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Buying your first home

Define your mortgage needs

The best mortgage solution is not just a matter of interest rates. You have several important decisions to make.

Repaying your mortgage is generally the biggest expense related to buying your home. Be sure to make the best choices.

To do so, you need to give a lot of thought to it.

First thing: the interest rate is not the main element to consider. You need first to find your borrowing profile. This is the best way to get to know yourself better, define your objectives and make an informed decision.

Your borrowing profile is determined by:

  • your current and future financial capacity
  • your tolerance to interest rate fluctuations

Ready to find out your borrowing profile?

Use our Find out what type of mortgage is right for you tool, then make an appointment with a Desjardins mortgage advisor. He will guide you towards the best choices based on your results.

 

The more you know, specifically about your borrowing profile and your objectives, the better able you will be to make the appropriate choices for your mortgage. Some of these choices can be very advantageous from a financial point of view.

Here are the main elements to consider.

Open or closed mortgage?

Whether you opt for a fixed or variable rate mortgage, you will have to choose between the very common closed mortgage and an open mortgage:

  • An open mortgage allows you to repay the entire loan ahead of time, without having to pay a fee at any time, but the interest rate is generally higher.
  • A closed mortgage can be entirely repaid ahead of time, given a fee, but partial repayments without having to pay a fee are allowed.

The following table will help you to understand the difference between the two.

  Closed mortgage Open mortgage
Term (duration of the loan )

From 6 months to 10 years

The choice depends on your borrowing profile and your objectives.

6 months or 1 year
Interest rate

Usually lower than the open interest rate.

In the case of a fixed rate, the shorter the term, the lower the interest rate.

Usually higher than the closed rate, since you can repay the loan in whole or in part, at any time without having to pay a fee.
Anticipated reimbursement and fee

Maximum 15% of the initial amount each year without penalty.

You will have to pay a minimal fee if the 15% limit is surpassed.

Pay all or part back at any time without having to pay a fee.

Your situation and your plans

Type of loan chosen by the majority of borrowers.

In the case of a fixed rate loan, your payments are stable for the duration of the term.

In the case of reduced or protected variable rate, your payments should not change, unless there is a major increase in interest rates.

In the case of yearly rate resetter mortgage, your payments are adjusted annually in relation to interest rates.

Advantageous if:

  • you plan to repay your entire mortgage quickly

    or

  • you plan to sell in the short term

Fixed or variable rate?

Should you opt for a fixed or variable rate for your mortgage? There are many options available, and the differences between them are often misunderstood.

Generally, your choice should depend on your answers to these 2 questions:

  • Do you plan to repay your loan in the short- medium- or long-term (amortization)?
  • Do you have low, medium, or high tolerance to potential interest rates increases?

A Desjardins mortgage advisor can help you establish your borrowing profile. Want to have a look at your borrowing profile right now? Use our Find out what type of mortgage is right for you tool.

To learn about the main features and advantages of fixed rate loans versus variable rate loans, consult our Fixed rate or variable rate? (PDF, 558 KB) comparative table.

A profitable strategy: mortgage diversification

In response to changing rates, you may be hesitating between choosing a fixed rate loan or a variable rate loan. With hybrid mortgages you have the possibility of diversifying your mortgage financing by combining 2 or 3 products. For example, 50% with a fixed rate loan and 50% with a variable rate. This strategy promotes interest cost savings and accelerates your loan repayment, or may reduce the impact of possible rate hikes.

Do you want to repay your mortgage in a very personalised way depending on your financial situation and your capacity to repay?

Do you want to take advantage of both short-term and long-term products? (e.g.: 1 year fixed rate and 5 year fixed rate)

See the hybrid mortgages section or meet with a Desjardins advisor, who will help you find your optimal diversification according to your borrowing profile.

Frequency of your payments

The frequency of your mortgage payments is an important factor to be considered. It depends on your preferences, your financial capacity, and your repayment objectives. You may opt for weekly, weekly accelerated, bi-weekly, bi-weekly accelerated or monthly payments.

The following table will help you determine the frequency that best suits you. In addition, our Calculate and optimize your mortgage payments tool allows you to see the impact of the various payment options on your interest costs and on the amortization of your loan.

Frequency of mortgage payments Mortgage payment amount Advantages
Monthly Depends on the chosen duration of the loan (e.g.: 25 years)
  • Same timing as paying rent
Weekly Annual total of monthly payments divided by 52
  • Synchronizes with your income if you are paid weekly
Weekly accelerated Monthly payment divided by 4 - equivalent to adding one monthly payment per year
  • Repayment period shortened by about 4 years
  • Reduced interest costs
  • Synchronizes with your income if you are paid weekly
Bi-weekly Annual total of monthly payments, divided by 26
  • Synchronizes with your income if you are paid every 2 weeks
Bi-weekly accelerated Monthly payment divided by 2 → equivalent to adding one monthly payment per year
  • Repayment period shortened by about 4 years
  • Reduced interest costs
  • Synchronizes with your income if you are paid every 2 weeks

Amortization period of the mortgage

The maximum amortization period for a mortgage is 25 years in Canada for mortgages secured by the Canadian Mortgage Housing Corporation (CMHC) or Genworth Financial. The amount financed by these insured loans generally represents 80% of the price paid or the market value of the property if it is lower than the purchase price.

The choice of amortization period is very important. The shorter the amortization period, the greater your mortgage payments, but the less you will pay in interest in the long term. A shorter period will also allow you to increase the net value of your property more quickly.

You may also choose a longer period to start and shorten it by repaying a greater amount or by repaying your loan more quickly, depending on your financial capacity.

