If you’re gearing up on buying a new house, one of the things that you must consider is the different types of mortgages that are available to you. The whole process of getting a mortgage can be quite difficult for first-time home buyers. But with the right level of support and assistance, everything can be a walk in the park.
To find the best mortgage that suits your financial capabilities, it is necessary to work with people with a deep understanding on this matter. They should also understand your short- and long-term goals so you can get the loan that you want without making a huge dent on your finances.
Different Types of Mortgages Available to You
There are at least five types of mortgages that are currently available to individuals and each of them has distinct characteristics that may suit your requirements.
- Closed Mortgage
A closed mortgage is one that has a limit on prepayments. They typically have prepayment options of up to 20% of the original amount. If ever you decide to pay out your mortgage, refinance it or renegotiate before the end of the term, prepayment costs will apply.
- Convertible Mortgage
This type of mortgage is similar to a closed mortgage. The only difference is that it gives you the option to convert the loan to a longer term without paying for any prepayment charges. For this type of mortgage, you can make an annual prepayment of up to 10%.
- Open Mortgage
Open mortgages are mortgages that can be prepaid in full or partial installments at any time throughout the term without paying for any penalty or prepayment charges. This is the type of mortgage that gives you the flexibility that you need until you’re ready to go for a closed term mortgage.
- High-Ratio Mortgage
High ratio mortgages refer to mortgages wherein the borrower offers a down payment of less than 20% of the property’s purchase price. These mortgages require mortgage default insurance, which can be pricey. It’s important to discuss all your options with your broker if this type of mortgage is considered.
- Conventional Mortgage
A conventional mortgage is the one that is given with a down payment of 20%. The borrower should also have a good credit score and enough income to qualify. This type of mortgage also doesn’t have the same premium as insured mortgages so it is the preferred choice for a lot of home buyers.
These are the types of mortgage currently available in the market today. If you want to know which one of these is for you, it is highly encouraged that you talk to a licensed broker or a mortgage lender. They should be able to give you sound advice as to what mortgage you need and how you’re supposed to take advantage of it.
You may also see the help of private mortgage lenders Toronto if you want more assistance in deciding the right kind of mortgage for you. With their knowledge and expertise, you’ll surely arrive at the best decision in the end.