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Different Sources of mortgage Funding in Canada

While in Canada, most of the people go to a bank thinking that the bankers would help them in getting their loan. They do not want to get their funding from other sources of the funds for their home. There are lots of sources from which they can pay their Mortgages easily without out any burden. Here also, your Mortgage broker plays a prominent role in reducing the cost that you pay for your lender. So, take a step forward when you are about to choose your mortgage broker.

Let’s go through some of the terms that are going to be used in the terms and conditions of the fund makers,

Conventional mortgages

A conventional mortgage is nothing but a type of Mortgage in which the underlying conditions hit the funding criteria. About 35% of the mortgages that are depending on the market conditions and consumer trends come under conventional mortgages. Here, there is a guarantee purchase of 35 to 50% of all the mortgages. The rates may be fixed sometimes, depending on the asset while it can also become adjustable-rate mortgage depending on the same.

Here, there is a minimum of 20% down and the credits are good. Conventional Mortgage can prove to be handy in your business in Canada.

Second Mortgage

On conventional basis, the second mortgage is a second lien on the property. A second mortgage is a fixed amount, which should be paid in a certain period of time. It can also be told as a credit card policy where the borrower has the option to pay the amount less than the interest that is charged each month. The second Mortgage is riskier for the lenders and so the interest rates are more than the first mortgage. The lenders do this because, if the loan goes into default, then the first mortgage is paid first and then only comes the second one.  

If the buyer does not want to break the first mortgage so as to get some additional amount out of their home, they go for second mortgage.

High Ratio Mortgages

High ratio mortgages come into play when your down payments are less than 20% of the actual purchase price. So, your mortgage must be insured against the payment by the insurer, such as the Canada Mortgage.

High ratio mortgage can also be told as the one with a loan ratio of more than 80%. The insurance for the Mortgage is purchased by the lender through any one of the Canada’s three default ways,

·    Canada Mortgage and Housing Corporation

·    Canada Guarantee

·    Genworth Financial

In Canada, the minimum down payment is 5%.

Let’s see some of the funding sources,

Loan companies

These loan companies are in the business from the beginning. They are ready to give you how much ever you want, provided you give them an assured property or asset. You cannot contact the company directly and there is always a broker right in the middle of you both. This broker provides you all the information regarding the mortgage financing.

Banks

Banks are the largest lenders and even they ask for an asset for the loan to get sanctioned. They provide you with Conventional mortgages and High ratio Mortgages. So, you can easily get a loan from a bank without much difficulty.

Finance companies

Before you hit a finance company, just look for a broker, who can help you through all the formalities. The broker must also be an experienced one. The finance companies provide you with all the three kinds of mortgages such as the conventional, high ratio and the second mortgages. A broker plays a major role in the financial companies.

Private Investors

They are just normal rich people who have some cash to lend. They just provide you the money and do not check all the hard terms and conditions. They have their own terms and conditions that should be full filled by the buyer. The only drawback here is the interest rates. Even here, it is better to go with the brokers to help you with the process.

Credit Union

They provide all the three types of mortgages. Credit Unions are done in small basis.

They only difference with all these funding sources are that the banks will not have flexibility in their rates, but the other lender can change the rates according to their clients. It is just like going around for shopping; you have to go to each lender for the best rates that can suit you well. Having a broker will help always.

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