How to get a mortgage in Canada: A complete guide

Buying a house is one of the milestones in any person’s life. Be it a condominium in Canada or rural property, everybody wants to own a home as it is a great way to improve quality of life, provide safety to family, and secure future. Though owning a home is an achievement, the process of buying it can be strenuous and complex. There are many important steps to be taken before owning a house, such as, assessing your financial situation, getting a mortgage, etc.

In this article, we have given a complete guide that will help you to buy the perfect house for yourself. And we have also discussed the mortgage process from beginning to last.

What is a Mortgage?

The term mortgage means a loan that is used to purchase or maintain a land, home, or any other kind of real estate property. Here, the borrower agrees to pay a sum to the lender over a period of time, typically in a series of frequent payments that are divided into interest and principal. And the property here serves as collateral to secure the loan.

A borrower must always apply for a mortgage loan through their preferred lender and make sure that they meet all the requirements such as, down payments and minimum credit scores. All the mortgage applications go through a tough underwriting process before they get to the end phase. Mortgage types are differentiated on the basis of the needs of the borrower, like fixed-rate and conventional loans.

Are you ready to buy?

Your Savings– It is possible to buy a home in Canada with a small down payment, still you should keep in mind that it is going to be a considerable size of the amount. Mostly, a standard 20% down payment is required for mortgages. And those who cannot raise this amount, have to pay the mortgage insurance. Mortgage insurance can cost $100- $150 per month. Apart from the mortgage amount, homeowners are also advised to keep 1.5-4% of the home’s selling price for closing costs which are usually paid on closing day.

Financial Condition– Anyone who is ready to give you a mortgage will, first of all, analyze your financial condition. This is a precautionary measure taken by banks and other lenders. The lenders want to minimize their risk before handing over such a huge amount of money to anyone. They will look at your income and the liabilities you have and will compare them to the price of the property you intend to buy. So, before applying for any mortgage you should do an all-round check of your financial status. If you have a huge amount of credit card debt, student loan, or any other kind of loan, you will want to pay back either some of it or if possible the whole amount before applying for a mortgage. Or you should consolidate those loans.

Credit Scores– Credit Scores play a very important role in mortgage applications. A bad credit score puts a very bad impression on the bank or any other lender. Credit scores or credit history are so crucial because these scores have an impact on the rates offered to you. The two major credit bureaus in Canada are Equifax and TransUnion. Both of the bureaus provide different credit scores. In Canada, 730 and more credit score is considered good and an 800+ credit score is considered excellent.

Job Security– Before applying for a mortgage, you should have a reliable income so that you can pay mortgage payments smoothly. It is true that no one can predict the future, but you should be assured that you’ll be able to pay back the mortgage with a balanced life. In addition to that, you should also decide beforehand the type of home or neighborhood you want to live in. All this information will help you at the time of taking the mortgage.

Understanding Mortgage Variations. Once you get to know how much home you can afford and what kind of home you are searching for, it’s time that you start searching for your mortgage options. All the home loans are not created equal, with mortgages having different terms of their down payment requirements, mortgage terms, interest rates, and interest rate structure. There are three main methods of comparing mortgages, with each kind offering its own benefits.

Conventional vs. Non-conventional– Conventional mortgages are those mortgages that involve a deposit of 20 percent and have relatively low-interest rates. And non-conventional loans normally have higher interest rates and require dedicated mortgage insurance.

Open vs. closed– Open mortgages are those mortgages that have a flexible payment schedule and allow for earlier payments, often at the price of higher interest rates. Whereas, a closed mortgage involves a non-flexible payment schedule and fixed rates.

Variable vs. fixed vs. convertible– Variable interest loans are those loans that change according to wider economic conditions. And fixed-rate home loans remain the same for the whole term of the loan. And the last convertible rate home loans are those loans that remain locked in, but only for a limited period of time.

Reverse Mortgage– A reverse mortgage is a unique kind of mortgage that allows people to access the cash from the equity they have created in their home. This option is only present in Canada to people that are above 62 years of age, with a reverse mortgage is a magnificent way to finance the retirement.

Where Can I Get A Mortgage?

There are several ways you can take while looking for a mortgage, and these ways are working with a mortgage broker or going to a bank or credit union.

