The ABCs of Mortgage Law: Understanding the Basics

Understanding the financial language can get tricky, especially since the terminologies and concepts can overwhelm many. However, knowing and understanding them can make a difference in you making a financially feasible decision and not making a prudent decision. One of the most common concepts is mortgage; it’s something that we have dealt with at some point in our lives, yet the information around it is surprisingly sparse. For this, we’ll be looking at the basics of mortgage law and the concept of mortgage.

Mortgages are related to properties, and according to statistics, almost 40 percent of Canadians have at least one type of mortgage on their property, and the numbers go even further if you are a homeowner; a whopping 88 per cent of Canadians who own their properties have taken a mortgage against it, which makes information about mortgage law even more pertinent. 

Mortgage Law


What is a mortgage?

A mortgage is a loan against a property, usually a residential unit. The property itself is the collateral for the loan, which means that should the individual who has taken out the mortgage fail to pay the mortgage off, the lending authority (usually a financial institute or bank) reserves the right to seize the property and start legal proceedings to auction or sell it off for the purpose of recovering the amount owed. 

What is mortgage law?

Mortgage law is the set of rules and regulations that bind individuals and banks or lending authorities and prevent either from gaining an unlawful advantage. Specifically, these laws will determine the procedures that need to be followed should a person default on their mortgage payments. For example, in many countries, including America, the lending authority has the right to seize the property, evacuate the occupants, and put the property up for sale after a person fails to pay their mortgage despite repeated notices. However, in Canada, mortgage law requires that due process in court be initiated before the lending authority goes for foreclosure. 

Let’s take a detailed look at mortgage payments and the different types of mortgages. 

Mortgage payments and the interest 

Mortgage payments are based on interest rates; that is, on top of the amount borrowed, the person will have to pay a fixed interest rate for the duration of the mortgage. For example, in a fixed-rate 15-year mortgage, with the interest rate at 5 per cent, the monthly payment will include the interest levied on it, which means that you will end up paying slightly more than what you actually borrowed for the mortgage. 

The many different types of mortgages

There are many different types of mortgages, which will be discussed in detail below. 

Fixed-rate mortgage

The first and most popular mortgage is the fixed-rate mortgage, which is also the standard one in a majority of countries. The fixed-rate suggests the interest rate; this means that for the entire duration of the loan, whether its 15 or 30 years, the interest rate will stay the same. They are popular because fixed-rate mortgages are stable, fit easily into the finances of an average person, and require less debt servicing than other types of mortgages. 

Adjustable-rate mortgage

The second most popular type of mortgage is an adjustable-rate mortgage, and, as the name suggests, this means that after an initial phase of fixed interest rate has passed, the rest of the duration will see periodic changes in the interest rate, based on the prevailing rates. In adjustable-rate mortgages, the initial interest rate, which is usually for the first five years, is extremely low and, for the remainder of the term, is adjusted based on prevailing market conditions. Adjustable-rate mortgages or ARMs are not very popular because, due to their fluctuating interest rates, the borrower may end up paying a lot more than a fixed-rate mortgage. 

Reverse mortgage

As the name implies, a reverse mortgage is borrowing against the value of the home that an individual already owns. In this case, reverse mortgages are designed for people within a specific demographic (ages 62 and above) who might require a large amount of cash at hand without actually selling the property. In reverse mortgages, the bank or financial institution issues a one-time payment in cash monthly payments or opens a line of credit for the individual. Since it is aimed at an elderly demographic, the reverse mortgage becomes due when the borrower passes away or sells the property. 

Open vs closed mortgages: the difference

Aside from the three aforementioned types, mortgages vary based on their repayments. For instance, mortgages are either open or closed. In open mortgages, repayments can be altered to fit your financial requirements; for example, if you get a big bonus or raise at work, you can start paying off your mortgage more, so you can pay it off earlier. In a closed mortgage, repayment terms and conditions are fixed, especially the amount and the duration, and a penalty will be incurred in any case involving such alteration in repayments. In this case, open mortgages are better for people who might not plan to stay in the property for long and might want to switch. Usually, they are offered to businesspeople with real estate portfolios since their turnovers are high. 

For closed mortgages, duration is key. Since no change can be made to the amount or the duration of the repayment, also called the amortization length, people who plan to settle and spend a long time in the property tend to go for a closed mortgage. 


Mortgaging is common worldwide, as this is a financially feasible process for people looking to purchase and settle in their property. Done with the right mortgage lawyer and with sound legal and financial advice, a mortgage will ensure that you own the property you live in and that the repayments fit into your financial schedule easily. Even if your credit score isn’t good enough for a mortgage, that does not mean you will be deprived of your dream home. A good mortgage lawyer or real estate attorney will help you with your particulars to ensure your mortgage application is approved. With the best, like Siddiqui Law Office, by your side, your dream home can become a reality. 

Siddiqui Law Office: for your dream home to become a reality

Mortgages need not be a foreign concept. Or a hard-to-get concept. Think of it as a way to acquire your dream house that you want your family to grow up in. And with a great real estate attorney by your side, this dream can become a reality without the harsh financial demands commonly associated with mortgages. With its experienced real estate attorneys, Siddiqui Law Office is poised to help you achieve that dream while keeping your legal and financial interests safe and served. Let Siddiqui Law work out the best mortgage plan that fits right into your life and allows you to achieve financial independence from the hassles of renting. Check out Siddiqui Law Office for more information on how prudent mortgaging can help you achieve your dream.