What Mortgage is Right for Me?
Fixed….Variable….Adjustable….Hybrid….Open….Closed! With so many different options for mortgages out there, it can be a little confusing and overwhelming, to say the least.
Whether you are purchasing a home for the first time or your mortgage is up for renewal, it is important you understand what type of mortgage is a perfect fit for your situation. Follow this helpful guide that explains some of the most common types, terms and options of mortgages that you may come across when deciding the best choice for you!
This is a mortgage that you choose your term (how long you wish to lock it in for), usually, anywhere from 1 to 5 years and the rate, the lender is offering for that term is set and will not change. For some people, this is a good option as it offers you consistency in knowing what your monthly payment will be so budgeting is easier. Although it does often come with a slightly higher interest rate than other options (1-4 year terms), the five-year fixed mortgage is the most popular. That being said this is a good option if you are able to capitalize on a time when interest rates are low.
This option is where your rate is adjusted throughout the year and will change according to the bank’s current prime rate. When the lender adjusts your rate not only does your interest change but so will your monthly payment. Depending on the interest rates this could mean your payment will go down or possibly up. If you are in a position that your budget allows for flexibility for your mortgage payment to change then this is an option to consider. Keep in mind that changes can be done with minimal notice and can occur up to 8 times per year.
Choosing this type of mortgage offers you a combination of Fixed and Adjustable. A Variable rate consists of your interest rate changing according to prime but keeps your monthly payments the same, so you are able to budget. The way this is done is the fluctuating amount that can change is the amount that is applied to the principal of your mortgage. Often times these rates can be lower than the Fixed rates.
No this isn’t energy efficient!!!! For this choice your mortgage is a 50/50 split between Fixed and Adjustable, giving you the best of both worlds. They will take 50% of your mortgage and put it into a Fixed term and the other 50% will be put as an Adjustable, letting you take advantage if interest rates fall. There are some disadvantages to the Hybrid mortgage. If you decide at any point before your term is up that you want another financial institution to carry your mortgage, this will not be possible if you have a Hybrid mortgage as they are non-transferrable. Also, if the terms for the maturity of the mortgage are different (ex. Your fixed portion matures in 3 years but your Variable matures in 5 years) you can run into penalties being applied.
Open or Closed
This is pretty self-explanatory. Going with an open mortgage gives you the opportunity to make lump sum payments on the principal of your mortgage without penalty. A closed mortgage normally doesn’t allow you to make additional lump sum payments or pay off your mortgage before your term is over without incurring severe penalties.
Knowing your options and speaking with a professional when it comes time to renew or get your mortgage is always advisable. Before you make any decisions be sure to evaluate your situation and shop around to get the best deal possible.
Today’s real estate industry is constantly evolving. Luc is committed to staying ahead
of the trends so his clients can acquire top dollar on the sale of their homes.
If you’re thinking about selling, call Luc Trahan, the Real Estate Man. (705) 818 1888