Here's a great article on the role of the Mortgage Professional and the responsibility of the home owner from ratesupermarket.ca.

Mortgage Professional On The Front Line To Homeownership

January 5, 2012 by Rubina

Increasingly Canadians looking to buy a house are seeking more information from the professional helping to secure their mortgage. They look to their mortgage expert for good financial advice, guidance and some level of consultation on what most likely is the biggest investment of their lives. 

The Role of Mortgage Professionals

A survey by Maritz Research Canada conducted for the Canadian Association of Accredited Mortgage Professionals (CAAMP), shows mortgage brokers in particular are expected to provide clients with options and support through the complicated mortgage process. There’s also an expectation clients will be offered competitive mortgage products, recommendations on product details and lenders, and in general a high level of customer service.
Mortgage experts are now on the front line when giving advice to new homeowners on how much they should borrow and at what rate. They’re committed to getting the best rate and product possible for the mortgage term a homeowner is seeking.

Here’s the Good News

Canadian home prices have held up surprisingly well despite the economic issues that have plagued the world in the last 3 years. The Canadian housing markets remains stronger compared to the U.S and appears to be a far better investment than the stock market. On top of this, Canadians have roughly 68 per cent equity in their home, compared with 43 per cent  in the U.S. an indication our housing market remains much stronger.
In the same survey Canadians admit they could handle a $200 a month increase on their mortgage payment if interest rates were to rise. If that’s the case then we should be putting more money towards our mortgage right now.  It will lower our principal and our loan will be much smaller when rates rise. Don’t borrow money in anticipation of making higher payments in the future. Ask your mortgage professional how bigger payments will reduce your amortization. You will be pleasantly surprised.

This is My Concern

Interest rates still remain historically low, making it easier and more comfortable for Canadians to borrow more money then they should. Canada’s rules are not as lax as the U.S. when it comes to lending, especially after new stricter guidelines were brought in by Finance Minister Jim Flaherty in 2010.  But that doesn’t mean homeowners aren’t full of false confidence they can borrow more than they can manage.
Before you meet with your mortgage broker or the mortgage specialist at the bank understand based on your financial situation how much you want to borrow. Remember when you borrow money you’re buying the right to pay that money back in a per-determined amount of time.  Don’t get pushed out of your comfort zone when it comes to your mortgage.
We’re quickly moving into the busiest time for mortgages in Canada. Springtime is when real estate sales ramp up as homeowners try to buy a home they can move into during the easy summer months.
It is easy to convince yourself to borrow more to get into a “dream home.” This is especially true for buyers who previously lost out on a home because they were out bid by another buyer. Remember if that dream home is out of your budget it can quickly becoming a nightmare if house prices fall even slightly and when interest rates start to rise.

Do Your Own Research First

My advice is to decide how much you can afford to borrow before you meet with your mortgage professional. Remember nobody cares about your money as much as you do.  Getting better service and good advice is imperative, but do your own research to make sure the mortgage amount is best for you.
Mortgage professionals are there to guide you through this complicated process and give you the best advice they can, but ultimately the decision about how much you want to borrow (after you know the amount you can qualify for) is up to you.

Risk? What Risk? Mortgage Investment From the “Buy Side”

Residential mortgages in Canada, compared to various other possible investments, are not usually considered to be particularly risky. And, they’re not. But they do carry more risk than government bonds do and they are therefore priced at a spread above government bonds. What risk is there – particularly with insured mortgages? In terms of credit risk (the risk that some portion of the principal advanced or interest owing may be lost due to borrower default) there is very little. For conventional loans with an LTV of 80%, credit losses would arise only in the event of a “perfect storm” scenario which would include a mortgage default, a steep drop in home values, property tax arrears and delay. This rare scenario could easily erode a lender’s 20% security cushion but investors also consider two other types of risk always associated with mortgages: Reinvestment Risk and Liquidity Risk.

Credit Risk is the risk that that some portion of the principal advanced or interest owing may be lost due to borrower default.

