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Guide to getting a mortgage from Neo

  • Updated

Neo Mortgage makes buying a home easier. Neo can help you find the best mortgage rates and provide expert support. Get pre-qualified today to start your journey to homeownership. To prepare for your mortgage, you need to understand the basics of the mortgage process.

Find the right mortgage for your needs

To find the right mortgage, understand the options available through Neo.

Conventional mortgage

A conventional mortgage loan isn't insured and may be suitable if you have:

  • At least a 20% down payment
  • A good credit score

Insured mortgage

An insured mortgage loan is protected by mortgage insurers, with the insurance premium ‌added to your total loan amount, and may be suitable if you:

  • Plan to make a down payment of less than 20%
  • Are first-time home buyer

Uninsured mortgage

An uninsured mortgage loan isn’t protected and may be suitable if you:

  • Are buying a home for over $1 million
  • Plan to make a down payment of more than 20%
  • Need to take equity out of your home

Choose your mortgage rate

To choose your mortgage rate, understand the difference between fixed and adjustable rates.

Fixed-rate

A fixed-rate mortgage keeps the same interest rate throughout the entire loan term. Choose a fixed-rate mortgage if you want:

  • Protection against changing interest rate
  • Consistent monthly payments

Adjustable-rate

An adjustable-rate mortgage is a loan where the interest rate can change during the loan term. Choose an adjustable-rate mortgage if you:

  • Expect interest rates to fall or stay stable
  • Are comfortable with changes in your mortgage payments

Understand mortgage essentials

To understand mortgage essentials, here are some key terms you should know.

  • Principal: The original amount borrowed
  • Interest: The cost of borrowing, typically shown as a percentage
  • Term: The total time to repay loan
  • Down payment: The upfront amount paid toward property
  • Amortization: The process of repaying loan through regular payments

Get a mortgage with Neo 

To get a mortgage with Neo, start by pre-qualifying to secure the best mortgage rates. Here’s your journey to getting a mortgage with Neo. Here’s what happens next:

Neo Mortgage Specialist connects with you

A Neo Mortgage Specialist will reach out to you to understand your mortgage needs and gather the necessary information.

Submit your mortgage application

You’ll need to submit a complete mortgage application along with the requested documents.

Application assessment

Our team will review your mortgage application and documents to determine your eligibility.

Receive your pre-qualification letter

If you’re qualified, our team will send you a letter confirming your pre-qualification based on ‌what you can afford.

Start the approval process

Once you have an accepted offer on a property, our team will begin your approval process.

Understand mortgage payments

To understand mortgage payments, you need to know the four main parts that make up your total monthly payment. Here’s the breakdown:

  • Principal: The portion of your payment that reduces the original loan balance
  • Interest: The cost of borrowing money, calculated as a percentage of the remaining principal
  • Taxes: Property taxes that are paid to the government
  • Insurance: Homeowner insurance that protects your property required by lenders

FAQs about getting a mortgage

Here are the answers to some frequently asked questions about Neo Mortgage.

What are the penalties for breaking my mortgage term early?

You’ll incur a prepayment penalty when paying off an existing mortgage before the end of the term. You could break your mortgage and incur penalties by:

  • Paying more than your allowed limit
  • Refinancing your mortgage before your loan term ends
  • Renewing your mortgage early
  • Moving your loan to a different lender before the term ends 

Here are the two types of prepayment penalties that apply based on your mortgage account type:

If you have a closed fixed interest rate term, you’ll pay one of the following two penalties, whichever ‌is greater:

  • Three months of interest on your loan
  • Interest rate differential (IRD), which is the difference between your mortgage rate and the current rate for a similar mortgage

If you have a closed adjustable interest rate term, you’ll pay the three months of interest on your loan.

How do changes to Bank of Canada’s key interest rate impact my mortgage rate?

Changes to the Bank of Canada's key interest rate impacts mortgage rates. Here’s how variable-rate and fixed-rate mortgages are impacted:

Fixed-rate mortgage

  • Doesn’t change with the Bank of Canada’s key interest rate
  • More affected by the bond market

Adjustable-rate mortgage

  • Linked to the Bank of Canada’s key interest rate
  • When the Bank of Canada lowers its rate, your monthly payments decrease on the adjustable-rate mortgage. However, with a variable-rate mortgage, your monthly payment stays the same, and more of that payment goes toward reducing the principal balance

What prepayment options do I have for my mortgage?

You can make prepayments on your mortgage starting from the interest adjustment date and on each anniversary, if you’re not behind on your payments. Here are your prepayment options:

  • Increase regular payments: You may increase your regular mortgage payments by up to 20% of the original mortgage payment
  • Lump-sum payments: You can make a lump-sum payment of $100 or more at least once a year on any regular payment date. However, your total lump-sum payment can’t exceed 20% of the original principal amount

Unused prepayment options can’t be carried over to the next year.

What happens to my mortgage if Neo goes bankrupt? Am I protected?

Your mortgage is protected. The Government of Canada guarantees all of the mortgages serviced through Neo, which are managed by Computershare Trust. If Neo goes bankrupt, your mortgage will remain unchanged at the time of renewal. Before the renewal, Computershare Trust will notify you so you can find a new lender.

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