Do you think 'The Bank' wants you to make smart choices when it comes to your mortgage?
A mortgage broker works for YOU, and not for the bank. Contact an educated mortgage broker before you go house shopping, before you refinance, or before you sign ANYTHING the bank mails you.
A licensed mortgage broker, such as Robert May of Verico Canada First Mortgage, can provide you with clear advice and direction on the many options available to you. He can help to show you how small choices can result in savings of tens of thousands of dollars. Does 'The Bank' do that for you? NOPE!
Here is an article published by CMHC (Hi Dan!) that details some of the information that a quality licensed Lethbridge mortgage broker can share with you.
How to Choose The Right Mortgage Options
CMHC’s Homebuying Step by Step guide has the answers you need to your mortgage financing questions.
Congratulations! You’ve decided to begin your search for a new home, or perhaps you’ve already found the home of your dreams and are ready to make an offer. It’s now time to consider your mortgage options. But with so many different choices available, how can you select the right kind of mortgage for your needs?
To help you make an informed decision, Canada Mortgage and Housing Corporation (CMHC) offers the following answers to some of the most common questions Canadians have about choosing a mortgage:
- What is the difference between conventional and high-ratio mortgages?
A conventional mortgage is a mortgage loan up to a maximum of 80 per cent of the lending value of the property. This means that the home buyer has made a down payment of at least 20 per cent of the purchase price or market value of the home. If your down payment is less than 20 per cent of the purchase price, however, you will typically need a high-ratio mortgage. A high-ratio mortgage is a mortgage loan which is higher than 80 per cent of the lending value of the property up to a maximum of 95 per cent. High-ratio mortgages normally have to be insured (by CMHC, for example) against payment default.
- What are fixed, variable or adjustable interest rates?
When you choose a mortgage, you have to decide whether you want the interest rate to be fixed, variable or adjustable. A fixed rate is locked-in for the entire term of the mortgage. With a variable rate, the payments remain the same each month, but the interest rate fluctuates based on market conditions. For adjustable rate mortgages, both the interest rate and the mortgage payments vary based on market conditions. Talk to your mortgage professional to find out which option is right for you, and be sure to evaluate the impact of an increasing interest rate on your monthly payment.
- Should I choose an open or closed mortgage?e same amount each month for the entire term of the mortgage. Some flexibility to repay principal through lump sum payments is allowed. Closed mortgages can be a good choice if you want a fixed payment schedule, and you don’t plan on moving or refinancing before the end of the term. An open mortgage allows y
With a closed mortgage, you pay thou to make a lump sum payment at any time. This type of mortgage can be paid off prior to maturity without penalty. An open mortgage can be a good choice if you’re planning to sell your home in the near future, or if you want the flexibility to make large lump sum payments. An open mortgage generally carries a higher interest rate than a closed one.
- What about the term, amortization and payment schedule?
The term is the length of time (usually from six months to 10 years) that the interest rate and other conditions of your mortgage will be in effect. Amortization is the period of time (such as 25 or 30 years) over which your entire mortgage will be repaid. Lastly, the payment schedule sets out how frequently you will make payments on your mortgage — usually either monthly, biweekly or weekly. Accelerated payments are also an option. These are available for weekly and bi-weekly payment schedules and are generally equivalent to one extra monthly payment per year. With accelerated payments the home owner is able to pay off his/her mortgage faster while decreasing the overall interest cost.
For more information or a free copy of CMHC’s Homebuying Step by Step guide, or for information on any other aspect of owning, maintaining or buying a home, visit our Web site at www.cmhc.ca or call CMHC at 1-800-668-2642. As Canada’s national housing agency, Canada Mortgage and Housing Corporation (CMHC) has been a source of objective, reliable housing expertise for more than 60 years.