Common Types of Mortgages

Published by Meghan Van Houten on

There are many type’s of mortgages available in the Canada’s Lending Market, which makes being a home buyer an overwhelming process.

That is why using a Mortgage Agent is always advised as we will take the time to explain your options and help find you the right mortgage product for your current and future needs.

We have made a list that will hopefully help you understand what is right for you. This list comprises some of the most common types of mortgages available in Halton, Kitchener, Waterloo, Cambridge, Guelph and surrounding area’s.

Conventional Mortgage Vs. High Ratio Mortgage

A conventional mortgage is classified as a borrower who has a down payment of 20% of the home’s value or greater.
A high ratio mortgage is when a borrower has down payment of less than 20%. Due to the higher risk involved, the borrower will have to obtain mortgage default insurance, which is rolled into the mortgage payments.  This insurances protects the lender from any potential payment defaults.
To find out how much home you can afford, and thus know how much down payment percentage you have, call us to get your pre-approval process started.

Open Mortgage Vs. Closed Mortgage Vs. Convertible Mortgage

An open mortgage gives you more flexibility for payments but is a short term option with a much larger interest rate.  However, if you pay off the mortgage or break the mortgage terms prior to the end of term, there is no penalty.
A closed mortgage, the most common form of mortgage, is more strict in the sense that if you pay off your mortgage before the term ends then you will be charged a penalty fee. A closed mortgage has generally lower rates but you cannot change your mortgage or end the amortization period early without penalty.
A convertible mortgage has the same terms as a closed mortgage, but you can convert your loan into a longer term without being penalized.

Variable Rate Mortgage Vs Capped Rate Mortgage Vs Fixed Rate Mortgage

A variable rate mortgage is a mortgage where the amount of your monthyl payment does not fluctuate, the percentage being paid to interest vs. principal changes along with the lenders changes in interest.  In other words, If your interest rate decreases then your monthly payment will go more towards your principal rate, and vice versa.
A capped rate mortgage is a variable rate mortgage that has a cap. This means that when your rates fluctuated throughout your amortization period then your payments will never go above the cap placed on your loan. This can help you budget better because you’ll know that you will never pay more than the capped amount.
fixed rate mortgage is a mortgage where your interest and principal rates are calculated for the duration of your loan period and do not waver at any time during your agreed term.  This means you will pay the same amount of Principal as Interest, based on the offered and accepted interest rate, for the entire term of your mortgage.

Reverse Mortgage

A reverse mortgage is a mortgage that allows you to access your home’s equity. This money can be transferred into a lump sum or monthly cash payments. Whether you are wanting to renovate your home, pay off debt, buy more real estate, invest, or go on a dream vacation, a reverse mortgage can help make these financial goals happen. Specific age requirements are necessary for a reverse mortgage.

For more information, or to hear about specialty mortgage options, please contact us any time.

Meghan Van Houten – Mortgage Agent
Mountainview Mortgages
5038 Fairview Street, Burlington, ON L7L 0B4
Independently owned and operated
Lic# 12568