Mortgage Brokers Mortgage Information for Ontario, Canada | Page 3
Mortgage Information for Ontario,
Canada
The Difference between Canadian and U.S. Home mortgages
With the standard mortgage term in the United States being a 30-year fixed term; the
mortgage terms in Canada are five-years; which is due to be remunerated every five years
over the course of a twenty-five-year term. This requires the balance on the mortgage to be
re-calculated and financed at the end of each five-year period. This five-year re-financing
requirement gives the buyer the possibility of having their interest rates increased according
to the current interest rate. If the buyer has the plan to prepay their mortgage at the end of
this prepayment timeframe, they face the chance of very high penalty rates.
A mortgage in Canada is portable—meaning if you relocate to another home within the five-
year term, you can request to use the prior mortgage from the other home for the new home.
However, if the new home is more expensive than the prior residence, you will have to take
out a second loan to cover the deference.
In Canada, the interest you pay towards your mortgage is not tax deductible as it is in the U.S.;
illuminating the incentive to over-borrow.
What is probably the most significant difference between Canadian and U.S. mortgages is that
the Canadian banks supervise mortgage terms in a sounder manner than the U.S. does. The
mortgage system in Canada is more similar to the way the U.S. handled mortgages during the
1970s. The Canadian banking regulations necessitate that banks keep loans on a balance
sheet; which discourages any lost due to underwriting standards.