Overview.
Have you looked into your mortgage options as you plan to sell your current home and buy a new one? It is important for you to take a look at the mortgage options available for you. It will help you plan if you decide to move out and maximize your options. A mortgage broker and consultant will help you understand them properly. But more importantly, your mortgage brokers and consultants will help you to have a bigger mortgage. Imagine that your options will include bringing your mortgage with you if it is portable. Also, you can often combine the current mortgage rate you have with the mortgage rate on the additional funds you will be needing.
Your Journey Starts Here.
A mortgage is a legal and binding contract between you and your lender. The contract specifies the details of your loan, and it’s secured on your chosen property, like a house or a condo.
A mortgage is unlike most types of loans because:
- the loan is secured by a property
- it may have a balance owing at the end of the contract
- it normally needs to be renewed multiple times the balance is paid in full
- it may meet the qualification requirements, including passing a stress test
- it needs a down payment
- it may need to break the contract and pay a penalty
- the loan is typically for an amount that may be in the hundreds of thousands of dollars
Today’s current interest rates are still at their low, one of the lowest in history due to the pandemic. This is a good time to consider breaking your existing mortgage and getting a new one to achieve the total amount you need. In order to break your current mortgage, your lender has the power as it is one of his rights to charge a penalty based on the larger of three months’ interest or the interest rate differential (IRD). This IRD is basically the difference between your former rate and the current rates of your current term.
Different lenders calculate IRD differently, based on their terms and conditions. You have to understand and read the terms of conditions of your bank for you to understand how to calculate your IRD. To get the actual penalty from your lender, you must request it. Typically, the three-month penalty applies to you if you are in a term that is longer than five years and you are past the fifth year. This applies to you and not the IRD, which will make your breaking mortgage more appealing.
Another option is to compare your new rate (either blended or extended) with the rate you plan to get with the new mortgage. The exact terms and conditions of your existing mortgage plan need to be reviewed by the lenders to determine if other factors need to be considered.
We are up-to-date on the current and latest trends rates and all-new available opportunities for you. We guarantee and assure you that it is worth your time and effort to ask a professional mortgage expert like us. Let us analyze and determine the options available for you and choose which is most beneficial for you and your situation. You can choose and decide from a broad range of lenders in our portfolio. We can definitely help you with all of your mortgage details for your next home and other properties.
The Seven Main Types of Mortgages.
Closed Mortgages
A closed mortgage usually has lower rates than open mortgages but with similar terms. Also, a closed mortgage agreement cannot be prepared, refinanced, or negotiated prior to the maturity limits, but some terms allow it for various reasons.
Fixed-Rate Mortgages
Fix rate mortgages are one of the most common dilemmas of home sellers and buyers. The interest rate of a fixed-rate mortgage is determined and locked in for the term of the mortgage. It is up to the lender/ financial institution to vary payment options to allow for quicker transactions and repayment of the mortgage and partial/full mortgage payment.
Conventional and Low Ratio Mortgages
If your down payment to a mortgage is 20% (or more) of the property’s value or purchase price, it is a conventional mortgage. This is also called a low ratio mortgage. This kind of mortgage does not typically require mortgage protection insurance.
High-Ratio Mortgages
When the borrower contributes less than 20% of the property’s purchase price as the down payment, it is high-ratio mortgages. These mortgages must have mortgage default insurance that is coursed through Canada Mortgage and Housing Corporation (CMHC), Canada Guarantee, or Genworth Financial, the three mortgage insurance companies in Canada.
Open Mortgages
This type of mortgage will allow you to be flexible to repay the mortgage at any time and does not incur penalties. It is usually in shorter terms but may include a few variable rates and longer time, depending on your lender.
Variable Rate Mortgages (VRM) / Adjustable Rate Mortgages (ARM)
VRM and ARM differ from each other in terms of a fixed-rate mortgage. In other words, these mortgages are initially set up like a standard loan, based on the current interest rate. The mortgage is reviewed at specified intervals. Assume the market interest rate has shifted, either adjusting the amount of the payment or the period of the amortization time or a combination of both. In that case, the lender then alters the mortgage repayment plan.
Home equity lines of credit (HELOC)
HELCO is a home quality line of credit that is a revolving line of credit secured by your home. A person can borrow money here up to a percentage of their home’s value (credit limit).
This is an option for borrowing on your home’s equity. Home equity is the difference between the value of your home and the balance of any current mortgage that is unpaid.
