People considering a move to or from Canada, should realize that Canadian mortgages offer different benefits from other countries, particularly the US. Although each country offers mortgage advantages, they also pose different challenges as well. Buying and selling a house In Canada or the US requires that you adopt different strategies to maximize your assets and minimize your risks.
In the United States, a 30-year mortgage is pretty standard, but Canada takes an entirely different approach. They offer terms of five years or less, but with the the interest amortized over a 25-year period. Although refinancing is certainly a possibility, Canadians cannot depend on this procedure happening. Also, prepaying a loan is expensive in Canada and not the advantage it is in the US.
Most Canadian mortgages have a portability feature that protects the home buyer. If you buy a home in Canada and have to move before your five year term is up, you can take your mortgage with you, applying the same terms to your new home purchase. So if the interest rate has gone up one or two percentage points, you are protected from this increase. You can also generally borrow more money if necessary to cover the difference in the sale price of your old home and the cost of your new one. Mortgages in the United States generally do not offer this protection to their buyers. If mortgage rates jump in the two years after your initial purchase, you will pay dearly for the new agreement.
Canadian buyers are also protected by the Interest Act of Canada, which works to protect citizens from excess interest charges. In fact, Canadian mortgages are generally figured semi-annually unlike American mortgages, which are calculated monthly. As a result, Canadian borrowers pay less in yearly interest charges. In the US, borrowers are able to deduct mortgage interest rates; however, something that Canadian borrowers cannot do. Whether or not this difference will make a financial difference to you depends on your individual situation. You would need to consult a mortgage specialist in the pertinent country to determine how these different policies will affect your home purchase.
Before you move to either the US or Canada, you need to understand their individual mortgage industries. Serious differences exist, and they may impact the type of home you decide to purchase. Consult with an experienced mortgage broker before you proceed. To learn more, contact an agency like Marty Fekete.