FAQs

Mortgages are loans you take out to buy real estate or turn your home equity into cash. Once approved, you repay the loan according to specific terms that include interest rate, payment amount and timeline. These details are set out in the mortgage document.

Your lender registers a charge on your property. If you can't repay the mortgage, your lender can take possession of your property and sell it to collect any money you owe them.

Mortgage renewal rates in Canada are fiercely competitive, and that’s because most Canadian mortgage borrowers will be looking to renew their mortgage multiple times over the life of their mortgage. 90.4% of mortgages are renewed at the same lender, however, the 9.6% that are refinanced or switched to another lender is also important to lenders.

To attract borrowers, mortgage lenders offer low mortgage rates for those looking to switch or transfer, while their current lender will try to offer a low mortgage renewal rate to ensure that they don’t switch to another lender. Mortgage renewal rates will often be as low as mortgage rates for new purchases, and lower than refinance rates.

Your mortgage lender will offer you a renewal rate when your mortgage is up for renewal. This mortgage renewal rate will be locked in if you agree to renew your mortgage for another term. This rate might not be the best rate available, which is why looking at other lenders can help you determine if your lender is offering a competitive rate.

Some banks offer a guarantee that your mortgage renewal rate will be the lowest in a certain period. For example, RBC offers a 30-day renewal rate guarantee, which promises that if rates decrease below your agreed-upon rate in the 30 days before your renewal date, then your mortgage rate at renewal will be the lowest rate during this 30-day period.

You can be denied a mortgage renewal, as mortgage renewals are not guaranteed. Roughly 3% of mortgage renewals are denied. The approval rate is even lower for same lender refinancing, with 18.6% being denied a mortgage refinance.

If your financial situation has deteriorated, such as if you have missed mortgage payments on your previous mortgage, lost your job, or now have a significantly lower credit score, your mortgage lender might choose not to renew your mortgage.

If you’ve been denied a mortgage renewal, there are a few options that you can take. You could meet with your current lender to see if accommodation could be made, try to find a cosigner, or switch to another lender. You may have to consider a B-Lender or a private mortgage lender, which often have higher rates and fees.

Read more about bad credit mortgages andalternative mortgage lenders in Canada to see what options are available to you.

During your mortgage renewal process, you can expect to receive a mortgage renewal statement from your lender. This will outline the terms of your current mortgage and any options for renewing or changing these terms.

You'll receive a renewal letter from your lender at least 21 days before your mortgage term is set to expire. You may receive this letter by mail or electronically, depending on how you have set up communication with your lender.

It's important to carefully review this statement and pay attention to any changes in interest rates or terms. The renewal statement will include:

The remaining principal amount

Interest rate

Payment frequency

Term length

Any charges or fees

Your renewal statement may also come with a mortgage renewal contract for you to sign and return if you agree with the new terms offered by your lender.

Your renewal statement will state if your mortgage will be automatically renewed. Some lenders might have automatic renewals, which means that your mortgage will automatically renew if you do not take any action. Automatic renewals indicate that you accept the terms and rates that your lender offers, which might not always be the most favourable.

The offer in your mortgage renewal statement may include changes to your current interest rate or other terms. It's important to carefully review these changes and understand how they will impact your mortgage payments and the cost of your mortgage.

Some potential changes you may see are:

Interest rates have increased or decreased

Your payment frequency has changed

Your prepayment limits have changed or there is a different prepayment structure

Your term length has changed

You may also use this opportunity to renegotiate or negotiate new terms with your lender that better suit your needs.

Mortgage amortization period is the length of time it takes to pay off a mortgage, including interest. It may be between 5 and 30 years, depending on how much you can afford to pay. For a new mortgage, the amortization period is usually 25 years.

Mortgage term is how long you commit to your mortgage rate, details and conditions with a lender. When a term ends, you pay off the mortgage or renew it for another term if your lender agrees. Terms range from 1 to 10 years, but 4- to 5-year terms are most common.

You can prepay an open mortgage, in part or in full, without a prepayment charge. Open mortgages usually have higher interest rates than closed mortgages. But open mortgages are also flexible. If rates start to increase, you can easily switch to a closed mortgage.

If you prepay a closed mortgage before the mortgage term ends, you'll pay a prepayment charge. For example, for a fixed-rate closed mortgage, the charge is usually the greater of 3 months' interest or the interest rate differential (IRD). For a variable-rate closed mortgage, the charge is usually 3 months' interest. Closed mortgages usually have better interest rates than open mortgages.

