which mortgage is right for you?
In the complex landscape of real estate financing, selecting the right mortgage type is a pivotal decision that can significantly impact a homeowner's financial journey. As individuals start on the path to homeownership, they are confronted with a plethora of mortgage options, each with its unique features and considerations. This article aims to simplify the diverse array of mortgage types available, giving clarity on the distinctive characteristics of conventional mortgages, high ratio mortgages, open mortgages, fixed-rate mortgages, and variable rate/adjustable rate mortgages. By exploring the nuances of these financial instruments, prospective homebuyers can make informed choices tailored to their specific needs and financial goals.
A conventional mortgage is one where the down payment is equal to 20% or more of the property's value/purchase price. A low-ratio mortgage does not normally require mortgage loan insurance.
A high ratio mortgage is one where the borrower is contributing less than 20% of the value/purchase price of the property as the down payment. High ratio mortgages must be insured through Canada Mortgage and Housing Corporation (CMHC), Sagen or Canada Guaranty, the three mortgage insurance companies in Canada.
A fixed rate mortgage is one where the interest rate is determined and locked in for the term of the mortgage. Lenders often offer different prepayment options allowing for quicker repayment of the mortgage and for partial or full repayment of the mortgage.
A variable rate or adjustable rate mortgage is one where the interest rate can increase or decrease during the term. The interest rate varies with changes in prime lending rates. How changes in the interest rate affect your payments will depend on whether your payments are fixed or adjustable. With there being many different types of mortgages, it really depends on your specific situation. Depending on things like: income, future income, house price, other debts, down payment etc... Different mortgages may be more suitable for you than others. The best way to find out which is right for you, is to talk to your mortgage broker or agent, however, it is good for you to know what the different types are and what they mean.
The trade marks displayed on this site, including CREA®, MLS®, Multiple Listing Service®, and the associated logos and design marks are owned by the Canadian Real Estate Association. REALTOR® is a trade mark of REALTOR® Canada Inc., a corporation owned by Canadian Real Estate Association and the National Association of REALTORS®. Other trade marks may be owned by real estate boards and other third parties. Nothing contained on this site gives any user the right or license to use any trade mark displayed on this site without the express permission of the owner.© Royal LePage TEAM REALTY