Types of Mortgages in Canada
If you’re looking to buy a home in Edmonton chances are you’re going to need a mortgage – but what type of mortgage is right for you? What kind of mortgages are there even to pick from? Do I go with an Edmonton mortgage broker or go straight to the bank? Purchasing a home can be rather stressful but whether you’re purchasing your first home or have been through it before there are a few basics mortgages to pick from. It never hurts to be informed on the options available to you
If you have 20% or more of the purchase price for a downpayment chances are that’ll you’ll be able to apply for for a traditional mortgage. Depending on the lender you may have to have insurance on the home as well.
An open mortgage allows you to pay off part of the debt or pay it back in full without having to worry about any penalties. An open mortgage will often have term lengths ranging from six months to a year with interest rates on this type of mortgage being comparable to those of a closed mortgage.
Variable Rate Mortgages
When you first get a variable rate mortgage your payments calculated by the lender which includes interest and principal. These payments will remain consistent throughout the term of the mortgage. As the rare of the market changes, so will your mortgage rates. So when the the interest rates drop you’ll notice that less of your payment will going to the interest with more coming off the principal.
Capped Rate Mortgages
Capped rate mortgages offer a variable rate that is capped by the lending institution. Markets will fluctuate with rates rising and falling but the lending institution offers a guarantee that you’ll never pay more than the capped interest rate. On average these mortgages will hit you with a penalty if you decide to pay your mortgage back in full
If you’d like a little more stability in the type of mortgage you take on, the closed mortgage could be a viable option. With a closed mortgage you’ll be able to lock in your interest rate over the length of the loan. Bringing peace of mind with the benefit of lower rates than an open mortgage. If you feel like interest rates may increase, you’ll want to choose a loan with an extended term.
In a convertible mortgage, with a term of 6 months to a year you’ll receive a fixed rate with the options of locking in for an extended term or continue for a short term with a more flexible rate.
Simply put, reverse mortgages afford you the opportunity to transfer the equity in your home into cash value. You won’t have to worry about selling or leaving in your home in the process, but you’ll need to be at least 62 years of age to qualify for this type of mortgage.Depending on the age of a homeowner, the amount of money you can borrow will vary. The older the homeowner is, the more money they’ll be able to borrow.
These are the basic types of mortgages available to Canadians today. There are a few variations and some banks offer their own style of lending but it all basically boils down to these 7 types of mortgages. Dominion Lending are Edmonton’s mortgage brokers and can help make sense of these mortgage lending nuances. If you need a little help or even more details feel free to contact us here