Being a first-time homebuyer can be an overwhelming process. With countless mortgage options available on the market you might be wondering which option is best for you. Well here at AKAL Mortgages Inc., we have made a list of the most common types of mortgages available in Canada.
Conventional Mortgage Vs. High Ratio Mortgage
A conventional mortgage is where the buyer can borrow a maximum of 80% of the home’s value. This means their down payment has to be at least 20%. If you cannot pay 20% of your down payment then your other option is a high ratio mortgage. Due to the higher risk involved, the borrower will have to obtain mortgage default insurance, which is paid for by the borrow but insures the lender for any potential payment defaults. Contact your Mississauga mortgage broker to figure out your affordability and see which of these two options is best for you.
Open Mortgage Vs. Closed Mortgage Vs. Convertible Mortgage
An open mortgage gives you more flexibility for payments. A closed mortgage is more strict in the sense that if you pay off your mortgage before the term ends then you will be charged a penalty fee. Open mortgages typically have higher rates but you can decide to switch to a fixed rate mortgage if the rates are better, whenever you like. Also, if you pay off your open mortgage before the loan period ends then you will not be penalised like you would for a closed mortgage. A closed mortgage has generally lower rates but you cannot change your mortgage or end the amortization period early. A convertible mortgage has the same terms as a closed mortgage, but you can convert your loan into a longer term without being penalised. Contact your Mississauga mortgage lender for any questions or to find out their specific terms for an open, closed and convertible mortgage.
Variable Rate Mortgage Vs Capped Rate Mortgage
A variable rate mortgage is a mortgage where your interest and principal rates are calculated for the duration of your loan period. Your payments will never change, but depending on how the residential market is doing, determines your mortgage rates. If your interest rate decreases then your monthly payment will go more towards your principal rate, and vice versa. A capped rate mortgage is a variable rate mortgage that has a cap. This means that when your rates fluctuated throughout your amortization period then your payments will never go above the cap placed on your loan. This can help you budget better because you’ll know that you will never pay more than the capped amount.
Reverse Mortgage
A reverse mortgage is a mortgage that allows you to access your home’s equity. This money can be transferred into a lump sum or monthly cash payments and can be used for a multitude of different reasons. Whether you are wanting to renovate your home, pay off debt, buy more real estate, invest, pay for education, or go on a dream vacation, a reverse mortgage can help make these financial goals happen. Specific age requirements are necessary for a reverse mortgage so talk with your Mississauga mortgage broker to see if you qualify.
Contact Us
At AKAL Mortgages Inc., we can provide the perfect Mississauga mortgage for you. Contact us at 416-621-1300 or email info@AKALmortgages.com to get started on your application today!