It's my job as your Mortgage Broker to understand your needs and explore the mortgage options that are most relevant to you!
Your best mortgage isn't necessarily the one that offers the lowest rate, but one that offers a complete package of terms, conditions, rates and fees that fit your unique needs and expectations.
A conventional mortgage equals no more than 80% of the appraised value or purchase price of the property, whichever is less. A high-ratio mortgage is usually for more than 80% of the appraised value or purchase price. It's often referred to as CMHC-insured, although there are 3 different companies who offer this type of mortgage insurance. The insurance premium as well as application, legal and property appraisal fees are all paid by the borrower.
Closed mortgages generally offer lower interest rates than open mortgages of the same term. An open mortgage, however, lets you pay off as much as you want, any time, without penalty. This could save you thousands in penalties.
The term you select is important. Short term mortgages are appropriate if you believe interest rates will be lower at renewal time. Long term mortgages are suitable if you feel current rates are reasonable and you want the security of budgeting for the future. This can be especially important for first time homebuyers.
Figuring out whether a fixed or variable rate mortgage is best for you is an important decision. Assessing whether a fixed or variable rate mortgage product is best for you requires an understanding of your personal financial plan and your ability to handle market fluctuations. Fixed rates are based on government bonds and will not change during the term of your mortgage. This buffers you from increases in market interest rates and allows you to budget for and rely on fixed payment for whatever term you select - from one to as many as 10 years. Variable rate mortgages change with Prime Rate which is directly affected by the Bank of Canada's key interest rate. So you receive a discount or premium in relation to "Prime", while prime rate itself can vary from time to time.
Closed mortgages generally have prepayment options of up to 20% of the original mortgage amount. If you decide to pay out or refinance before the end of the term, prepayment penalties can apply.
An open mortgage can be repaid at any time throughout the term, either in full or partially without paying a prepayment charge. This can give you flexibility until you're ready to lock into a closed term.
What is a high-ratio mortgage?
A high-ratio mortgage refers to a mortgage in which the borrower has a down payment between 5% - 20%. These mortgages require mortgage default insurance. The Canadian government supports high levels of homeownership through an insurance plan that covers lenders in the event that borrowers default on their mortgage. There are several options to suit your needs and I will be happy to discuss this with you and explain why this insurance might not only be necessary, but could actually save you money.
A fixed interest rate is guaranteed for the duration of your mortgage term. This option allows your payment to remain constant so you know how much you will pay every month and the amount you will have paid off at the end.
A variable interest rate will fluctuate with prime rate throughout your mortgage term. This impacts the amount of principal and interest you pay each month, as your mortgage payment can often remain constant. Lately, many lenders are opting to vary the payment depending on rate changes. A bank's prime interest rate may change at any time, but is almost always in tandem with the Bank of Canada.
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