Shopping for a home in Calgary can mean running into a lot of unfamiliar words, and at Mortgage Connection, we know few cause more head-scratching than the phrase “conventional lending.” You just want to know how much you need to put down and what it means for your monthly budget, and we’re here to help you figure it out.
A conventional mortgage, sometimes called conventional lending, is a home loan where you put down at least 20% of the purchase price, so you skip mortgage default insurance and can borrow up to 80% of the home’s value.
What a Conventional Mortgage Means
A conventional mortgage is the loan you get when you have a solid down payment ready to go. With conventional lending, you bring at least 20% of the home’s price to the table, and the lender covers the remaining 80%. Many people aim for a conventional mortgage because it means you don’t have to pay mortgage default insurance, which can be helpful for your budget month-to-month.
How a Conventional Mortgage Works
Your down payment does more than lower the amount you borrow. It can also lower the lender’s risk, since you’ve already invested real money in the home from day one.
Picture a house priced at $500,000. If you put down $100,000, that’s a 20% down payment, and you borrow the remaining $400,000. Because your down payment hits that 20% mark, you qualify for a conventional mortgage right away.
Payback Basics You Should Know
Every payment you make chips away at 2 things. Part goes toward the principal, which is the amount you borrowed, and part goes toward interest, which is what the lender charges you for borrowing money with them.
Your amortization is the total time you take to pay off the loan, with 25 years being a common option. With a conventional mortgage, you may be able to choose an amortization period of up to 30 years, depending on the lender and your situation.
A shorter amortization means higher monthly payments but less interest over time. A longer one lowers your monthly cost, but you pay more interest in the long run.
Benefits of a Conventional Mortgage
Putting down 20% or more can have a few advantages. Here’s what you gain with a conventional mortgage:
- You skip default insurance premiums, which can add thousands to your loan
- You own more home equity from the start, since 20% of the value is already yours
- You borrow less, so your payments stay smaller, and you pay less interest over time
Conventional vs. Other Mortgage Types
If putting down 20% isn’t realistic for your situation, there are other mortgage options that may allow you to purchase with a smaller down payment. Our team can help you explore your options and find an approach that fits your budget and financial situation.
Conventional vs. High-Ratio
A high-ratio mortgage is what you get when you put down less than 20%. Because you’re borrowing more than 80% of the home’s value, mortgage default insurance is generally required for an eligible mortgage. The insurance protects the lender if the borrower defaults, while the borrower typically pays the premium.
Conventional vs. Collateral
A collateral mortgage is registered against your property in a way that may give you more flexibility to access additional borrowing with your lender later, depending on the product and your financial situation.
How to Qualify with Mortgage Brokers in Calgary
Qualifying for a conventional mortgage comes down to a few clear steps. Mortgage brokers in Calgary can walk you through each one so nothing surprises you along the way. Here’s how to start qualifying for a conventional mortgage:
- Save at least 20% of the purchase price for your down payment
- Show steady, provable income the lender can verify with documents
- Keep a healthy credit score so lenders see you as a reliable borrower
Hit these marks, and you put yourself in a strong spot to lock in a conventional mortgage that fits your budget.
Contact Mortgage Connection Today
Conventional lending doesn’t have to feel like a puzzle. Our team of experienced mortgage brokers at Mortgage Connection can help you understand your options and find a mortgage that matches your goals. Reach out today to start the conversation and take the guesswork out of your next home.
