Understanding Mortgages!

June 11, 2018 | Posted by: Holly Cochrane

Perhaps the time has come where you’re ready to purchase your first home or maybe your current mortgage is up for renewal.  In either scenario there is a lot of information out there and this can make your head spin!!

Listed below are some of the most common types of mortgages, explained more simply. 

Conventional mortgage- the client has over a 20% down payment and the remaining 80% is financed through the lender. 

High Ratio Mortgage- this is where the client has less than 20% of a down payment and the mortgage requires mortgage default insurance by law. Typically the insurance premium is rolled into the total mortgage amount.

Fixed Rate Mortgage- the mortgage rate doesn’t change for the entire term of the mortgage. At the end of the term, another rate and term will be selected.

Variable Rate Mortgage- the rate for this type of mortgage fluctuates with the Canadian prime rate.  Even though the rate may change from time to time your mortgage payment may remain the same. Changes in the interest may affect your mortgage payment amount or amortization at the end of your term. 

Closed mortgage- these mortgages have restrictions. Some closed mortgages can’t be paid off before the term ends without paying a large penalty. Many closed mortgages allow for prepayment each year, and if the client goes above the prepayment amount then there will also be penalties on the portion of prepayment above the allowable yearly amount.  

Open mortgage- is very flexible because you can make lump sum prepayments or accelerated payments without penalty. This allows the homeowners to pay off the loan sooner. Open mortgage do have higher mortgage rates.

Portable Mortgage – With a portable mortgage, you are able to take your current mortgage and apply it to a new property if you move. There are a few options you have, so involve your mortgage professional right away for guidance.  

It is our job and passion to be knowledgeable and up to date on all things mortgage related. Please give us a call with any questions you may have! We look forward to hearing from you.

  

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