Choosing The Right Mortgage For YouThis article will help you understand the differences between a variety of mortgage options. There are many different mortgage products offered by the various lending institutions in Canada, so you may not know what features to look for. As you'll see, each type of mortgage has slightly different features which appeal to a variety of different preferences. For example, some home buyers take comfort in knowing that the amount of their mortgage payments will be the same throughout the entire term of their mortgage. Other home buyers may be willing to accept some fluctuation in the amount of their mortgage payments in exchange for the potential long-term savings or the change to pay off their mortgage faster. The right mortgage for you in the one that best matches your overall comfort level and fits with your income and lifestyle. Conventional or High Ratio A conventional mortgage is a loan for no more than 75% of the appraised value or purchase price of the property, whichever is less. The remaining amount required for a purchase (25%) comes from your resources and is referred to as the down payment. If you have to borrow more than 75% of the money you need, you'll be applying for what is called a "High-Ratio Mortgage". Here's how it works: You must have at least a 5% down payment when you buy a home. Any down payment between 5% and 24% is considered a high-ratio mortgage, and the mortgage must be insured by the Canadian Mortgage and Housing Corporation (CMHC) or GE Capital Mortgage Insurance Company (GEMICO). The insurer will charge a fee for this insurance. The amount of the fee will depend on the amount you are borrowing and the percentage of your own down payment. Typical fees range from 0.5% to 3.75% of the value of your home. This amount can be paid up front or added to the principal amount of your mortgage. A Mortgage Specialist or Mortgage Broker can help you determine the exact amount of the fee. Fixed Rate or Variable Rate Mortgage When you take out a fixed-rate mortgage, your interest rate will never change throughout the entire term of your mortgage. As a result, you will always know exactly how much your mortgage payments will be and how much of your mortgage will be paid off at the end of your term. With a variable rate mortgage, your rate will be set in relation to the lending institution's Mortgage Prime Rate at the beginning of each month. In other words, it will vary from month to month. Historically, variable-rate mortgages have tended to cost less than fixed-rate mortgages when interest rates are fairly stable. When rates change, your payment amount remains the same. However, the amount that is applied toward interest and principal will change depending upon the interest rate that month. If interest rates drop, more of your mortgage payment is applied to the principal balance owing. The can help pay off your mortgage faster. However, if interest rates rise, more of your monthly payment is taken up by your interest payment. Short-term or Long-term The "term" is the length of the current mortgage agreement. A mortgage typically has a term of six months to 5 years. Usually, the shorter the term, the lower the interest rate. A "short-term" mortgage is usually for two years of less. A "long-term" mortgage is generally for three years or more. Short-term mortgages are appropriate for buyers who believe interest rates will drop at renewal time. Long-term mortgages are suitable when current rates are reasonable and borrowers want the security of budgeting for the future. The key to choosing between short and long term is to feel comfortable with your mortgage payments. After a term expires, the balance of the principal owing on the mortgage can be repaid, or a new mortgage agreement can be established at the then-current rates. Open or Closed Open mortgages can be paid off at any time without penalty and are usually negotiated for very short terms, They are suited to homeowners who are planning to sell in the near future or those who want the flexibility to make large, lump-sum payments before the end of the term. A closed mortgage has a locked-in interest rate for the full term of the mortgage. Most first-time home buyers prefer a closed mortgage because they want to enjoy the comfort of steady, predictable mortgage payments. If you want to re-negotiate your interest rate, or pay off the balance, you will need to wait until the maturity date or pay a penalty. About The Author John Carle & Sharon Gregresh are Realtors with Royal LePage - ArTeam in St. Albert, AB. They pride themselves on providing more than just real estate sales and listings. Their clients benefit from a much larger spectrum or real estate services. Contact them any time at [email protected] or through their website at www.workingtogether.ca. They can be reached by phone at (780) 458-5595
MORE RESOURCES updated Fri. March / 29 / 2024 Refinancing - Learning Center Zing! Blog by Quicken Loans Types of Mortgage Refinance Options Bankrate.com Discover Home Loans Review 2024 - Mortgages Business Insider How to Refinance Your Mortgage NerdWallet Will Mortgage Rates Go Down in 2024? What Homebuyers Should Expect Business Insider Underwater Mortgage: What To Do Bankrate.com Mortgage Interest Rates Today, March 28, 2024 | Rates Are Down This Week. Will They Stay That Way? Business Insider Mortgage Refinance Rates: Compare Current Rates Business Insider When to Consider Refinancing Your Mortgage Business Insider Mortgage Interest Rates Today, March 27, 2024 | Rates Down Slightly as Homebuying Season Ramps Up Business Insider 30-year refinance rates: What to know CNN Underscored The best mortgage lenders for refinancing in March 2024 CNN Underscored 15-Year Mortgage Refinance Rates: Compare Current Rates Business Insider Current mortgage refinance rates CNN Underscored Mortgage Relief and Mortgage Assistance Programs [2024 ] The Mortgage Reports Mortgage demand falls again HousingWire Should You Refinance Your Mortgage In 2024? Bankrate.com Best Mortgage Refinance Lenders In 2024 Bankrate.com Mastering Rate-and-Term Refinance: a Complete Explainer Business Insider Current mortgage interest rates: Mortgage rates today CNN Underscored VA Refinance Rates - Current VA Loan Refinance Rates Today Business Insider MBA: Mortgage Applications Decreased in Weekly Survey Calculated Risk Current FHA Refinance Rates Today - Mortgages Business Insider Refinance Requirements: What You Need to Refinance Your Home in 2024 The Mortgage Reports When to Refinance Mortgage: Is it Time? - Buy Side from WSJ The Wall Street Journal Conventional Refinance Rates and Guidelines for 2024 The Mortgage Reports How Soon Can You Refinance a Mortgage Loan? 2024 Rules The Mortgage Reports How To Refinance An Underwater Mortgage Bankrate.com How Soon Can You Refinance a Mortgage? NerdWallet Current 15-year refinance rates — and lenders that offer them CNN Underscored Mortgage Rates Chart | Historical and Current Rate Trends The Mortgage Reports Can You Refinance With No Income Verification in 2024? The Mortgage Reports Best Refinance Lenders of March 2024: Refinance Your Mortgage The Motley Fool What Credit Score Do I Need To Refinance? Bankrate.com Should I Refinance My Mortgage Now? When to Refinance As Rates Drop Business Insider Office of Research blog: A look at cash-out refinance mortgages and their borrowers between 2013 to 2023 Consumer Financial Protection Bureau How To Get Equity Out Of A Paid-Off House Bankrate.com CFPB Releases Study of Refinance Mortgage Loans Between 2013 and 2023 Consumer Finance Monitor Save up to $1,500 on a Mortgage Refinance With the New FHFA Program Business Insider Mortgage Interest Rates Today, March 22, 2024 | Rates Rose This Week, But Could Trend Lower in Coming Months Business Insider Should You Refinance Halfway Through Your Mortgage? Bankrate.com
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