Bank- Most people while looking for a mortgage prefer going to banks or to their local bank branch where they have a chequing account. But lending money from a bank can be a hectic task because there are lots of rules and regulations which an individual needs to follow to get a loan from the bank. Whereas, on the other hand taking a loan from a mortgage broker is a way too simple task as compared to bank loans, because while lending money from the bank you need to show several documents and answer their long and unending questions, it’s not the same when borrowing money from a mortgage broker.

Mortgage Broker- Another very easy way to get a loan or mortgage is through a mortgage broker. An independent mortgage broker is an individual who has access to various lenders and they can also provide you with a piece of good and unbiased advice. Before you make up your mind and go to your local branch we suggest you explore the option of a mortgage broker.

Why get Mortgage from a Mortgage Broker?

Mortgages are one of the biggest financial commitments that all of us make at some point of our life, but they can be risky and complicated. And with so many products available it’s not an easy task to find the correct deal for your needs. And that’s where mortgage brokers come into the scene. They assist you to get the perfect and most suitable mortgage for your circumstances and make your path easy to get an offer. And there are several reasons why you should consider using a broker while getting a mortgage loan.

• Market Knowledge- Other than finding the most competitive mortgage product, a mortgage broker knows several other things related to mortgages. A professional mortgage broker knows which mortgages you will be able to access and which lenders are going to reject your application. Brokers help you to land it in the first attempt, they also have an idea about the lenders that are going to turn around your mortgage application.

• Access To Exclusive products- Mortgage brokers can access those mortgages that may not be available to you directly. Some of the lenders choose to offer their products with the assistance of brokers and they don’t deal directly with the people. There are high chances that these products may better match with your conditions and you can get these only if you go through a broker.

• Hassle-free Process- If you go to your bank for getting a mortgage and purchasing your home it can be a very complicated task, with many documents to submit and forms to fill out. But the broker handles all your legal work by himself and takes away all your tensions and leaves you stress-free.

• Specialist Needs- If you are a self-employed individual you have a seasonal income and you have a history of bad credit then it will be very difficult for you to get a mortgage through banks. A mortgage broker has access to various specialist lenders and experience in helping those people who are denied mortgages from the mainstream market.

• Open All Hours- If you hire a professional mortgage broker, their services will be always open to you at your convenience, on weekends, or even during the lunch hour. You can get in contact with them in your preferred way whether over the phone, by email, on social media, or on video calls. This flexibility of mortgage brokers makes them better than the building societies and street banks.

• Wider Financial Advice- Brokers have their specialty in various other areas of financial services, which means they can handle all your personal finances, rather than just working with your mortgage. for example, a broker can assist you in arranging buildings cover, which will be asked by your mortgage lender, and by your side, they can also talk about life insurance and various other types of cover that might be suitable for you. Brokers not only help you in getting the home of your dreams but can also recommend the best insurance plans that are suitable for you.

Factors that lenders look at while approving a mortgage

Lenders look at several factors before approving mortgage applications. Some of these factors are given below:

• Income- Lenders prefer giving a mortgage to borrowers who have a stable income. They ask for proof that your income is enough to make mortgage payments. If you get a full-time salary or guaranteed salary, that would make the lenders trust you. But if you get an hourly salary based on a contract or which is not even guaranteed, lenders will hesitate before considering you. And if you are self-employed, you can still get a mortgage, it’s just that you will have to show more documents.

• Down Payment- The lenders ask for certain documents based on the mode of your down payment. If you are paying the down payment from a bank account, the lender will ask for the last 90 days’ transaction history. If your funds are from RRSPS, or from investments then you will have to provide three monthly statements. And if it is from the sale of another property, then you will need to give a copy of the purchase agreement with your signature and a recent mortgage statement.

• Assets- You are required to give the lender a summary of all your assets, including chequing accounts, TFSAs, saving accounts, non-registered accounts, and vehicles. Even though assets are not included in the calculation of your debt ratios have substantial assets give proof to the lender that you are a responsible borrower.


Each one of us at some point of time have thought of getting a mortgage loan, whether it is for our home, studies or anything else. Getting a mortgage quickly in few steps and according to your circumstances at a reasonable rate is very important, and that is possible only when we get the loan through a mortgage broker. Thus, it is suggested that you explore all possible options of brokers before borrowing money or while getting a mortgage loan.