Get to know the basics before you choose your mortgage. You must select the most important to you – lower rates or flexibility. Take some time to study mortgage types:
Closed Mortgage: A closed mortgage is best if you want consistent rates. Interest rates are typically lower (and do not change with the length of the term). However, a closed mortgage does not offer much flexibility in paying off your mortgage sooner – with the exception of a once-a-year lump sum payment up to 20% of your entire mortgage.
- Predictable and consistent payment amount
- Often comes with lower interest rates
- Limited flexibility with paying down the mortgage faster
- Cannot change interest rate during the term of the mortgage
Variable Mortgage: A type of mortgage where the interest rate is based on the lender’s prime rate plus or minus a certain percentage. Your mortgage payments may vary depending on the current interest rate. Variable mortgages can offer lower interest rates than fixed-rate mortgages but also have more uncertainty and risk.
- Uncertainty surrounding payments
- Pay less over time
- Take advantage of lower rates when interest rates are low.
Open Mortgage: If you are looking for flexibility in paying off your mortgage, consider an open mortgage. No penalty is incurred if you decide to make lump sum payments or pay off your mortgage before the term expires; however, this flexibility comes often with a higher interest rate – which can result in higher monthly payments.
- Maximum flexibility: no penalty for making lump sum payments or paying off your entire mortgage before the term expires
- Higher interest rate
- Best for those looking to pay off their mortgage as soon as possible
Choosing the right mortgage can be daunting, but it’s essential to take the time to understand the options available to you. Whether you value consistent payments, flexibility, or the ability to pay off your mortgage sooner, there is a mortgage type that will suit your needs. Do your research, and select the mortgage that aligns with your financial goals. By doing so, you can take the first step towards owning your dream home.
Don’t hesitate to contact us with any questions or if you want to start the mortgage process for yourself!
Trish & The Primex Team