CMHC’s Homebuying Step by Step guide has the answers you need to your mortgage financing questions.

Congratulations! You’ve decided to begin your search for a new home, or perhaps you’ve already found the home of your dreams and are ready to make an offer. It’s now time to consider your mortgage options. But with so many different choices available, how can you select the right kind of mortgage for your needs?To help you make an informed decision, Canada Mortgage and Housing Corporation (CMHC) offers the following answers to some of the most common questions Canadians have about choosing a mortgage:

• What is the difference between conventional and high-ratio mortgages?
  A conventional mortgage is a loan for up to 80 per cent of the purchase price (or market value) of a home. With a conventional mortgage, the buyer supplies a down payment of at least 20 per cent, and mortgage insurance is usually not required. If your down payment is less than 20 per cent of the purchase price, however, you will typically need a high-ratio mortgage. High-ratio mortgages normally have to be insured (by CMHC, for example) against payment default.
• What are fixed, variable or adjustable interest rates?
  When you choose a mortgage, you have to decide whether you want the interest rate to be fixed, variable or adjustable. A fixed rate is locked-in for the entire term of the mortgage. With a variable rate, the payments remain the same each month, but the interest rate fluctuates in accordance with the overall market. For adjustable rate mortgages, both the interest rate and the mortgage payments vary based on market conditions. Talk to your lender to find out which option is right for you.
• Should I choose an open or closed mortgage?
  With a closed mortgage, you pay the same amount each month for the entire term of the mortgage. Closed mortgages can be a good choice if you want a fixed payment schedule, and you don’t plan on moving or refinancing before the end of the term. An open mortgage allows you to pre-pay a lump sum or even the entire loan at any time without a penalty. An open mortgage can be a good choice if you’re planning to sell your home in the near future, or if you want the flexibility to make lump sum payments.
• What about the term, amortization and payment schedule?
  The term is the length of time (usually from six months to 10 years) that the interest rate and other conditions of your mortgage will be in effect. Amortization is the period of time (such as 25 or 30 years) over which your entire mortgage debt will be repaid. Lastly, the payment schedule sets out how frequently you will make payments on your mortgage — usually either monthly, biweekly or weekly.

OTTAWA, March 26, 2009 — Today, the Canada Mortgage and Housing Corporation (CMHC) launched a consumer outreach campaign to help borrowers understand the importance of working with lenders to find manageable solutions if they are facing financial difficulties in repaying their mortgage loans.

CMHC Launches Campaign to Help Homeowners

“CMHC has a long tradition of offering mortgage default management tools to lenders to help them assist homeowners whose financial circumstances have changed. We want to remind people that the best course of action is to speak to their lenders at the first sign of financial difficulty. With early intervention, cooperation and a well executed plan, you can work together with your lender to find a solution.” stated Mark McInnis, CMHC Vice-President of Insurance Underwriting, Servicing and Policy.

The campaign includes consumer information on the options available to homeowners who may be having difficulty meeting their mortgage payments. This information is also being provided to government partners and credit counseling organizations.

CMHC advises homeowners to:

1. Talk to your lender at the first sign of financial difficulty
2. Clarify your financial picture, both for yourself and your lender
3. Stay informed about what options and resources might be available to you

For Approved Lenders with CMHC-insured mortgages, we provide tools and the flexibility to make timely decisions when working with homeowners to find a solution to an individual’s unique financial situation. These tools include:

Offering a temporary short-term payment deferral. Lenders may be prepared to offer greater payment flexibilities especially if previous lump sum prepayments have been made, or if an accelerated payment schedule has been previously chosen.

Extending the original repayment period (amortization) in order to lower the monthly mortgage payments.

Adding any missed payments (arrears) to the mortgage balance and spreading them over the remaining mortgage repayment period.

Offering a special payment arrangement unique to an individual’s particular financial situation.

More information and resources are available at CMHC’s website at www.cmhc.ca search keywords “mortgage payment difficulties”, or at 1-800-668-2642.

CMHC is Canada’s national housing agency. For more than 60 years CMHC has shared a wealth of knowledge and housing expertise to help create an informed and reassured homeownership experience for Canadians.

For more information:

Kristen Scheel
CMHC Media Relations
613-748-2799