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Wednesday, 11 April 2012

Mortgage Advisory! Number three: mortgage types and options!

Mortgage Types and Options! Make it custom fit!
Are you sure your bank is giving you the best possible rate and product custom fitted to your circumstances and needs not of their own? Think Again!

Plain and simple: your mortgage broker must find you a mortgage product what fits your:
  • budget: to ensure you are able to maintain payments even if you have temporary job or health issues and or extra expenses what you have not foreseen at the time of your application
  • term: meaning if you are planning and or more likely will move in a year or two do not take a 5 year term closed mortgage as the penalties might be too high vs. the saving on the rate
  • high rate mortgage: in case you are not able to qualify at mainstream lenders an must deal with alternative lenders due to credit and other issues, make the term only a year or two and while already have ownership take time to clean up your credit
  • credit: sometimes you must take a high rate mortgage, make sure you are work diligently to repair your credit, or better eliminate your debt to get back to low rates and a good lender
  • personal: there are other personal circumstances to consider, everybody has their own, most assured the mortgage what your Mortgage Broker recommends you will be custom fitted to your needs and not of the lender
Mortgage Types:
  • conventional: when a borrower has a minimum 20% down payment when purchase or 20% equity at refinancing it is called conventional mortgage Under traditional mortgage financing the mortgage do not exceed 80% LTV of the home value! (you save a bundle on CMHC, Genworth etc. insurance cost)
  • insured or high ratio: allows the borrower to put 5% down when purchase or have 5% equity when refinance. Insurance required by lender, insuring the lender, paid by the borrower! Insurers guidelines apply. There are other insurers than CMHC, your mortgage broker will get the one approved by your lender and providing you the best policy along with suitable guidelines!
  • zero down payment: the true zero down payment is history as the government has eliminated it, like many other goodies from our lives, however no money down mortgage is available via "cash back" or "flex down" programs through the lenders insurer like Genworth, CMHC and Canada Guaranty! These programs are only available OAC.
Mortgage options:
  • open mortgage: allows borrower to repay all or portion of the mortgage at any time without penalty. These type of mortgages are typically has higher interest rate, but the flexibility is priceless.
  • closed mortgages: ideal for long term stability and budgeting. There are restricted options for prepayment, however they allow you to make lump sum payment every year without prepayment penalty! Must be negotiated at the time of applying for the mortgage or refinance a mortgage.
  • variable mortgage: volatility as you do not know when rates are changing and not a good option when rates are most likely will go up. It fluctuates with prime rate! When your Mortgage Broker advises you the rates are most likely will go down, you can ride out a term 1-5 years with huge savings on interest rates. Otherwise you must get a cap rate product. What is it? 
Contact us for a FREE CONSULTATION!