Curious how people navigate this mysterious world.
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You go to the bank (or a mortgage broker, who’s just a person who’ll talk to multiple banks for you) and explain you want a mortgage.
They’ll ask you a bunch of basic questions: how much the house you want to buy costs, what house is it, your basic finances (income, other loans you have to pay, etc.), and how much down payment you have (how much of your own money you’ll put to the purchase).
They’ll crunch some numbers to make sure, primarily, that the house you want to buy is worth what you’re trying to buy it for and that you have enough money each month to cover the mortgage payments.
Assuming that all checks out, you’ll put in your down payment, the bank will put in the rest, and you’ll buy the house. Then you’ll pay the bank back in monthly installments for the next 15-30 years. In the background the bank is what’s called “lienholder” on the house…if you stop making payments, the bank takes over the house.
In Canada, as far as I know, the actual loan is only good for something like 5 years then you need to “re-finance”…pay off the old loan, start a new one. Banks do this because interest rates (the extra amount the bank charges as a service for loaning you the money) change from time to time.
A mortgage is just a fancy loan.
Let’s say you want to want to buy a house for $400,000. You don’t have that much money. So you meet up with a representative of your bank, and arrange a mortgage. In this case, it would be typical for you to pay the bank something like $20,000 up-front, and then $500,000 in little slices over the next 25 years. As for the person selling the house, the bank pays them $400,000 up-front.
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