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Mortgages, like houses, come in different shapes and sizes. The
BC Mortgage Guy will help you choose the one best suited to your
needs.
rob@thebcmortgageguy.ca
Open or Closed
Open Mortgage : Terms
from 6 months to 1 year A mortgage in which you can prepay all, or
part of the original balance without penalty. This is helpful if
you plan to pay off a large sum, or the entire balance in a short
period. Rates are higher than closed terms because of the
convenience. If rates are going up, and you are moving, you should
consider a closed term, and port your mortgage to your new
place.
Closed
Mortgage : Terms from 6 months to 10yrs
Be careful to pick a term that suits your needs. Otherwise you may
be faced with a large penalty if you try to prepay too much, or try
to switch your mortgage to another lender midterm.
ARM or Variable
ARM (Adjustable Rate Mortgage) or
Variable Rate Mortgage : Do not confuse this with an
open mortgage. They can be open, or closed. Terms are from 6 months
to 5yrs. Rates fluctuate with prime, usually monthly. Historically,
rates are as much as 2 or 3% below the 5yr fixed rates. This can
save you up to $200 or more interest per month on a $100,000
mortgage. Expect to pay a penalty if you want to pay it off early
or switch lenders. Most lenders will let you convert to a fixed
rate, closed term, without penalty. If your luck holds, you can
save tens of thousands off the principal and interest, and take
years off your amortization.
Portable
This is where it gets confusing. No mortgage is portable. It is the
rate and term that are portable. If you move to a new place and
want to take your mortgage with you, you will need a new mortgage
with the same rate, term, and amortization that was left on your
old place. You will have to re-apply, even if you are staying with
your present lender. You will have to pay more legal fees. The
benefit of a portable mortgage is that you may keep your low rate
and not have to pay CMHC fees again.
Conventional
A mortgage that does not require a mortgage insurance fee.
Typically this is a mortgage which is 75% or less of the purchase
price or property value. By having a large down payment, you can
save thousands in insurance fees. The disadvantage is that if you
wish to sell, it can limit the number of potential buyers who would
like to assume your mortgage, but do not have a large
downpayment.
CMHC or GE Capital
Mortgage Insurance companies licensed by the Federal Government to
provide mortgage insurance for lenders, to protect them against
default by borrowers. The insurance is usually added to the
mortgage. Rates range from 0.5% to 3.75% or more, of the mortgage
balance. This insurance enables many more buyers to enter the
market, keeping housing demand strong.
Our Fees
Are Usually Paid By The Lender,
Some Conditions. Rates Are Subject To Change Without Notice
© 2003 The BC Mortgage Guy - ... for friendly and courteous
financial assistance.
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