The loan you get from a lender to help pay for your home is a mortgage. A mortgage is a legal contract between you and your lender. It specifies the details of your loan and it's secured on a property, like a house or a condo. With a secured loan, the lender has a legal right to take your property.

A fixed rate mortgage is one where the rate doesn’t fluctuate during the fixed rate period of the loan. This allows you to budget for your mortgage payment, as it will always be the same. A fixed rate mortgage does come with steep penalties if you choose to break it before the end of your term.

A variable rate mortgage's interest rates fluctuates based on the underlying benchmark interest rate. This affects how much of your payment applies to the principle of the mortgage. If interest rates go down, more of the payment is applied to the principal. If the rate goes up, more of the payment goes towards the interest. Variable mortgages are easier to get out of, as they only have a three month penalty, in essence, they
are more flexible.

Choosing a fixed rate, means that your mortgage will most likely be closed. Which means you cannot pay off the balance without incurring any penalties. However, most lenders will allow you to pay up to 20% of the balance each year without a penalty. (policies vary lender to lender)

An open mortgages means your mortgage can be paid off in full, at any time, with no penalty. Open mortgages  generally have a much higher interest rate than a fixed term, closed mortgage.

To qualify for a mortgage from a bank, you'll need to pass the mortgage stress test. To do this, home buyers and homeowners who are refinancing need to prove that they can afford a mortgage at a rate higher than the one that they're approved for.

Since June 2021, the rules for the mortgage stress test have meant borrowers have to be approved for a rate of either the interest rate they were approved for by their lender plus 2%, or 5.25% (the minimum qualifying rate), whichever is higher. This rate can be referred to as the “stress-tested rate”.

For example, if you’re approved for a mortgage at an interest rate of 3%, you’ll have to prove that you can also be approved for a mortgage with a 5.25% rate. But if you’re approved for a mortgage at an interest rate of 4%, you’ll need to prove you can also be approved for a mortgage with a 6% rate.

If you want to buy a home with a down payment of less than 20%, you’ll need mortgage loan insurance. This protects your lender in case you can’t make your payments.

CMHC mortgage loan insurance lets you get a mortgage for up to 95% of the purchase price of a home. It also ensures you get a reasonable interest rate, even with your smaller down payment.

Mortgage loan insurance helps stabilize the housing market, too. During economic slumps when down payments may be harder to save, it ensures the availability of mortgage funding.

To get mortgage loan insurance, you’ll need a minimum down payment. The amount depends on the home’s purchase price:

• if the home costs $500,000 or less, you will need a minimum down payment of 5%
• If the home costs more than $500,000, you will need a minimum of 5% down payment on the first $500,000 and 10% on the remainder
• If the home costs $1,000,000, or more, mortgage loan insurance is not available

Your lender pays an insurance premium on mortgage loan insurance. It’s calculated as a percentage of the mortgage and is based on the size of your down payment. Your lender will likely pass this cost on to you. You can pay it in a lump sum or add it to your mortgage and include it in your payments.

To qualify for a CMHC-insured mortgage, your credit score must be at least 680.