What is a mortgage & how does it work in Canada?

A mortgage is a loan used to finance the purchase of property. The property acts as collateral for the loan. Borrowers make regular payments of principal and interest over a set term (e.g., 5 years) within a longer amortization period (e.g., 25 years).

How do I get pre-approved for a mortgage in Edmonton?

To get pre-approved in Edmonton, you provide financial information (income, debts, credit history) to a lender. They assess your borrowing capacity based on lending guidelines and the stress test, then provide a pre-approval letter stating a potential loan amount and a rate hold, which strengthens your offer when house hunting.

What's the minimum down payment in Canada?

For homes under $500,000, the minimum down payment is 5%. For homes between $500,001 and $999,999, it's 5% on the first $500,000 and 10% on the remainder. For homes $1 million or more, a 20% down payment is required. A down payment under 20% requires mortgage default insurance.

What credit score is needed for a mortgage in Canada?

While you can technically get a mortgage with a score as low as 600, a score of 680 or higher is recommended to access the best interest rates from prime lenders. A score above 740 is considered excellent. Lenders also consider your overall credit history, not just the score.

What is the mortgage stress test in Canada?

The mortgage stress test requires borrowers to qualify at a higher 'qualifying rate' than their actual mortgage rate. This rate is typically the greater of your contract rate plus 2%, or the 5.25% benchmark rate. It ensures you can afford payments if interest rates rise.

Can I get a mortgage if I am self-employed?

Yes, self-employed individuals can get a mortgage. Lenders will typically ask for two to three years of financial statements and tax documents (Notices of Assessment) to verify income stability. Some lenders have specific programs for self-employed borrowers who can't meet traditional income verification but have a strong credit history and down payment.

Should I choose a fixed-rate or variable-rate mortgage?

A fixed-rate mortgage locks in your interest rate and payment for the entire term, offering stability. A variable-rate mortgage fluctuates with the lender's prime rate, offering potential savings if rates fall but risk if they rise. The choice depends on your risk tolerance and the economic outlook.

What are common mortgage closing costs in Edmonton?

Closing costs in Edmonton typically range from 1.5% to 4% of the home's price. They include legal fees, title insurance, property appraisal, and home inspection. Alberta has a major advantage: no provincial land transfer tax, which saves buyers thousands.

How is a prepayment penalty calculated?

For a variable-rate mortgage, the penalty is usually three months' interest. For a fixed-rate mortgage, it's the greater of three months' interest or the Interest Rate Differential (IRD), which can be a much larger amount. It's the cost of breaking your closed mortgage term early.

What is the First Home Savings Account (FHSA)?

The FHSA is a powerful registered plan for first-time home buyers in Canada. It combines the benefits of an RRSP (tax-deductible contributions) and a TFSA (tax-free growth and withdrawals for a qualifying home purchase), making it one of the best tools for saving for a down payment.

How does being on maternity leave affect my mortgage application?

Lenders can approve you for a mortgage while on maternity or parental leave. They will typically require a letter from your employer confirming your return-to-work date and your guaranteed income upon return. They will use your full return income for qualification purposes.

What happens if the property appraisal comes in low?

If the appraisal value is less than your purchase price, the lender will only finance based on the lower appraised value. This means you are responsible for making up the shortfall. For example, if you offered $500,000 but it appraises at $490,000, you must come up with the extra $10,000 in addition to your planned down payment. This is a key reason to have a financing condition in your offer.

What is a monoline lender?

A monoline lender is a financial institution that focuses solely on one product: mortgages. Unlike big banks, they don't offer chequing accounts, credit cards, or investments. They often work exclusively through mortgage professionals and can offer highly competitive rates and flexible products because of their lower overhead costs.

How does having a legal rental suite affect my qualification in Edmonton?

Having a legal, conforming secondary suite in your Edmonton home can significantly help with mortgage qualification. Most lenders will allow you to add a portion of the rental income (typically 50% of the monthly rent from a signed lease, or a market rent estimate) to your own income, which increases your borrowing power.

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Lincoln Sharpe | Mortgage Specialist - Serving Edmonton & Beyond

I'm Lincoln Sharpe, your trusted mortgage expert with over 7 years of lending experience. I support homebuyers, realtors, and financial advisors across Canada, delivering clear, confident, and strategic mortgage solutions.

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Canadian Mortgage FAQ - Expert Answers (Edmonton & Canada)

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