Mortgage모기지 (주택 담보 대출)

What is it?

A mortgage is money you borrow to buy a home, with the home as security (the lender can take it if you do not repay). You borrow the price minus your down payment (the part you pay with your own money).

You repay the principal (the amount borrowed) plus interest (the cost of borrowing) in regular payments, usually monthly or every two weeks. When it is fully repaid, the lender’s right ends and the home is yours free and clear.

If you stop paying, the lender can sell the home under the law (power of sale) to recover the debt. CMHC notes that if the sale does not cover the debt, the borrower may still owe the shortfall.

In Ontario it is registered on title as a “charge”

Ontario’s Land Titles Act calls a mortgage a “charge”. The owner (the chargor) promises to repay the lender (the chargee) and that right is registered against the land. A registered charge must state the principal amount it secures.

On closing (the day you pay the balance and become the owner), your lawyer registers the charge in the electronic land registry together with the transfer. Ontario’s Mortgages Act says “mortgage” includes any charge on property for securing money, so the two words mean the same thing.

The parts of a mortgage

Term and amortization are different things. See “Amortization and term” for details.

Who lends?

• Banks and credit unions: the most common lenders. FSRA (Ontario’s financial regulator) says a Level 1 mortgage agent can help you get a mortgage from a traditional lender such as a bank or a credit union.
• Lenders that only work through mortgage brokers: FSRA notes that some lenders only work through licensed brokerages, brokers or agents. These are often called monoline lenders.
• Alternative or private lenders: a short-term option when a bank says no. FSRA warns that rates and fees can be higher and that you need an “exit strategy” to move to a cheaper loan, usually within one or two years. You must use a Level 2 agent or a broker for these.
• In Ontario, people and companies that broker mortgages must be licensed by FSRA under the Mortgage Brokerages, Lenders and Administrators Act (banks, credit unions and some others are exempt). You can check a licence on FSRA’s website.

Insured and uninsured mortgages

If your down payment is less than 20% of the price, you need mortgage loan insurance (insurance that protects the lender, from CMHC or a private insurer). OSFI’s Guideline B-20 (OSFI is the federal bank regulator) says that by law a purchase mortgage with a loan-to-value ratio above 80 percent must be insured.

The lender pays the premium but normally passes it on to you. CMHC premiums range from 0.60% to 4.00% of the loan depending on the loan-to-value ratio (4.50% with a non-traditional down payment), and in Ontario provincial sales tax applies to the premium. An insured mortgage needs a price under $1,500,000.

With 20% or more down, the mortgage is uninsured (also called conventional). There is no premium, but the lender may look at your file more carefully. See “Mortgage default insurance” and “Down payment”.

The stress test

Federally regulated lenders check that you could still pay at a higher rate than your contract rate. For uninsured mortgages, OSFI sets the minimum qualifying rate (the greater of your contract rate plus 2% or 5.25%); for insured mortgages the federal regulations use the same formula.

This means you can borrow less than the amount your actual rate alone would allow. See “Mortgage stress test” for a worked example.

When the term ends: renewal

If principal is still owing when your term (for example 5 years) ends, you must renew. You can renew with the same lender at a new rate, or switch to another lender.

Since November 21, 2024, OSFI no longer requires the minimum qualifying rate when a stand-alone uninsured mortgage (a regular mortgage, not one combined with a HELOC) moves to another federally regulated lender with no increase in the loan amount or the remaining amortization (a “straight switch”). Compare offers before you renew.

When you sell: discharge

When you sell, your lawyer pays the remaining principal, interest and fees to the lender out of the sale money and registers a document that removes the charge from title (a discharge of charge, called a cessation of charge in the Act). The Land Titles Act says the land registrar notes the cessation once there is proof the charge has been satisfied.

Paying off a mortgage before the term ends can trigger a prepayment penalty. How it is calculated is written in your mortgage contract, so ask the lender for a payout statement before you sell. Also check whether your mortgage is portable (can move to your next home).

Example