Most Canadians throughout the country will at some point in their life will apply for a mortgage. As with any other financial transactions, it is a good idea to do your homework and understand the complexities of your mortgage. Having a solid understanding of your finances as well as the different mortgage products available can help you make the best choice. Your mortgage will probably be the most important debt of your lifetime; making a well informed decision will benefit you for years to come.

You must determine how much you are able to afford to spend when buying a home. This includes not only the purchase price of the home, but all of your other financial obligations. Do not assume that the maximum amount you are pre-approved for is an amount you can actually afford. Figure out what your monthly expenses are, including car payments, insurance, groceries, cable, telephone, etc. You may want to track these expenses for a few months in order to get an accurate total of your monthly expenditures. It's also a good idea to set aside money for emergencies, i.e. car repairs, house maintenance, etc. Subtracting the amount of the monthly expenses (including savings) from your monthly income will give you an estimate of how much you can afford for a mortgage payment. The general rule is to not exceed 32% of your gross monthly income for housing costs, and no more than 40% on monthly debt payments.

Once you've decided on the amount you can afford, you will need to shop around for a lender. Banks, mortgage companies, insurance companies, trust and loan companies as well as credit unions can all offer mortgages. Different companies will offer different prices as well as conditions; talk to several different lenders, as well as types of lenders in order to get the best product for your specific needs. You may also want to consider using a mortgage broker. A mortgage broker does not directly lend money, but rather finds a lender best suited for your needs. Because mortgage brokers have access to a wide range of lenders you will usually have more choices regarding products and terms. If you choose to use a mortgage broker, remember that not all brokers have the same access to financial institutions so you may want to consider consulting with more than one broker.

When shopping for a mortgage, obtain the information you will need in order to compare products. In Canada it is federally regulated that all banks, insurance companies and trust and loan companies must provide you with the following information before you sign a mortgage agreement. If you are shopping for a fixed-rate mortgage you must be provided with:

• The amount being lent
• The term of the loan as well as the amortization period
• Total amount of payments at the end of the term, as well as how much of that total you will have paid in interest
• Annual interest rate, including the real annual percentage rate which includes any and all extra charges (APR)
• The actual date on which interest will begin to be charged
• The amount of the payment and the due date
• If your payments are first applied to cover the interest and other applicable charges, and then to the outstanding principal
• Any optional services, i.e. disability or life insurance, that you have accepted, as well as the cost and the penalties, rebates and/or charges that will be applied if you decide later to cancel these services
• Any default charges that will be applied if your mortgage is in default
• Description of any property that is being provided as security for the loan
• Any broker fees that are paid by the lender to a broker that are included in the amount being lent
• The fee you will have to pay to discharge the mortgage after it has been paid off
• Any other charges that may apply, including the type of charge and the amount

If you are applying for a variable-rate mortgage you must be provided with:

• The annual interest rate of your mortgage as of the date of the disclosure statement
• How and when the annual interest rate is calculated
• How much your payments are based on the annual interest rate
• What your total payments will be at the end of the term based on the annual interest rate
• If the interest rate variations are linked to a public index you must be provided at least once a year with a disclosure statement that contains the annual interest rate and outstanding balance and the beginning and end of the period covered by the statement. You must also be provided with the amount of each payment and when it is due based on the annual interest rate that is applied at the end of the period

If you are applying for a variable-rate mortgage and the amount of your payment is not automatically adjusted to reflect changes in the annual interest rate you must also be provided with:

• The annual interest rate above which your payments will not be sufficient to cover the interest due on your loan for the period
• You must be made aware that negative amortization can happen. This occurs when your outstanding balance increases even when payments are made in full

Federal law also prohibits the financial institution from unduly pressuring you to buy their other products as a condition for accepting your mortgage application. For instance, the institution cannot deny your mortgage application because you choose not to buy your mortgage life insurance from them. You have the right to shop around for not only your mortgage, but for any other financial products that you may need for your new home. It's wise to always compare different products from different institutions, lenders and/or brokers in order to assemble the best package for your personal needs.