Pre-approval, down payments, CMHC insurance, and how rates shape what you can afford.
Pre-approval versus pre-qualification
Pre-qualification is an estimate based on numbers you supply. Pre-approval is a lender reviewing your documents and credit, committing to a maximum amount and holding a rate for you while you search. Get the second one before you fall for a house — it sets the budget and makes your offer credible.
The down payment rules
The minimum is 5% on the first $500,000 of the price and 10% on the portion above that, up to $1.5M. At $1.5M and above the minimum is 20%. Anything under 20% down is an insured mortgage: the default-insurance premium is added to the loan and you pay it down over the amortization.
Twenty percent or more removes the insurance and opens up longer amortizations — a lower monthly payment, but more interest over the life of the loan. The trade-off is yours; the calculator shows both sides.
Rates, the stress test, and what you can actually borrow
Federally regulated lenders must qualify you at a rate above the one you will actually pay — the stress test — which is why the payment you could afford and the mortgage you can get are two different numbers. Fixed rates lock the payment for the term; variable rates move with the lender's prime rate. Neither is always right; it depends on your horizon and your tolerance for a payment that can change.
Amortization and the monthly number
Amortization is how long the loan is scheduled to take to repay; the term is how long your current rate and conditions last. A longer amortization lowers the payment and raises the total interest. Run the mortgage calculator with a few amortizations and rates side by side — the spread is usually the most useful thing a first look at financing tells you.