A short-term mortgage (with a term of 3 years or less) usually has a lower interest rate than a longer-term mortgage. When interest rates are high, and you think they may drop, choosing a short-term mortgage lets you lock in for a shorter period. A short-term mortgage may also be a good option if you plan to sell your home or pay off the mortgage early.

A long-term mortgage usually has a higher interest rate than a shorter-term mortgage. When current rates are reasonably low, choosing a longer term secures the interest rate for a longer period of time and makes budgeting easier.

No, a HELOC is not the same as a mortgage loan. With a mortgage loan, you receive funds on a certain date and pay them back according to your mortgage agreement. A HELOC is a line of credit that lets you access up to 65% of your home's appraised value. You use the funds you need and pay them back. Both a HELOC and a mortgage loan are secured by a registered charge on the title to your property. Learn how to consolidate your debt into a mortgage.

Getting pre-qualified for a mortgage is the first step on your home-buying journey and can be done online in minutes. Our pre-qualification tool gives you an estimate of how much you might be able to afford for your first home or for a new home if you're considering selling your current one. You must still provide documents and more financial details before getting pre-approved for a mortgage. Learn moreAbout getting pre-qualified.

Getting pre-approved for a mortgage is a more significant step where you’ll be paired with a dedicated Mortgage Advisor. You’ll answer questions and provide financial documents that closely match those of a full mortgage application. If pre-approved, your pre-approval certificate will show your maximum mortgage amount, subject to several conditions. This certificate indicates to sellers and real estate agents that you’re serious about buying a home, but it doesn’t guarantee final approval.

With a cash-back mortgage offer, in addition to the mortgage principal, you get a percentage of the mortgage amount in cash. The interest rates on these mortgages are higher than on some other mortgages. You may want a cash-back mortgage if you need money for expenses, such as new furniture, or repaying loans to cover closing costs.

The mortgage stress test was introduced on January 1, 2018, as a way to protect Canadian homeowners. It requires banks to check that a borrower can still make their payments at an interest rate that's higher than they will actually initially get. The purpose of the stress test is to evaluate if a borrower (a.k.a. the potential homeowner) can handle a possible increase in their mortgage interest rate.

For Canadians to qualify for a federally regulated bank loan, they need to pass the mortgage stress test. To do this, homebuyers need to prove that they can afford a mortgage at a qualifying rate that’s higher than the rate they are approved for by their lender. The stress test was revised in June 2021. As of June 2021, that rate has been either the interest rate they were approved for by their lender plus 2%, or 5.25%, whichever is higher.

For example, if your mortgage rate is 2%, then the stress test would require that you be able to afford the mortgage at a rate of 5.25%, since that's higher than 4 % (the approved rate plus 2%). If the rate approved by their lender is 5%, however, the mortgage stress test would require that the buyer be able to qualify for the home at a rate of 7% (ex. the approved rate of 5% plus 2%).

This stress test is also performed with homeowners looking to refinance, take out a home equity line of credit or change mortgage lenders. Those who renew with the same lender don't have to undergo the stress test again.

This change in mortgage approvals has meant that borrowers may end up only qualifying for lower mortgage amounts. This is because of the higher qualifying rates as a result of the stress test.

1. Build your budget around saving

If you dream of buying a home in Canada, it's important that you build your budget around making that dream come true. First, you might want to use an affordability calculator to help you figure out how large of a mortgage you can handle. Then, when you look at how much you can afford to spend on housing, food or other expenses, decide what you'd like to put aside every month towards saving for homeownership.

Consider choosing a percentage of your paycheque to direct into savings. It might be anything from 5% to 20% each month. Once you've decided on that, you can divide up the rest of your budget towards your wants and needs. That will help you choose a rental apartment or home, whether to buy a car or use public transit and make other financial decisions that are in line with your home ownership goal.

Unsure where to start? Scotia advisors can help you make a home ownership savings plan.

2. Automate your savings

The fastest way to save money for any financial goal is to make it so easy that it’s part of your routine. You can set up pre-authorized contributions after your monthly, biweekly or weekly paycheques.

By immediately putting the money into your saving or investing accounts, you won't be tempted to spend it. You'll also earn interest on the money, which could help you save up the money you need sooner.

3. Use your refunds and bonuses

While it can be hard to find extra money to put towards saving for a down payment — especially when dealing with inflation — you can direct any expected or unexpected windfalls towards your savings. For example, if you get a tax refund, you can put that towards your down payment. Does your work give you a bonus? Put that towards your down payment, too. Any amount you can add to your savings goals can help.

