Deciding which mortgage makes sense can be difficult, I’m here to help.
There are several factors to consider when making a decision about the best mortgage solution. From terms and rates to flexibility and type of mortgage, I will assess your unique needs and present the best solutions.
Choosing the right type of mortgage solution could save you money in the long term.
1. A Fixed Mortgage - offers you the security of locking in your interest rate for the term of your mortgage, so you know exactly how much principal and interest you will be paying on the mortgage during the term. Terms range from 1 year to 10 years. Fixed rate mortgages can offer some form of pre-payment, from 10% to 20% of the original mortgage amount each year, depending on the lender.
If you wish to pay off your mortgage in full, there will be a penalty of either 3 months simple interest, or an Interest Rate Differential (IRD). Not all fixed mortgage penalties are calculated the same. Some lenders charge higher IRD penalties then other lenders. It is a good idea to question how the IRD payout penalty on a fixed mortgage is calculated.
Sometimes “life happens” and if you have to payout your mortgage prior to maturity you’ll want to ensure the penalty is reasonable. A mortgage broker can present lenders who offer favorable penalties on fixed rate mortgages.
2. Variable Rate Mortgage - allows you to take advantage of today's low Prime Rate. Most variable rate products are set below prime, terms range from 3 years to 5 years. Payments vary depending on the product or lender you choose.
In some cases, you can fix your payments for up to 3 years or 5 years, but the interest rate will fluctuate as the Bank Prime Rate changes. In other cases, your monthly payments will fluctuate depending on how many times the Prime Rate changes during your term. Variable rate mortgages can offer some form of pre-payment, from 10% to 20% of the original mortgage amount each year, depending on the lender.
By: Kristi Hyson with Axiom Mortgages (kristi@kristihyson.com)
