Mortgage Intelligence - Waterloo Region

How your lender sets your interest rate
Lenders set the interest rate for your mortgage. They consider factors to help them determine your cost.

These factors can include:

the length of your mortgage term
their current prime and posted interest rate
if you qualify for a discounted interest rate
the type of interest you choose (fixed, variable or a combination)
your credit history
if you’re self-employed
Lenders typically offer higher interest rates when the term length is longer. It’s not always the case.

What is interest
Interest is the fee you pay your lender for the use of their money.

When you apply for a mortgage, your lender may offer different interest rate options. The interest rate is used to calculate how much you need to pay to borrow money. These rates rise and fall over time.

Every time you renew your mortgage term, you renegotiate your mortgage interest rate. This means your mortgage payments could be higher or lower in the future.

APR (Annual Percentage Rate) includes the interest rate plus any extra fees (like lender fees, mortgage insurance, etc.) spread out over the year. So it's the true cost of borrowing, shown as a percentage.
Example:
Let’s say you borrow $100,000:
⦁ Interest rate: 5% – you pay $5,000/year just for the loan.
⦁ APR: 5.5% – because it includes things like lender fees, now your actual yearly cost is $5,500.
So, when you're comparing mortgage offers, APR gives a better apples-to-apples view of what you're really paying.

Interest Rate is the cost of borrowing the money – like the base price. It’s what the lender charges you just to give you the loan.

Mortgage amortization
The amortization period is the time it takes to pay your mortgage. The amortization period is an estimate based on your current term's interest rate.

If your down payment is less than 20% of your home’s price, your maximum amortization period is:

30 years if you’re a first-time buyer purchasing a new build
25 years in all other cases
If your down payment is more than 20% of your home’s price, your lender sets your maximum amortization period.

-Mortgage term-
The mortgage term is the time your mortgage contract is in effect. Terms may range from a few months to 5 years or more.

At the end of each term, you’ll need to renew your mortgage. You’ll likely need multiple terms to repay your mortgage. If you pay the balance at the end of your term, you don’t need to renew your mortgage.