4. Open a First Home Savings Account (FHSA)

The Government of Canada is introducing the First Home Savings Accounts (FHSAs) in 2023. This is a registered savings account in which first-time homebuyers in Canada can contribute up to $8,000 per year, up to a lifetime maximum contribution limit of $40,000 per taxpayer.

When you make a contribution to an FHSA, you'll be able to take a tax deduction to help offset the tax you paid on that $8,000 in that year. You may carry forward up to $8,000 of your unused annual contribution amount to use in a later year. The money then grows tax-free and can be withdrawn for your first home purchase without incurring taxes.* You also don’t need to make a repayment on the money that you withdraw from the FHSA.

5. Use your Registered Retirement Savings Plan (RRSP)

While RRSPs are primarily for saving for retirement, the government lets taxpayers use a portion of RRSP savings to put towards a down payment on their first home. This plan, called the Home Buyer's Plan, allows you to withdraw up to $35,000 from your RRSP funds to put towards your first home. If you choose to do so, you'll have to make an annual repayment and repay the funds within 15 years.

You can use the Home Buyer’s Plan and the FHSA together to save towards your first home.

If you haven't yet created an RRSP, be sure to check with the CRA to understand how much you can contribute. RRSP contributions are limited to up to 18% of your previous year's income, up to a maximum of $29,210 in 2022.

6. Open a Tax-Free Savings Account (TFSA)

TFSA is a registered tax-advantaged account where you can invest after-tax funds and they grow funds and take out funds at any time tax-free for any reason. It's great for investing for short- and medium-term financial goals, like buying a home.

If you have maxed out your RRSP contribution room and FHSA contribution room, a TFSA is a great alternative account to save for a down payment. Because your investment returns are tax-free in a TFSA, investors might choose a TFSA to take advantage of potentially market returns from mutual funds or higher GIC rates.

Be sure to check your TFSA contribution room, you can also check with the CRA for that amount (like with the RRSP).

Bottom line

While buying your own home might feel like a long-term goal, if you save consistently and strategically, you'll be able to make your home ownership dream come true much sooner.

When looking for a mortgage, you can compare a variety of options offered by different lenders. In addition to banks and credit unions, you can also consider getting a mortgage from an insurance company, mortgage company, trust company or a loan company. Who you pick will be based around which mortgage works best for you; beyond the mortgage rate, think about things like the length of the mortgage term, the amortization period and the payment schedule that will work best with your financial plan. You can compare different mortgage options using the Mortgage Tech Calculator to find the best mortgage to suit your needs.

Once you choose a lender, you can start the pre-approval process to see if you qualify for a mortgage. While different lenders have different qualification criteria, the pre-approval process typically involves a review of your:

Income: What are your sources of income?

Assets: What do you currently own (cars, real estate, investments/savings)?

Debt: What do you currently owe? (credit card bills, student loans, etc)

Down payment: If you are buying a home, how much do you have saved for a down payment?

Credit history: How responsible are you with repaying your debts? Something that can negatively impact your credit score is having applied for credit with different lenders recently. Another thing to avoid is applying for additional credit in the period after you have your mortgage approved, but before funding (buying your home). This can jeopardize your mortgage approval, because taking on additional debt can negatively impact your credit score. Learn more here about improving your credit score.

Mortgage borrowing costs refer to the total costs associated with getting a mortgage. To determine your borrowing costs, you will need to know the annual percentage rate (APR).

The APR is the cost of borrowing charged on your mortgage loan each year expressed as an annual rate. The APR includes more than just interest. It is a combination of your interest rate, certain fees and extra charges that you must pay in connection with the mortgage loan expressed as a percentage.

When budgeting for your mortgage, you should also consider closing costs.

Administrative fees

Legal fees

Home inspection fees

Additional insurance (title insurance, property insurance)

Property taxes

Moving costs

Land transfer fees

Appraisal fees

Prime Rate is currently at 7.20% as of September 25th, 2023.

For fixed and variable rate quotes, I'll have to connect you with one of our Mortgage Brokers as this will greatly depend on factors like your purchase type, down payment, income, credit, location and property details.

Yes, you can refinance up to 95% of your home's value if you're going through a marital breakdown. Conditions apply.

No. When switching lenders at renewal, you no longer need to pass the stress test for a straight switch.

This means you can move to a new lender without refinancing or accessing additional funds/equity, making the process smoother and less restrictive.

If you sell real estate within 365 days of purchasing it, the CRA Residential Property Flipping Rule (effective January 1, 2025) treats any profit as taxable business income, removing the principal residence exemption.

Exceptions apply for specific life events.