But before making your choice, ask yourself these 2 questions:

  • What is my repayment objective: short, medium or long term?
  • What is my repayment capacity?

To answer these questions, you can use our Calculate and optimize your mortgage payments tool. It will let you to visualize the impact of various payment and amortization options on your interest charges and on your loan's amortization.

Accelerating your loan repayment

Do you want to pay down your mortgage faster? Do you have an inflow of new cash?

At any time you may:

  • repay up to 15% per year of the original amount borrowed ahead of time, without having to pay a fee
  • pay up to double your regular payments without paying a fee

What would be the effect on the repayment of your loan? See the impact of various scenarios using our Calculate and optimize your mortgage payments tool.

Paying back the Home Buyer's Plan (HBP)

Did you use the Home Buyer's plan (HBP) to make up your down payment? You must also repay your Registered Retirement Savings Plan (RRSP) within 15 years, by paying back annually at least one fifteenth of the total withdrawn.

The most efficient repayment method is to make regular deposits throughout the year to your RRSP. Your repayment is then integrated into your budget. This method makes it easier to manage and ensures you repay the amount within 15 years.

You can choose from a great variety of mortgages. You can even diversify your mortgage by combining 2 or 3 mortgage products. The possibilities are many.

First however, ensure that you are well aware of your borrowing profile. Use our Find out what type of mortgage is right for you tool. You will discover your borrowing profile and the various personalized combinations associated to it.

To better understand our various mortgage solutions, consult the Compare our mortgage solutions (PDF, 121,7 KB). Then contact a Desjardins advisor for apt advice on our range of options.

Are changing rates making you hesitate? Not sure whether to choose a fixed or variable rate mortgage?

Then opt for our hybrid mortgages in 2 or 3 loans, instead of one.

For example:

Non-hybrid mortgage Hybrid mortgage
Mortgage amount borrowed $175,000 Mortgage amount borrowed $175,000
 
  • 100% at fixed rate for 5 years
 
  • 40% at reduced variable rate ($70,000)
  • 60% at fixed rate for 5 years ($105,000)

Buying a house is often the biggest investment in your lifetime. Diversifying your mortgage can be a very good strategy, just as it can be when it comes to savings.

By diversifying your mortgage, you increase your chances of:

  • saving on interest charges
  • paying off your loan faster
  • reducing the impact of possible interest rate increases

But in addition to being financially advantageous, diversification gives you great flexibility. It lets you:

  • optimize your customized mortgage solution according to your borrowing profile
  • pay down your mortgage on your terms, according to your financial situation and capacity to repay
  • combine any type of loan and to diversify its amortization, frequency of payments, etc.
  • factor in the financial flexibility of your co-borrower when your incomes are very different
  • benefit from the advantages of both short-term and long-term products
  • enjoy attractive average interest rates

Start by seeing what your personalized combination could look like by using our Find out what type of mortgage is right for you tool. Then meet with one of our advisors who will help you make to the right choices based on your borrowing profile.

Buying your first house is often synonymous with renovating. Evaluate the cost of the work before applying for your loan. This is even more important if the renovations will increase the value of your home. It's best to include the estimated renovation cost into your mortgage loan application.

Planning to renovate a little later? Several financing solutions are available to you. Learn about them in our Renovating your home section. A comparative table will let to evaluate the various financing solutions according to your specific needs.

Your Desjardins advisor can also help you to make the best choice.

As a new homeowner, you must protect your house, yourself and your family. Two types of protection - home and loan insurance - are offered to cover all you needs.

Desjardins home insurance

All-risk insurance coverage covers most basic adverse events that could affect your home.

Main risks covered by home insurance
  • Fire
  • Theft
  • Vandalism
  • Damage due to wind
  • Certain types of water damage
  • A vehicle hitting your house

However each insured person is different, so Desjardins home insurance suggests insurance adapted to your particular situation and to your specific needs.

Learn more - Home Insurance

Desjardins Loan Insurance

This is a doubly valuable insurance: not only does it help you in case of disability, but also in the event of death. Your financial obligations related to a loan or mortgage-secured line of credit are therefore covered.

Desjardins Loan Insurance includes:

  • disability insurance, to cover regular payments to the caisse for the total duration of the insured's disability
  • life insurance, to cover the balance of the loan in the event of the insured's death
5 good reasons to choose Desjardins loan insurance
  • To prevent your debt from becoming a burden for you and your family, should the worst befall you
  • To avoid having to put off plans that are important to you because of your financial commitments
  • Because salary insurance is not always enough, generally covering only two-thirds of your salary
  • To avoid having to dip into your savings in the case of disability
  • Because the probability of a 35-year old being disabled for at least 90 days before reaching the age of 65 is 50%

The loan insurance premium corresponds to a percentage of the balance of your loan. It therefore decreases at the same time as your balance. You therefore pay a premium that is fair is relation to the real risk that your loan represents. It's exclusive to Desjardins.

Desjardins loan insurance also gives you access to the "Guide, protect and support" (GPS) assistance service. At all times and without any additional fees. This service helps you to find reassuring solutions at the end of the phone in a variety of fields: health, psychological assistance, housing, estate settlement, legal questions, travel, etc.

Getting Desjardins Loan Insurance is simple. In most cases, you just have to answer a few questions when applying for your loan.

If you choose a Versatile Line of Credit, see how Loan Insurance - Versatile Line of Credit is designed for this kind of financing.

Learn more - Loan Insurance

Useful links

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As of September 26, 2016 RSS news feeds
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Various loans and terms Starting from 1.94%*

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