FAQs

What is the difference between Fixed and Variable Rate Mortgages? Expand/Collapse

Fixed Interest Rate Mortgages

  • Your interest rate will not change throughout the entire term of your mortgage.
  • You will know exactly how much your monthly payments will be and how much of your mortgage will be repaid at the end of your term.

Variable Interest Rate Mortgages

  • Your interest rate may fluctuate from time to time as it is based on current market conditions, it changes when Peace Hills Trust Prime Rate changes.
  • If your interest rate decreases, your payment amount will remain the same, but more of your mortgage payment is applied to the principal balance owing.
  • If your interest rate rises, your payment amount will remain the same, but more of your mortgage payment will go toward interest.

What is the difference between Closed and Open Mortgages? Expand/Collapse

Open Mortgage

  • You can pay off the mortgage at anytime without penalty. You can also make additional payments

    without prepayment penalties. 

  • Interest rates are typically higher than rates for closed mortgages because of their inconsistency in payments (it’s difficult for a lender to forecast returns due to the flexibility in payments).

Closed Mortgage

  • Requires you to make set payments at set times throughout the term of your mortgage. 

  • You cannot pay out a closed mortgage early without a penalty. Prepayment without penalty on a closed mortgage is restricted to the prepayment privileges outlined in your mortgage loan agreement. 

  • Interest rates are typically lower for this type of mortgage.

What is the difference between Short-term and Long-term Mortgages? Expand/Collapse

Long Term

  • A long term mortgage is generally for 3 years or more.

  • The mortgage rate is generally higher than that of a short-term mortgage, but it can provide security to the borrower by fixing the payments and the interest rate for the term of the mortgage. If mortgage rates are presently reasonable and the borrower has a tight budget, generally the best option would be to go long-term in order to avoid unexpected costs.

Short Term

  • A short term mortgage is usually less than 3 years. 

  • A short term mortgage is a good option if you believe interest rates will drop by your maturity date. Usually, the shorter the term, the lower the interest rate.

What is a High Ratio Mortgage? Expand/Collapse

If your down payment is less than 20% of the purchase price or appraised value of the property, you will typically need a high-ratio mortgage. A high-ratio mortgage will usually require mortgage default loan insurance by a mortgage insurer, such as Canada Mortgage and Housing Corporation (CMHC). The mortgage default loan insurance premium can be paid in a single lump sum or it can be added to your mortgage and included in your monthly payments.

What is Mortgage Loan Default Insurance? Expand/Collapse

Mortgage loan insurance is typically required by lenders when homebuyers make a down payment of less than 20% of the purchase price. Mortgage loan insurance helps protect lenders against mortgage default, and enables consumers to purchase homes with a minimum down payment of 5% — with interest rates comparable to those with a 20% down payment.

To obtain mortgage loan insurance, lenders pay an insurance premium. This cost is passed on to you. The premium payable is based on a percentage of the home’s purchase price that is financed by a mortgage (calculated as a percentage of the loan and is based on the size of your down payment). The premium can be paid in a single lump sum or it can be added to your mortgage and included in your monthly payments.

Please Note: Mortgage Loan Default Insurance should not to be confused with Mortgage Life Insurance.

The following table lists current CMHC standard premium percentages for a typical purchase transaction of a residential property and the Standard Premium percentages on Increase to Loan Amount for Refinance.

 

Notes:

  • Assumes a 25 year amortization period. For premium on increase to loan amount for refinance,

    assumes no change to the original remaining amortization period.

  • The exact premium will be calculated when you are approved for a mortgage.

  • The Mortgage Default Insurance premiums are not refundable if your mortgage is paid early.

  • A 10% premium refund may be available when CMHC Mortgage Loan Insurance is used to finance an

    Energy-Efficient Home.

Example of a Mortgage Default Insurance premium calculation:

Mortgage Amount: $100,000.00

Loan-to-Value Ratio: 95%

Premium on Total Loan Amount: 2.75%

Premium Payable: 0.0275 x $100,000 = $2,750.00

Visit www.cmhc for a list of additional Mortgage Loan Insurance Premiums and further details on Mortgage Default Insurance.

Who needs Mortgage Loan Default Insurance? Expand/Collapse

Lenders typically require mortgage loan insurance for loans made to anyone that wishes to purchase a home with a down payment of less than 20% of the purchase price. The Trust and Loan Companies Act prohibits most federally regulated lending institutions from providing mortgages without mortgage loan insurance for amounts that exceed 80% of the value of the home or purchases with less than 20% down payment. Through your lender, CMHC Mortgage Loan Default Insurance enables you to finance up to 95% of the purchase price of a home.

Who is Canada Mortgage and Housing Corporation? (CMHC) Expand/Collapse

Canada Mortgage and Housing Corporation (CMHC) is Canada’s national housing agency. Established as a government-owned corporation in 1946 to address Canada’s post-war housing shortage, the agency has grown into a major national institution. CMHC is Canada’s premier provider of mortgage loan insurance, mortgage-backed securities, housing policy and programs, and housing research.

