Mortgage Financing 101
by SCOTT MOORE, REALTOR | may 30, 2025We deal with lots of buyers at The Moore Group — everything from first-time buyers eager to get into the market to last-time buyers looking forward to an easier life as downsizers. Nearly all of these people finance their homes at some level — and many of them, even the experienced buyers, have questions about the details of mortgage financing.
Here are a few of the most common questions we get asked. Of course, we recommend that you check with your mortgage broker for advice specific to your situation.
If you need a suggestion, Marc Rouire at Castle Mortgage is our go-to mortgage broker and has helped hundreds of our clients as well as most of our realtors on our team. Which brings me to the first question we get asked a lot:
What is the difference between a mortgage broker and a mortgage specialist at my bank?
A mortgage broker is able to shop around for you and get the best rate on offer. It might turn out that the best rate available happens to be at your own bank or credit union, but it may come from somewhere different. If you are dealing with a mortgage specialist at your bank they can only offer you the products and rates that their bank has to offer.
2. What is the difference between the amortization period and the term of the mortgage?
A mortgage term is the period your mortgage contract lasts, typically ranging from a few months to five years. At the end of each term, you must renew your mortgage unless you’ve fully paid off the balance. If it is not paid off, then you re-apply for a new term.
An amortization period is the total length of time you have to pay off your mortgage. 25 years in most cases. 30 years for new home builds, first-time buyers, and those with a down payment of 20% or more.
3. What is the difference between a variable and a fixed mortgage?
A fixed mortgage has a fixed interest rate for the term of the loan - usually 3, 4, or 5 years. The interest rate for the mortgage is based on the rate is at the time you agree to the mortgage and the payment is the same each month. If rates go up, you “win” because you are locked in at a lower rate— but if rates go down, you could end up paying a higher rate for the rest of your term. With a variable mortgage, the rate goes up or down as interest rates rise and fall - so your payment amount goes up if rates go up, or down if they fall. People usually pick one or the other of these products based on their predictions for what is likely to happen in the world over the term of the mortgage and/or their tolerance for risk and uncertainly.
4. Why is the rate that I’m quoted higher than the Bank of Canada rate? For example, I’m seeing 5 year fixed at 3.99% today (May 30, 2025), but the Bank of Canada rate is 2.75%.
Your banks’s interest rate will be higher than the Bank of Canada policy interest rate, also known as the overnight rate, as banks will borrow from the Bank of Canada and need to account for the borrowing costs and looking at profitability. It is important to shop around and find competitive rates, that’s why we recommend connecting with Mortgage Brokers like Marc Rouire.
5. How does the ratio between the principal and interest work?
On a fixed mortgage, the amount of your payment is the same every time, but the amount that goes towards interest and the amount that goes towards the principal changes constantly through the life of the loan. The portion of the payment that goes to interest is always getting smaller, simply because you owe less money thanks to each payment you make.
Lastly, a question that is so common that we wrote a whole post just on this topic: What is the difference between a deposit and a down payment in Manitoba.
If you’re buying a home this year — reach out now. We’d love to work with you.