Remember Mary and her government bond? When Mary sold her 10% government bond (and earned an impressive capital gain because rates had decreased from the time she first invested), she decided to consider taking on a little more risk and she looked at investing in a fund of fixed rate residential mortgages. The fund manager explained to her that the fund’s yield would not be constant because amounts of principal are repaid to the fund every day – either through regular amortized borrower payments or full payouts. The fund would then reinvest the repaid principal in new mortgages which could have lower rates than the older repaid mortgages. Mary now understood the concept of Reinvestment Risk. Her bond had paid a constant rate of return until maturity. An investment in mortgages was going to provide a less certain return, but she invested in the fund anyway because she was comfortable that she was being compensated for this risk by the yield she would earn, which includes a spread above the yield of government bonds.
Reinvestment Risk is the risk that the mortgage principal may be repaid prior to maturity (without the appropriate interest penalty) and reinvested at a lower rate.

A couple of years after she invested in the mortgage fund, Mary decided to sell all of her investments and open her own business. Over that two year period, her mortgage fund had performed well but there had been widely reported problems in the American mortgage and housing market which were threatening to spill over into Canada. Mary was not the only investor in the fund wanting to sell and the fund manager was having great difficulty finding new investors as investments which contained the word “mortgage” had fallen out of favour in the market. Mary had come face to face with Liquidity Risk and, although she was able to sell her investment in the mortgage fund and open her own business, it took longer than she had expected – especially compared to how easy and fast it had been to sell her government bond two years earlier.

Liquidity Risk is the risk that, in the event that an investor needs to sell some or all of its mortgage portfolio , it could take some time to find a buyer and to go through the review process and close the transaction.

Mortgages are priced at a spread over government bonds to compensate investors for Credit Risk, Reinvestment Risk and Liquidity Risk. But how big does the spread need to be? Look for the answer in the next edition.

Bonds, Yields and Spreads and how they affect mortgages in "easy to explain" terms.

The Bond Market and Fixed Income Yields - How Does it Really Work?  

The first thing we need to understand about the bond market is the concept of “yield”. The yield of a bond is the income, the earning, the profit – the reason why an investor would invest. With a bond, yield is a function two things: the interest the bond pays and the price the investor pays for the bond. 

Think of this example:

A few years ago, Mary bought a new bond with a face value or principal amount of $100 which pays annual interest of $10. Mary’s yield is 10%. Interest rates in the economy have decreased since Mary bought her bond and, today, a similar new $100 bond only pays annual interest of $5 (a 5% yield). Mary must be happy to have a bond with a yield of 10% when the current yield is now only 5%, right? If Mary decides to sell her bond, she will ask for $200 for it since she knows that investors today are only earning a yield of 5%. Her bond still pays annual interest of $10 to whoever owns it, so the new investor who pays $200 for her bond, will earn a yield of 5%. Bonds pay a fixed rate of interest until they mature. Bond prices, and therefore bond yields, change all the time. 

Have you ever noticed that reporters, when trying to explain the reason why the bond market influences mortgage rates, will often say "because mortgages are financed through the bond market"?  Financed through the bond market? While that statement is not entirely true, it can help us understand the relationship between mortgages rates and the bond market. 

The bond market (and we are referring to Government of Canada bonds) operates on the simple basis of supply and demand. We have all heard, especially recently, about the government's operating deficits and overall debt. When the government takes in less than it spends, it finances the shortfall mostly by issuing bonds (and other short term instruments such as Treasury Bills). Investors buy these bonds when they are first issued but there is also a vast secondary market which allows investors to buy and sell existing government bonds before they mature. As with anything in the economy, increased demand results in higher prices. Higher bond prices result in lower bond yields since the interest rate of each bond is fixed when it is issued (like Mary’s example above). Demand for government bonds tends to increase during times of uncertainty and when investors see increased risk in the stock market - like they probably do now. When the economy recovers and the outlook for corporate earnings brightens, investors tend to return to the stock market. Demand for bonds falls off, bond prices are pushed down and bond yields are pushed up.

Government bond yields are widely followed and are used as a reference point or a benchmark for other fixed rate investments. Government bonds are considered to be the safest and the most liquid (easy and fast to sell if necessary) fixed income investments available in Canada. They therefore provide the lowest returns. Other fixed rate investments are evaluated in comparison to government bonds and, since government bonds return the lowest yields, yields on other investments are always higher. The difference is often referred to as the "spread". Using government bonds as a benchmark therefore provides a base frame of reference for valuation of other fixed rate investments - like mortgages.

From MCAP Mortgages