CMHC works to enhance Canada's housing finance options, assist Canadians who cannot afford housing in the private market, improve building standards and housing construction, and provide policymakers with the information and analysis they need to sustain a vibrant housing market in Canada.

CMHC reports to Parliament and the public on its operations, including mortgage loan insurance, through its annual Corporate Plan Summary, its Annual Report and its Quarterly Financial Reports.

Can I pay my mortgage off faster without paying a prepayment charge? Expand/Collapse

If you currently have a Closed Mortgage, there are options available that can help you reduce your mortgage balance quicker and avoid paying prepayment penalties to the lender. Here’s how:

Consider increasing your monthly payment

You can double your existing monthly payment (increase it by 100%) therefore reducing your mortgage balance quicker and not worry about the lender charging a prepayment penalty. Certain conditions may apply, please speak to a Regional Office Account Manager to ask for details.

Make Lump-sum payments within your Prepayment Privilege

Instead of making an annual lump sum payment up to 10% of your original principal on the First and Second Anniversary Date of your mortgage, why not make 1 or more lump-sum payments up to 10% of your original principal. Keep in mind, any lump-sum payments over the 10% of your original principal will be subject to prepayment charges.

Increase your payment frequency, accelerate it

Switch to accelerated weekly or accelerated bi-weekly payments and make up to an extra month's payment every year. Accelerated weekly and accelerated bi-weekly payment options are calculated assuming there are only four weeks in a month.

The Accelerated Weekly Payment is calculated, for example, by taking your normal monthly payment and dividing it by four. Since you pay 52 weekly payments, by the end of a year you have paid the equivalent of one extra monthly payment. This additional amount accelerates your loan payoff by going directly against your loan's principal. The effect can save you thousands in interest and take years off of your mortgage.

The Accelerated Bi-weekly Payment is calculated by dividing your monthly payment by two. You then make 26 bi-weekly payments. Just like the accelerated weekly payments you are in effect paying an additional monthly payment per year.

See the Benefit:

Note: This is provided for illustration purposes only please contact your local Regional Office to obtain further information.

Choose an Open Mortgage

An Open Mortgage provides you flexibility. You can prepay any amount at any time towards your mortgage without the fear of having to pay a prepayment charge for doing so.

What is Mortgage Portability and can it save me money? Expand/Collapse

When a lender has received CMHC Mortgage Loan Insurance on your home mortgage loan and you are considering selling and purchasing another home, there may be a mortgage portability option you can exercise. Mortgage Portability allows the repeat user of CMHC insured mortgage financing to save money by reducing or eliminating the premium on a new insured loan for the purchase of another home.

Please contact your Account Manager for further details.

How are Prepayment Charges calculated? Expand/Collapse

We have taken the confusion out of estimating prepayment charges. To proceed, you want to determine what Prepayment Privileges your existing mortgage may have, adhering to these privileges could help you avoid paying a prepayment charge altogether. Next, determine what the prepayment charges are:

Peace Hills Trust prepayment charge is 3 months’ additional interest payment if you pay more than the prepayment privilege allows.

Last, estimate your prepayment charge. Our Prepayment Charge Calcuator is simple and easy to use, just click to start. You can also use this simple step by step formula to provide you with your estimate:

How to manually estimate the 3-month Prepayment Charge:  

Step 1:

What is the amount you want to prepay on your mortgage over and above the prepayment privilege amount, if any, in your mortgage agreement?

_________ (A) 

Step 2:

What is your Current Interest Rate expressed as a decimal? (Example: 4.55% = .0455)

_________ (B)

Step 3:

(A) X (B) = (C) _________ (C)

Step 4:

(C) ÷ 4 = (D)

_________ (D)

(D) = The estimated 3-month Prepayment Charge

When would a prepayment charge apply? Expand/Collapse

Prepayment charges apply when you choose to prepay the mortgage balance before the Maturity Date on a Closed Mortgage. Choosing the right mortgage can reduce your prepayment charges or better yet, avoid a prepayment charge altogether. We provide several scenarios in which a prepayment charge may apply, including “other” fees:

Scenarios, costs and tips

Are there any other fees when paying off or paying down my mortgage? Expand/Collapse

Administration Fees that may apply if you prepay your mortgage in full include:

  • Mortgage Discharge Fee: Administration fee for preparing the discharge request.
  • Reinvestment Fee: Administration Fee if you prepay your mortgage in full during the first term (i.e. you never renewed your mortgage)
  • Mortgage Assignment Fee: Administration Fee if you request to assign your mortgage to another financial institution, rather than a discharge. Note: Legislation may restrict the lender from charging a Mortgage Assignment Fee in certain Provinces and Territories.

Administration Fee applicable in the above instances: 

  • First Year (Within 12 Month period): $500 
  • Second Year (Within 24 Month period): $250 
  • After Two Years (After 24 Months): $0

Have a question that you don't see here?  Contact your nearest Regional Office and speak to one of our Account Managers.