FAQ

Frequently Asked Questions About Mortgages in Canada

A trusted guide from your local Canadian mortgage broker

Understanding mortgages in Canada can feel overwhelming, especially if you’re a first-time homebuyer. That’s why we’ve compiled this FAQ—a clear, friendly guide that answers the most common questions Canadians have about mortgages. Whether you’re buying, refinancing, or renewing, Red Key Mortgage is here to help you make smart, confident decisions.

A mortgage broker is a licensed expert who works for you not the bank. Unlike banks that offer only their in-house products. We don’t work for a single bank—we work for you. That means we can shop around on your behalf, comparing rates and products from:

  • Major banks and credit unions
  • Trust companies and alternative lenders
  • Private mortgage lenders

This means more options, competitive rates, and mortgage terms that truly fit your goals.

Want to learn more? Watch our video: “What is a Mortgage Broker in Canada”

Not all mortgage options are created equal—and neither is the advice you’ll get. Here’s why more Canadians are turning to mortgage brokers instead of going straight to the bank:

  • More options, better fit: We have access to a wide range of lenders—big banks, credit unions, alternative lenders, and private options you might not even know exist. That means more choice, and a better shot at finding the right mortgage for you.
  • Unbiased advice: We don’t work for any one lender. Our job is to find what actually works best for your situation, not to sell a specific product.
  • We handle the heavy lifting: Paperwork, rate shopping, lender negotiations—we take care of it, so you don’t have to waste time or energy navigating it all on your own.
  • No cost to you (in most cases): For standard residential mortgages, we’re typically paid by the lender. You get professional advice and service—without the invoice.
  • Industry know-how: From the latest interest rate trends to ever-evolving stress test rules, we stay on top of it all, so you don’t have to.

It’s easier than you think. Here’s a simple breakdown:

  1. Initial Consultation: We talk about your goals, budget, and timeline.
  2. Pre-Approval: We review your income and credit to determine how much you can borrow.
  3. Rate Shopping: We compare offers from multiple lenders to find your best match.
  4. Application Time: We submit your full mortgage application.
  5. Final Approval & Closing: You sign the paperwork and prep for move-in day.

Pro Tip: Starting with a pre-approval gives you clarity and confidence when house hunting. Schedule a free consultation.

Lenders calculate affordability using two key ratios:

  • GDS (Gross Debt Service): Your housing costs (mortgage, taxes, heating) should be less than 39% of your gross monthly income.
  • TDS (Total Debt Service): When you add all other debts—like car loans or credit cards—this should stay under 44%.

Not sure where you land? That’s where we come in. We’ll run the numbers and help you build a realistic, comfortable home-buying budget that fits your life—not just the bank’s formulas.

Canada’s mortgage stress test ensures you can afford your payments if interest rates rise. As of 2025, you must qualify at the higher of:

  • Your contract rate + 2%
  • The Bank of Canada’s benchmark rate (currently 5.25%)

This rule applies whether you’re buying with or without mortgage insurance.

Here are your main options:

  • Fixed-Rate: Same payment for the entire term
  • Variable-Rate: Rate changes with the prime rate
  • Adjustable-Rate: Payment amount changes as rate changes
  • Open Mortgage: Prepay anytime, higher interest
  • Closed Mortgage: Lower rate, limited flexibility

👉🏻Explore fixed vs. variable mortgage options

Minimum down payment depends on the home price:

  • 5% for homes under $500,000
  • 10% for the portion between $500,000–$999,999
  • 20% for homes $1 million and over

Homes under 20% down also require mortgage loan insurance.

Want to learn more? Watch our video: ”What’s the minimum down payment for mortgages in Canada?”

Most Canadian homebuyers don’t pay a fee when using a broker. Exceptions include:

  • Private or high-risk mortgages
  • Non-resident borrowers

Any potential fees will be discussed upfront—no surprises.

Want to learn more? Watch our video: ”How Much Do Mortgage Brokers Make?”

Here’s a typical mortgage application checklist:

  • Government-issued ID
  • Recent pay stubs and job letter
  • T4 slips and income tax returns
  • Credit report
  • List of debts and assets
  • MLS listing and purchase agreement
  • CRA Notices of Assessment (if self-employed)

We’ll guide you through gathering exactly what you need.

Timeframes vary slightly by lender, but typically:

  • Pre-Approval: 1–3 business days
  • Full Approval: 5–10 business days after accepted offer

Delays often happen due to missing documents, so staying organized pays off.

Absolutely—and it’s a smart move.

Pre-approval gives you:

  • A solid budget to shop with
  • Rate protection (up to 120 days)
  • Better standing with sellers

👉🏻Get pre-approved with Red Key Mortgage today

If your down payment is under 20%, mortgage insurance is required. It protects the lender (not you) and is offered by:

  • CMHC (Canada Mortgage and Housing Corporation)
  • Sagen
  • Canada Guaranty

It’s a one-time premium that can be added to your mortgage balance.

People often use these terms interchangeably—but they’re not the same, and knowing the difference can really pay off.

  • Pre-Qualification is an informal estimate of how much you might be able to borrow. It’s based on the numbers you share, but nothing’s been verified. Think of it as a starting point.
  • Pre-Approval is a step further. It includes a credit check and review of your documents, giving lenders—and sellers—confidence that you’re financially ready to buy.

Why it matters: If you’re serious about house hunting, go for pre-approval. It not only helps you understand your true budget but also shows sellers you mean business in a competitive market.

Being self-employed doesn’t mean homeownership is out of reach, it just means the process comes with a few extra steps. If you run your own business or work freelance, here’s what most lenders will want to see:

  • At least two years of business income (tax returns or financial statements)
  • A strong credit history
  • A larger down payment—often in the 10–20% range
  • Clear proof of steady cash flow

The good news is there are lenders who specialize in working with self-employed borrowers and we know exactly who they are. We’ll help you find one that understands how your income works and sees your business success as an asset.

Want to learn more? Watch our video: ”Self-Employed Mortgages in Canada”

Definitely. Renewal time is your chance to:

  • Shop around for better rates
  • Negotiate better terms
  • Switch without penalty (if done at term-end)

Some lenders even cover legal fees for switching. Don’t auto-renew—review your options first.

A collateral mortgage is registered for more than your current loan amount. It allows easier access to equity in the future, but switching lenders later can be trickier.

Ask your broker if this type of registration fits your long-term goals.

Most mortgages offer these perks:

  • Lump sum payments (often 15–20% annually)
  • Monthly payment increases

These features let you pay off your mortgage faster—without penalties.

You may face a penalty:

  • Fixed-rate mortgages: Interest Rate Differential (IRD)
  • Variable-rate mortgages: 3 months’ interest

We’ll help assess the cost and whether breaking your mortgage is financially worthwhile.

Want to learn more? Watch our video: ”Do banks charge penalties to break a mortgage?”

Still Have Questions?

Red Key Mortgage is here to simplify the mortgage journey for you. Whether you’re buying, refinancing, or just exploring your options, we’ll answer your questions with honest advice and personalized service.

👉🏻Contact us today for a free consultation.