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For centuries we’ve been conditioned to just ‘take the bank's word for it’, but with the growing wealth of information available to consumers these days, it just makes sense to compare the marketplace before you sign. The days of driving from bank to bank filling out applications and having to wait for days or worse, weeks, for approval, are long gone. RatesWise leverages relationships and technology to speed up the process, find you a few of the best options on the current market, and help you connect with the right people.

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What Is a Mortgage? (And 4 Other Questions First-Time Buyers Ask)

FAQs

May 30, 2025 (2 mins read)

If you're thinking about buying a home in Ontario, you’ve probably heard the word “mortgage” a lot. But what does it actually mean? Don’t worry, you’re not alone. Let’s break it down in simple terms.

What Is a Mortgage?

A mortgage is a loan you get to help you buy a home. The bank or lender gives you money, and you agree to pay it back. You set a time duration with your lender, usually every month.

Think of it like borrowing a big amount now and slowly paying it back, with interest, while living in your new place.

Is a Mortgage a Loan?

Yes, a mortgage is a loan, but it's a special kind of loan just for real estate. What makes it different?

It’s usually a large amount of money
It’s paid back over a long time (like 5, 10, 20, 25 years)
If you can’t pay at the set duration, the lender can take the home back

So, yep, it’s a loan, but it’s tied to your house.

What Is the Structure of a Mortgage?

A mortgage is built like a puzzle with four main pieces:

Loan Amount (Principal) – This is the money you borrow to buy the home.
Interest – The extra money you pay the lender for borrowing.
Taxes – In Canada, you might pay property taxes as part of your monthly payment.
Insurance – This helps protect your home or the lender, depending on the plan.

Together, these are often called PITI: Principal, Interest, Taxes, and Insurance.

What Is a Mortgage in Principle?

A mortgage in principle (also called a pre-approval in Canada) is a letter from a lender saying they’re likely to give you a mortgage if your details check out.

It helps you:

Know your budget before you shop
Show sellers you’re serious
Move faster when you find the right home

In short, it’s a “yes, likely”, not a final approval, but close.

What Are the 4 Parts of a Mortgage?

Let’s repeat it clearly — the four parts of a mortgage are:

Principal – The money you borrow
Interest – The cost of borrowing
Taxes – Property taxes (can be part of your payment)
Insurance – Home or mortgage insurance

Understanding these helps you know where your money goes each month.

Final Thoughts

Mortgages sound big and scary, but they’re just a way to buy a home, step by step. And you don’t have to figure it all out alone. At Rateswise, we’re here to help you understand your options, clearly and calmly.

Ready to learn what you can afford? Try our Mortgage Calculator or talk to our experts!