A mortgage is a loan you take when you are buying a house or any other property. When you are taking a loan, you need to be extremely careful every step along the way. You should be aware of the terms and conditions, repayment plans and down payments, to name a few. Taking a mortgage can be an overwhelming process. When you are headed to meet your Mortgage Broker Newmarket, there are certain things that you should have in mind. This will help you to make an informed decision and take the right mortgage for your needs.
The type of mortgage you can opt for is dependent on the amount you can pay as a down payment. The types are:
Conventional Mortgage: If you have the funds available and can pay about 20% of the purchase price as a down payment then a conventional mortgage is the perfect option for you.
High Ratio Mortgage: Everyone can’t pay the needed 20%. In such a situation, you can opt for a high-ratio mortgage. This type of mortgage would include paying insurance premiums. You could opt to pay everything in a single payment or you could add it to the total mortgage amount. The loan plays the determinant factor of the amount of insurance premium to be paid.
There are two types of repayment plans which you can choose from:
Open Mortgage: In this type of repayment plan, you can choose to repay anytime during the mortgage term. You won’t be required to pay any penalty. The term of this repayment is short and ranges from 6 months to a year. This option is the perfect choice when you are planning to pay off your mortgage in a shorter period. However, the rate of interest would be a little bit higher.
Closed Mortgage: This repayment plan has set terms and conditions which one needs to abide by. The terms could range from 6 months to a decade. If you feel you can make a prepayment, then the options available are quite limited. In case you decide to renegotiate the terms, refinance or pay the mortgage before the end of the term, then you would have to pay a penalty. The late interest in closed mortgage repayment is significantly lower.
Variable Rate and fixed-rate mortgages are the two types of mortgage rates.
Variable Rate: Here you need to pay the amount of the mortgage principal and the interest payment. The variable rate is dependent on the prime lending rates of that time. As the lending rates keep fluctuating, the principle is adjusted according to the current rate. Hence, the mortgage rate keeps changing based on the rate changes.
Fixed-Rate: When you opt for a fixed mortgage rate, there is a fixed interest rate in the terms of the mortgage. The payments are set according to that. There are no fluctuations in the interest rate being paid by you.