Tips on How to Get a Mortgage that Suits You
Are you wondering how to get a mortgage that is right for you? This can be a difficult question to answer. Most Canadians will have to take out a mortgage in order to buy a home. The first step in figuring out how to get a mortgage that will work for you is to look at your options. There are many different kinds of mortgages to choose from. The right choice can deliver significant savings, while the wrong one can result in you losing your home. When considering mortgage options, look at how each relates to your own needs and resources.
Common Mortgage Types
This mortgage is for no more than 80 percent of the home's value as determined by an appraiser or its purchase price. This means that you will have to come up with at least 20 percent of its price for your down payment.
This kind of mortgage offer you more than 80 percent of the home's appraised value or its purchase price. In fact, they may provide as much as 95 percent of the cost so that you would only have to pay five percent as your down payment. However, you will need to pay for mortgage loan insurance so that the lender can be repaid if you are unable to pay back the loan.
Borrowers can repay these mortgages in full or in part at any time with no penalty cost. The drawback is that open mortgages usually have a higher interest rate because of their uncertainty.
This kind of mortgage does not allow you to make extra payments, and if you repay the loan ahead of time, you will have to pay a penalty. The benefit is the lower interest rate when compared to open mortgages.
Fixed Rate Mortgages
The interest rate remains the same over the course of these mortgages, with no changes to your payments.
Variable Rate Mortgages
The interest rate on these mortgages will vary in accordance with changes to the financial market. You will still pay the same amount every month, but the amount of your payment that goes to the interest or to the principal will vary depending on changes in the interest rate.
Consider the following questions when considering how to get a mortgage that will be beneficial for you:
How long are you going to be in the house?
This is one of the more important factors to consider when looking at how to get a mortgage. If you plan to be in the home for less than seven years, a variable rate mortgage may be right for you. If you plan to spend at least 20 years in the house, consider a fixed rate mortgage. If you plan to sell quickly or expect to get a large sum of money, an open mortgage can be beneficial.
How much risk can you tolerate?
If you need to know exactly what you will be paying over the duration of the mortgage, then go for a closed fixed rate mortgage. If you are willing to risk a fluctuating interest rate, then you may be able to get a lower interest rate with a variable rate mortgage.
Keep in mind that the terms open and closed relate to the flexibility that you get with regard to repayment of the debt. Fixed and variable relate to the calculation and application of the interest rate. This means that you can get a closed mortgage with a fixed or variable interest rate, or an open mortgage with a fixed or variable interest rate.
Want to learn more about how to get a mortgage that matches with your financial needs? Contact us at Mary Roy and Team and we’ll find you the house of your dreams, and let you know the best way to take a mortgage out on it!