Taking out a mortgage loan is the easiest way to own a house in Ontario, Canada. With a mortgage, you are able to acquire a house you wouldn’t have otherwise been in a position to afford.
Unfortunately, not many people know the different types of mortgages available in Canada. They only take what is offered by the lender.
In Canada, there are many types of mortgages available and the following are some examples. You can find out about mortgages you qualify for by contacting Ontario mortgage brokers.
– Fixed rate mortgage
With a fixed rate mortgage, the interest rate remains the same throughout the term of the loan. When you take out a fixed rate mortgage, you know exactly how much the loan will cost you, which is good for planning purposes.
The only shortcoming of this type of mortgage is that you won’t be able to take advantages of low interest rates when interests fall.
– Adjustable rate mortgages (ARM)/ Variable rate mortgages (VRM)
The interest rates on an adjustable rate mortgage are linked to the Canada’s Central Bank’s base rate. The lender adjusts your mortgage rate or mortgage term accordingly when the Central Bank’s rate changes.
The mortgages differ from fixed rate mortgages in that the interest rate may be changed (raised or lowered) during the mortgage term. With an ARM, you are able you are able to keep the monthly payments as low as possible.
The loans are initially set up like standard loans (based on the prevailing interest rates) and then reviewed at specified intervals. If market rates have changed at the time of review, the lender changes either your interest rate or mortgage term (or both). This changes the repayment plan.
Open and closed mortgages
With an open mortgage, you get the flexibility to repay the loan at any time – without penalty. You can prepay, renegotiate or refinance before maturity.
With a closed mortgage, you don’t have the flexibility to prepay, renegotiate or refinance before maturity. If you wish to pay this mortgage early, the lender may require to pay a penalty.