If your down payment is less than 25%, then you qualify for a high-ratio mortgage. This type of mortgage requires loan insurance, which can cost an additional 0.5% to 3.75% of the mortgage amount. With this type of mortgage you could also be limited to a maximum house price.

Second Mortgage
Of course, if you cannot add on to your mortgage, you may consider a second mortgage. Each mortgage uses your home as security and gives the mortgagee the right to take your home if you default on your loan. The first mortgagee gets paid first in cases of default and has the best chance of recovering all of its money. So it only goes to figure that subsequent mortgages usually come with a higher interest rate.

Mortgage Features
Here are some mortgage options you should know about:
Every lending institution is different, and each will have their own customizable mortgage options. When you're hunting for a lender and a home, see how the following features could be beneficial to you.

Prepayment
This is a wonderful option if you receive regular bonuses or if your income fluctuates throughout the year. With a pre-payment privilege, you have the right to make payments toward the principal portion of your mortgage over and above the monthly payments. A mortgage with a pre-payment option is closed. An open mortgage means you can pay the entire principal sum without notice of bonus.

Portability
If you still have time remaining on that fantastic loan you negotiated, portability is one option you'll want to discuss with your lender. Quite simply, it means transferring the balance of your current mortgage at the existing rates and with the existing terms and conditions, to your new home.

Assumability
Let's say that the vendor has negotiated a dynamite mortgage. With an assumable mortgage you, the purchaser, simply assume the obligations of the mortgage. This is a wonderful feature especially if the terms are more favourable than the existing market conditions would allow. Remember, when it is time for you to sell, you may still be liable for any mortgage you allow the buyer to assume. This means if the buyer stops making payments, you could be accountable for the payments. Be sure to have the subsequent buyer approved for the assumption of the payments, thereby avoiding this potential land mine.

Expandability
If you need additional funds down the road, will your mortgage terms allow you to increase the principal amount? Usually, your new rate will be a blended amount of the initial mortgage rate and the prevailing rates. It's a great option to discuss with your lender if you foresee large expenses in your future like renovation or education costs.

You Should Know

Assuming an Existing Mortgage
By assuming the existing mortgage, you may be able to save on the usual mortgage fees such as appraisal and legal fees. You'll save time, since you don't have to negotiate to arrange financing from another lender and the existing mortgage on the home may be less than the current market rates. Unless otherwise specified, you'll still have to qualify with the lender first!

Vendor Take Back
With a VTB, the vendor also becomes a lender, holding all or some of the mortgage. Sometimes the vendor will offer this loan at lower than bank rates.

Rate of Interest
Quite simply, interest is the cost of borrowing money. There are two types of rate structures: fixed and variable.

A fixed-rate mortgage will remain the same for the length of the negotiated term. Your payment schedule is established in advance. You can choose either an open or closed mortgage, depending on the term.

If you are going to need a high-ratio mortgage, the mortgage broker may require that you take a longer term mortgage (usually, at least 3 years) so you don't get into trouble if rates rise in the short term. The mortgage will always be closed but with privileges. Often mortgages only come in two terms; 6 months and one year. Both are generally at higher rates than a closed contract for the same time period.

A variable-rate mortgage fluctuates with the prevailing market cycles. Your monthly payment will remain constant (usually for a year or two), but the amount allocated to your principal will vary. If the market trend is toward lower rates, this may be a good option. If rates are rising, you may choose to convert to a fixed-rate mortgage. But if you're on a tight budget, you may not like the feeling of uncertainty. You may be willing to pay more for peace of mind.

Terms
Mortgage Term
Over the course of your amortization period, you may have many different mortgages. The term is simply the length of time that interest rates, payment schedules and obligations to the lender exist. When the term comes to a close, you will have the option to renew your mortgage (taking into account current market conditions) at your current or new lending institution. You can also put a lump sum toward the principal without restriction, or pay off your entire mortgage without penalty. If you wish to change the structure of your agreement during the term you may have to pay a substantial fee to the lender.

Choosing Security or Flexibility
Mortgages are available with closed, open and convertible options, with fixed or variable rates. The options you choose will reflect your beliefs about the market -- is it going up or down? -- and your short-term goals and desire for long-term security.

Amortization
This is the amount of time over which the entire debt will be repaid. Most mortgages are amortized over 15-, 20-,25-,30- or 35-year periods. The longer the amortization, the lower your scheduled mortgage payments, but the more interest you pay in the long run.

For payment comparison over various amortization periods, refer to the schedule of payments.

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