TYPES OF MORTGAGES
FIXED RATE MORTGAGE (CLOSED)
A fixed rate mortgage(closed mortgage) offers you the security of locking in your interest rate for the term of your mortgage. Thus, you know exactly how much principal and interest you will be paying during the term. Terms range from 6 months to 10 years. Fixed rate mortgages also offer some form of prepayment. This amount may be from 10% to 25% of the original mortgage balance on Jan 1st of each year. The term closed means you can not break the contract without penalty. If you wish to pay off your mortgage in full before maturity, then there will be a penalty. Penalty can either be 3 months simple interest, or an Interest Rate Differential (IRD). More than 70% of homeowners use fixed rate mortgage to finance their house financing needs.
VARIABLE RATE MORTGAGE (CLOSED)
A variable-rate mortgage allows you to take advantage of today’s low Prime Rate. Thus, most variable rate products are set below prime. Again terms can range from 1 to 5 years. In most cases, you can fix your payment amounts for up to 5 years too. The interest rate will fluctuate as the Bank Prime Rate changes. Variable rate closed mortgages also offer some form of prepayment. From 10% to 25% of the original mortgage balance Jan 1st of each year, depending on the lender. The term closed mortgage means you can not break the contract without penalty. If you wish to pay off your mortgage in full before maturity, there will be a penalty.
OPEN MORTGAGE
An open mortgage allows you the flexibility to pay off some or the entire mortgage at any time, without penalty. Ofcourse, Interest rates are usually higher and are tied to the Bank’s Prime Rate. Hence this type of mortgage may be suitable for investors. They often plan to flip the property in less than 6 months. likewise, individual may also opt for it. If they are planning to sell the house in near future like within a year.
SECURED LINE OF CREDIT (HELOC)
A secured line-of-credit (often referred as HELOC- Home equity line of credit) allows you to access the equity in your home. Interest rates are tied to prime, usually slightly above prime. As well as lower interest rates compared to an unsecured line of credit. Required payment on the balance is interest only. Also making it a good choice where cash flow may be important. Thus, you may have a secured line of credit and a mortgage if you have good equity in your home. banks typically use the full limit of HELOC as a liability regardless how much of it is used.
Helping you achieve your goals
Purchasing a home is an important decision and you should be confident about your investment. Moreover, I will work with you to offer a valuable insight throughout the mortgage approval to closing process. Thus, saving you time, and finding the mortgage solution that will best suit your needs.