MORTGAGES 101 – WHAT YOU NEED TO KNOW

Mortgages can feel complicated, especially when you’re buying a home for the first time. Understanding how lenders assess risk, how payments work, and what the key terms mean will help you make clearer, more confident decisions.

Here’s a simplified breakdown of how mortgages work 👇

1️⃣ What a mortgage really is

A mortgage is a loan secured against the home you’re buying. If payments stop, the lender has legal rights to take possession and sell the property.

✔️ you provide a down payment 

✔️ lender provides the rest 

✔️ you repay principal + interest over time 

This structure allows buyers to purchase homes without paying the full price upfront.

2️⃣ How lenders decide whether to approve you

Lenders won’t approve large loans without proof you can repay them. Your credit score is a major factor.

✔️ 680+ is ideal for best rates 

✔️ scores below 680 may limit options 

✔️ strong income + low debt improves approval 

Your application is evaluated by reviewing credit, income, employment stability, debt ratios and down payment source.

3️⃣ How mortgage payments are structured

Every mortgage includes three core pieces:

✔️ principal — the amount borrowed 

✔️ interest — the cost of borrowing 

✔️ amortization — the total length of repayment (usually 25–30 years) 

Monthly payments combine principal + interest. The longer the amortization, the lower the monthly payment — but the more interest paid over time.

4️⃣ Why down payment size matters

Your down payment affects your eligibility, insurance requirements, and monthly payment.

✔️ under 20% requires mortgage default insurance 

✔️ 20%+ avoids insurance and offers more flexibility 

✔️ all down payments must be verified with a 90-day history 

This shows the lender you have invested equity in the home.

5️⃣ The difference between fixed and variable rates

Fixed Rate 

✔️ interest rate stays the same 

✔️ predictable payments 

✔️ stable budgeting 

Variable Rate 

✔️ tied to Bank of Canada rate 

✔️ can rise or fall over time 

✔️ may start lower but carries uncertainty 

A broker can help you compare which option fits your risk tolerance and financial goals.

6️⃣ Why a pre-approval is essential

Before you shop for a home, you need clarity on what you can afford.

✔️ confirms your maximum purchase price 

✔️ locks in a rate for a set time 

✔️ shows sellers you’re serious 

Pre-approval reviews your credit, debt, income, and savings to determine your eligibility.

7️⃣ How to shop for a mortgage wisely

A mortgage broker compares products from multiple lenders to find the best match — not just the lowest rate.

✔️ lowest cost 

✔️ lowest payment 

✔️ maximum flexibility 

✔️ minimum risk 

Brokers help you understand penalty structures, prepayment options, portability, and hidden costs that may matter more than the headline rate.

💬 Final Thought

A mortgage is more than a loan — it’s a long-term financial strategy. Understanding how mortgages work, what lenders look for, and which options fit your situation can save you thousands over the life of your loan.

If you want help choosing the right structure or reviewing your affordability, message The Frontline Mortgage Group and we’ll walk you through every step.