Your Own Mortgage?

One of the first decisions homebuyers and mortgage shoppers face is whether to select a fixed rate or variable rate mortgage.

With a fixed rate mortgage, the mortgage rate and payment you make each month will stay constant for the term of your mortgage. With a variable rate mortgage, however, the mortgage rate will change with the prime lending rate as set by your lender. A variable rate will be quoted as Prime +/- a specified amount, such a Prime – 0.45%. Though the prime lending rate may fluctuate, the relationship to prime will stay constant over your term. This video explains the 2 options in more detail.

Comparing Fixed and Variable Mortgage Rates

You can think of the difference, or spread, between variable and fixed mortgage rates as the price of insurance that lending rates will not increase, more or less. When interest rates are low and are not expected to fall further, it is generally advised to lock in a fixed rate, as variables rates will, at best, stay the same, or increase. On the other hand, if you expect interest rates to fall with some certainty, then a variable rate is preferred, as you will be able to absorb the benefit of paying lower interest. Similarly, if the difference between the variable rate and the fixed rate is significant, it may not be worth paying the premium for the stability protection of a fixed rate. Read more

What Is Mortgage Default Insurance? Do I need It?

Video #5 – Do I Need Mortgage Default Insurance When I Transfer The Property Into My Name?

Mortgage default insurance, commonly referred to as Canadian Mortgage and Housing Corporation (CMHC) insurance, is mandatory in Canada for down payments between 5% (the minimum in Canada) and 19.99%. Mortgage default insurance protects lenders if a homeowner defaults on their mortgage. To understand how it is calculated and paid for, watch the video below.

Although mortgage default insurance costs homebuyers 1.75% – 2.75%1 of their mortgage amount, it is actually beneficial to the buyer market. Without it, mortgage rates would be higher, as the risk of default would increase. Lenders are able to offer lower mortgage rates when mortgages are protected by default insurance, as the risk of default is spread across multiple homebuyers.

Who Offers Mortgage Default Insurance?

In Canada, mortgage default insurance is provided by CMHC (Canada  Mortgage and Housing Corporation), Genworth Financial and Canada Guaranty  Mortgage Insurance.
canada-guaranty-logogen financial

cmhc logo

How Do You Pay Mortgage Default Insurance?

Mortgage default insurance is financed through your mortgage. Unlike closing costs such as lawyer fees and land transfer tax, it does not require a lump sum cash outlay at the time you purchase your home. Your insurance premium is added to the value of your mortgage, and your monthly payment increases accordingly. Continuing with the above example, the revised mortgage amount would be $260,000 + $5,200 = $265,200. Read more

Land Transfer Tax – What Is It and Does It Apply to Me?

Video #6 – Land Transfer Tax (LTT) is a full tax everyone has to pay unless you are a first time home buyer. Land Transfer Tax is charged by the Land Title office when you make changes to a property’s title (ex. you are putting the property title from someone else’s name into your name). This is not the same as property tax and is not a part of your property tax payments.

This is often overlooked when considering the total cost of purchasing a home. All provinces have a land transfer tax, except Alberta and Saskatchewan, who instead levy a much smaller transfer fee. To see how land transfer tax is calculated, watch the video below. To help offset the cost of land transfer tax, British Columbia offers land transfer tax rebates for first-time home buyers.

Calculating British Columbia Land Transfer Tax

The amount of tax you pay is based on the fair market value of the land and improvements (e.g. buildings) on the date of registration unless you purchase a pre-sold strata unit. The tax is charged at a rate of 1% for the first $200,000 and 2% for the portion of the fair market value that is greater than $200,000.

For example, if the fair market value of a property is $250,000, the tax paid is $3,000.

PTT Calculator
Enter Property Value:
Tax on amount under $200,000:
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British Columbia First-Time Homebuyer Land Transfer Tax Rebate

First-time homebuyers are eligible to receive a full land transfer tax refund on homes purchased for $425,000 or less. On homes purchased between $426,000 – $450,000, the first-time homebuyer will be eligible for a partial refund equal to [ ($450K – fair market value) / 25K ] * LTT amount.

You Can Qualify For the First-Time Homebuyer Land Transfer Tax Rebate If:

    • You are Canadian citizens or permanent residents as determined by Immigration Canada

Read more

Mortgage Payment Options Available To You

Video #7 – Payment Options For Your Own Mortgage

When you purchase a property and take on your own mortgage, how much you pay and how often you pay it depends on which mortgage payment frequency option you choose. In Canada, you can choose from five different mortgage payment options: monthly, bi-weekly, accelerated bi-weekly, weekly, or accelerated weekly. The most popular payment options are monthly, bi-weekly, and accelerated bi-weekly. To see how all three could affect your mortgage payment and repayment, watch the video below.

What are the different mortgage payment options?

  • Monthly
  • Bi-weekly
  • Accelerated Bi-weekly
  • Weekly
  • Accelerated Weekly

What is a monthly mortgage payment?

A monthly mortgage payment is when your mortgage payment is withdrawn from your bank account on the same day of every month (i.e. on the 1st). With a monthly mortgage payment, you make 12 payments per year.

What is a bi-weekly mortgage payment?

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Real Estate Glossary



   Real Estate Terms 




Amortization Period The number of years it will take to pay back your mortgage loan.

Assignment Sale An Assignment Sale is when the original purchaser sells and/or transfers all the rights and obligations of the original contract between themselves and the Vendor to another party before the official completion date for the property. Title transfer for the property does not occur until the city issues the necessary permits and the unit is ready for occupancy.

Assumability Allows the buyer to take over the sellers mortgage on the property.

Building Permit A certificate that must be obtained from the municipality by the property owner or contractor before a building can be erected or repaired. It must be posted in a conspicuous place until the job is completed and passed as satisfactory by a municipal building inspector.

Closed Mortgage A mortgage that locks you into a specific payment schedule. A penalty usually applies if you repay the loan in full before the end of a closed term.

Closing Costs Costs, in addition to the purchase price of a home, such as legal fees, transfer fees, and disbursements, that are payable on the closing date. Closing costs typically range from 2 to 4 percent of a home’s selling price. Read more