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Glossaries »
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Which type of mortgage will best suits with your credit situation! Things Before You Apply for a Mortgage Loan
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Types of Mortgages
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Fixed Rate (Closed) Mortgage
Fixed Rate mortgage holds an advantage that by which you could have control over it for getting a great saving, you may benefit from the security of locking in your mortgage interest rate for a predetermined length of time, usually ranging from six months to five years and terms such as three months, or six, seven and 10 years are also available with the other companies as well.
With the fixed rate mortgage you have control over choosing a term, if you think interest rates will increase, your option to select a longer term that may be a five-year, have a great advantage for you to be benefit from, and if you think that the rates are going down to decrease and or remain relatively stable for a long period of time, then adopting a shorter term is an ideal solution to get an advantage, most people dream about.
Paying off your entire mortgage or part of the mortgage loan more than the annual allowable maximum payment amount before the maturity of the loan always carry some additional payments, depending on the institution, these payments are generally known as penalty. Most of the lenders will allow you to make additional payments on your mortgage without any penalty, that could amount to as much as 25 per cent of your original mortgage amount. Make sure you understand this before choosing your term.
Variable Interest Rate Mortgage
Mortgages without fixed-rate term may be suitable during periods when interest rates are expected to fall, consumers may choose variable-rate mortgages to take advantage of lower rates without re-negotiating their mortgage. With Variable Interest-Rate Mortgage, a consumer have advantage, during the term of the mortgage, your payments usually stable as cpmpared to change in the principal and interest. However, as the base rate for the variable interest-rate mortgage changes, so will the interest rate on your mortgage.
Variable Interest-Rate Mortgage is a game of principal and interest, at the begining of the variable term the lender will calculate a mortgage payment that includes both the principal and interest. Rise in interest rates may cause your loan payment propartionatel high towards your paying interest then and less will go towards reducing the principal and on the other hand, drop in interest rates may advantage your loan payment propartionatel high towards adding up the principal then paying interest.
Adjustable Rate Mortgage
Mortgage where the interest rate and payment amount are adjustable from time to time during the term is known as Adjustable Rate Mortgage. As a result, the interest rate on your loan and the monthly payment will rise and fall with increases and decreases in overall interest rates.
Most of the variable-rate mortgages are offered as closed and charge a penalty for paying off all or part of the mortgage, in relation to completely open in which you can pay off all or part of your mortgage at any time, without a penalty. You may check it with your mortgage lender before choosing a mortgage company.
Open Mortgage
A mortgage which can be prepaid (pay off entire or part of your mortgage) at any time, without penalty is known as an open mortgage. Open mortgages usually have a short term (from six months to one year), with usually higher interest rate than the fixed rate for a closed mortgage with a similar term. One of an ideal situation in which an open mortgage may be most favourable option, if your house is for sale and you want to repay the loan with the money you get from the sale.
Convertible Rate Mortgage
A provision in some adjustable-rate mortgage (ARMs) that allows the Borrower to change the ARM to a fixed-rate mortgage at specified timeframes after loan origination. Convertibility feature of a mortgage allows you to renegotiate your interest rate before the maturity date, you can lock into a longer term during the current term of your mortgage without paying a penalty while staying with the same lender. However, this early renewal opportunity is not offered widely by the mortgage lenders. You can check this feature with the mortgage lender of your choice.
If current interest on your variable interest-rate mortgages or fixed-rate mortgages with short terms, is lower than upcoming interest rate, you may change to a longer-term mortgage such as a five-year term. The convertibility feature provides you opportunity to save from the increase in the interest rate.
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Compare current mortgage interest rates for Canadian mortgage rate. Canada fixed mortgage rate closed & adjustable mortgages, long term mortgages, and open, variable & convertible mortgage rate online available with various banks, lenders, brokers and other lending options. Click here for current mortgage rate.
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Mortgage Loan Insurance w
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Mortgage Loan Basics - Mortgage 101
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Before Mortgage Loan Apply
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Internet Mortgage Lead Sponsors
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• Term
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After Mortgage Loan Applied
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• Paying Mortgage Faster
• Mortgage Refinance
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• Do and Don'ts
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