Which Type of Mortgage is Right for Me? | Diamond & Diamond
  • Thursday, 06 May 2021

Which Type of Mortgage is Right for Me?

Finding a mortgage is no easy task whether you are planning to buy a home or refinancing to help pay off your creditors. This article will illustrate the major considerations when it comes to finding a mortgage that is suitable to you.

A borrower when shopping for a mortgage should not only consider the principal amount, interest rate, amortization and the payment frequency that best fits a borrower’s needs but understand that a mortgage is a legal contract between the borrower and lender. It provides a loan secured against the borrower’s property. As such, there are different mortgage types which the borrower can consider.

Below are several common mortgage terms for consideration:

Open Mortgage: allows the borrower the flexibility to pay extra amounts towards the mortgage without a penalty.

Closed Mortgage: limits the extra amounts that a borrower can pay towards the mortgage each year (this limitation is referred to as the Prepayment Privilege).

Portable Mortgage: allows a borrower to transfer his or her current mortgage of a property onto a new property which the borrower intends to purchase.

Assumable Mortgage: allows a third party to take over the borrower’s mortgage and property or have a third party take over the borrower’s mortgage and property.

Fixed Rate Mortgage: the interest rate of the mortgage remains constant for the entire term of the loan.

Variable Rate Mortgage: the interest rate is not fixed and will adjust as the prime rate changes.

Standard/Conventional Mortgage: the mortgage is registered for its actual amount against the property.

Collateral Mortgage: a collateral mortgage can be registered for an amount that is higher than the actual mortgage amount. This allows the borrower to borrow additional funds from the lender (a process referred to as readvancing) if required in the future, without having to refinance the borrower’s mortgage.

Private Mortgage: a mortgage that is sourced privately through an individual or business, as opposed to a major bank or financial institution.

There are many factors when obtaining a mortgage that is suitable to a borrower’s needs and the above shows how every mortgage term should be carefully assessed before securing a mortgage against one’s property.

FAQ’s:

What documents are required in order to obtain a mortgage?

When applying for a mortgage, there are a lot of documents that you should prepare. These include employment/income documents (pay stubs, T1 forms, etc.), personal financial documents (bank account information, statement of assets or investments, etc.), down payment documents, and property documents (purchase and sale agreement, MLS listing, legal description of the home, etc.).

What factors affect the interest rate a lender offers?

The interest rate your lender offers you may depend on:

  • the length of your mortgage term
  • the type of interest you choose
  • the current posted interest rate offered by your lender
  • your credit history
  • if you’re self-employed
  • if you qualify for a discounted interest rate
  • the type of lender you choose like a bank, credit union, financing company, or mortgage investment company
  • the specific lender
    Before you commit to a lender, shop around to get the best rate for you. This could save you thousands of dollars.

When should I pick an open mortgage?

You should opt for an open mortgage if you:

  • plan to pay off your mortgage soon
  • plan to sell your home in the near future
  • think you may have extra money to put toward your mortgage from time to time

Leave a Reply

 

Get the help you deserve

1-800-567-HURT

Call NOW for a free consultation

Diamond & Diamond Ontario Head Office

255 Consumers Road, 5th Floor, Toronto, Ontario

>> Learn More

Diamond & Diamond Alberta Head Office

4246 97 Street NW, Unit 100, Edmonton, Alberta

>> Learn More

Diamond & Diamond British Columbia Head Office

1727 West Broadway, Suite 400, Vancouver, British Columbia

>> Learn More

Barrie

17 Poyntz Street

Brampton

341 Parkhurst Square, Suite 5

Calgary

1331 Macleod Trail SE, Suite 420

Edmonton

4246 97 Street NW, Unit 100

Hamilton

105 Main Street East, Suite 1500

Kelowna

1631 Dickson Avenue Suite 1100

London

256 Pall Mall St, Suite 102

Oakville / Mississauga

2939 Portland Drive, Suite 200

Oshawa

50 Richmond Street E, Unit # 108 B

Ottawa

955 Greenvalley Crescent, Unit 315

Sudbury

144 Elm Street, Suite 201

Surrey

1104 – 13737 96 Ave, Surrey, BC V3V 0C6

Thunder Bay

278 Algoma Street South

Toronto

255 Consumers Road, 5th Floor

Vancouver

1727 West Broadway, Suite 400

Windsor

13158 Tecumseh Rd. E. Unit 3B