As one of the Big Five banks in Canada, Scotiabank is the first place many Canadian homebuyers turn when it comes to getting a mortgage. Whether it’s because they’ve done their banking with this institution for years or because Scotiabank’s attractive advertising pulled homebuyers through the welcoming doors, there’s no denying that when you think the word “mortgage” you probably think Scotiabank.
But what’s it like getting a mortgage through Scotiabank? We’re going to look into the specifics of getting a mortgage with Scotiabank so you can decide if this bank is the right choice for your future home.
The down payment
Scotiabank offers some cool features on its mortgages (which we’ll get to further below), but for many mortgage specifics, it’s required to adhere to the same rules as other Canadian lenders. These rules ensure homebuyers don’t borrow more house than they can afford.
One of the mortgage specifics that’s the same across lenders is the minimum size of your down payment.
If your home has a purchase price of less than $500,000, you must put down at least 5%. If your home has a purchase price of between $500,000 and $999,999, your minimum down payment is calculated as 5% on the first $500,000 and 10% on the remaining amount. If your home’s purchase price is more than $1 million, you must have at least a 20% down payment.
The sliding scale might sound a little confusing, but you can use Ratehub.ca’s mortgage affordability calculator to help you determine exactly how big your down payment must be. Remember, there’s no rule saying you must put down only the minimum required down payment on your home. You can always put down a larger down payment that’ll reduce the total principal amount owing and interest you’ll pay over the life of your loan. It’ll also make your mortgage payments more affordable.
Mortgage default insurance
Not to be confused with the less important and unnecessary mortgage life insurance, mortgage default insurance (commonly known as CMHC insurance because the primary seller of this insurance is the Canada Mortgage and Housing Corporation) protects the lender in the event you default on your mortgage.
Just like the rules governing the size of your down payment, Scotiabank doesn’t dictate whether you must purchase mortgage default insurance. Instead, there are federal regulations that determine if you need to purchase it and what your premiums will be. The smaller your down payment, the higher your premium. Here are the different premium rates:
Your mortgage default insurance is calculated as a percentage of your home’s purchase price. The premium itself is added to your mortgage amount, so you don’t have to pay it up front. You can use Ratehub.ca’s mortgage payment calculator to see exactly how your CMHC premiums affect your monthly mortgage payment.
Your mortgage’s amortization period is the total length of your mortgage. The most common amortization period is 25 years, but you can get a shorter timeframe. Although choosing a shorter amortization period will increase your monthly payment, it will allow you to become mortgage-free sooner. Your options for a mortgage amortization period will always be the same no matter which lender you choose.
Your mortgage’s term is the predetermined period that your mortgage’s interest rate will not change. Mortgage terms at Scotiabank vary from one to 10 years in length. Typically, interest rates to be higher for longer mortgage terms because you’re guaranteed a rate of return over a longer time. Shorter mortgage terms have lower rates.
Your mortgage’s payment frequency simply refers to how frequently you make your monthly payment. With a Scotiabank mortgage, you can choose from monthly, biweekly, weekly, accelerated biweekly, or accelerated weekly. With the last two options, the formula used to calculate your monthly mortgage payment is slightly different, resulting in a slightly higher biweekly or weekly payment. This slightly higher payment allows you to pay off your mortgage sooner.
Let’s say you get a mortgage with Scotiabank and in a few years decide you’d like to become mortgage-free earlier than your original amortization period. To do this, you can make extra payments on your mortgage by using the prepayment privileges built into your mortgage. Prepayment privileges are one of the areas of the mortgage process where Scotiabank shines. Depending on the mortgage solution you choose, you can prepay your mortgage by up to 10%, 15%, or 20% of your original principal and increase your regular mortgage payment by up to 10%, 15%, or 20% every year without a prepayment charge.
Scotiabank also offers a once-yearly match-a-payment option where you can make an extra payment on your mortgage on any of your regular payment dates. If you take advantage of this option, you’ll also be eligible for the miss-a-payment feature, which allows you to miss one mortgage payment in your term. Missing a payment with no penalty can be useful if you lose your job or if you rent your property and it sits empty for a month while you search for a new tenant.
Your mortgage rate is the interest rate you’ll pay on your mortgage. Variable-rate mortgages have their interest rate tied to the lender’s prime rate, and if that rate goes up, so will your mortgage interest rate. These rates tend to be lower because there’s a risk they’ll increase during the mortgage term. Fixed-rate mortgages have an interest rate that will not change for the term of the mortgage. These types of mortgages are popular because there’s less risk for the homebuyer if interest rates rise.
In Canada, you can go directly to a lender’s website and see its posted rate, or you can go through a mortgage broker who will shop around for the best mortgage rates. There’s often a large difference between a lender’s posted rate and the lowest interest rate you can receive, so it’s important that you negotiate with your lender either by using a mortgage broker or by going the do-it-yourself route. A lower mortgage rate means you pay less—possibly thousands of dollars less—interest over the life of your mortgage so it’s worth it to negotiate!