Mortgage Information
There are a variety of mortgage options that you may be eligible for. The choice depends on you, your income, and your lifestyle. Below are some guidelines to choosing the right mortgage.Conventional or high-ratio
A conventional mortgage is a loan for no more than 80% of the appraised value or purchase price of the property, whichever is less. The remaining 20% or more comes from your resources and is called the down payment. If you need to borrow more than 80% of the appraised value, you will have to apply for a "high-ratio mortgage".
For a high-ratio mortgage you have to have between 5% and 20% down payment. This type of mortgage must be insured by the Canada Mortgage and Housing Corporation (CMHC) or GE Capital Mortgage Insurance Company (GEMICO). There will be a fee for this insurance. This 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 principal amount of your mortgage. This amount can be paid right away or added to your mortgage. Talk to me or a Mortgage Specialist to determine the exact amount.
Short-term or long-term
The term is the length of the current mortgage agreement. A mortgage agreement lasts between six months to ten years.
A short-term mortgage is usually for two years or less. A long-term mortgage is generally for three years or more. Short-term mortgages are appropriate for customers who believe interest rates will drop at renewal time. Long-term mortgages are suitable when current rates are relatively low or borrowers want the security of budgeting for the future.
Fixed of variable
A fixed rate mortgage means that your interest rates will not change throughout the term of your mortgage. You will know precisely how much you will be paying each month and how much of your mortgage will be paid off at the end of your term.
A variable mortgage means that your interest rates will vary from month to month. Usually variable rate mortgages are better when interest rates are stable. However if they fluctuate a lot, you may be taking a risk signing up for one. Talk to your Mortgage Specialist for advice.
Open or closed
Open mortgages can be paid off at any time without penalty. Usually these mortgages are for homeowners who want to make large payments before maturity.
Closed mortgages have to be paid within a specific term. If you want to pay off your mortgage ahead of time, you will have to pay a penalty fee.