You will have many options when it comes to choosing a mortgage. Your lender or broker will help you find the mortgage that best matches your needs. Become familiar with the following terms and options to help with your decisions.
The length of time you agree to take to pay off your mortgage (usually 25 years).
How often you make your mortgage payments. It can be weekly, every two weeks or once a month.
Types of interest rates:
• Fixed rate—The rate doesn’t change for the term of the mortgage.
• Variable rate—The interest rate fluctuates with market rates.
• Protected (or capped) variable rate—The rate fluctuates but will not rise over a preset maximum rate. Mortgage term: The length of time that the options and interest rate you choose are in effect. It can be anywhere from 6 months to 10 years. When the term is up, you can renegotiate your mortgage and choose the same or different options.
Open and closed mortgages:
• Open mortgage—Lets you pay off your mortgage in full or in part at any time without any penalties.
• Closed mortgage—Offers limited (or no) options to pay off your mortgage early in full or in part, but it usually has a lower interest rate.
Conventional and high-ratio mortgages:
• Conventional mortgage—A loan that is equal to or less than 80% of the lending value of a home. This requires a down payment of at least 20%.
• High-ratio mortgage—A loan that is over 80% of the lending value of a home. This means the down payment is less than 20% and will likely require mortgage loan insurance. Pre-payment options: The ability to make extra payments, increase your payments or pay off your mortgage early without incurring a penalty.
An option that lets you transfer or switch your mortgage to another home with little or no penalty when you sell your existing home. Mortgage loan insurance can also be transferred to the new home.