When it comes to mortgages in Canada, there are quite a few to choose from. If you’re a Canadian or planning to move to Canada, then you may be wondering what the different types of mortgages available are. Read on to learn about the various kinds of mortgages available in Canada.
This type of mortgage is also known as a traditional mortgage, usually purchased from a commercial mortgage broker. If you can come up with a down payment of 20% of the home’s sale price, then you can apply for this type of mortgage. Keep in mind you may be required to get homeowner’s insurance, but this really depends on the company you receive financing from. Many people don’t have 20% to put down on a home, but that’s ok because there are other options they may be interested in.
Variable Rate Mortgage
A variable rate mortgage means that when the market changes, your mortgage rates will change too, but at the beginning of your mortgage, the lender will calculate your payments. This will include the principal and any interest, and the payments will stay the same unless the market changes. There are pros and cons of getting this kind of mortgage, such as you may end up paying more on interest when the market changes and experiences an increase in interest rates. Nonetheless, this type of mortgage is still one of the most popular choices among Canadians.
Capped rate mortgages come with variable rates, but the lender puts a cap on it. What this means is that your rates will fluctuate with the market, but the lender will cap you off at a certain rate. In other words, you won’t pay above their cap, but it is worth pointing that if you decide to pay your entire mortgage off in full, then you could be hit with a penalty fee. The amount you’ll pay depends on the lender you chose to get your mortgage with.
Open mortgages are also available to Canadians, and these mortgages allow homeowners to pay their mortgage off completely or in part, all without having to worry about being hit with penalties. The term lengths will usually range from six months to a year, and interest rates on them may be a bit high. This is especially if you compare them with closed mortgages, but the terms of both mortgages are relatively the same.
This type of mortgage is designed for those who have equity in their homes, and if you have equity in your home, then you can transfer it into cash value. During the process of getting a reverse mortgage, you won’t have to sell your home, nor will you be required to leave it, but you do have to be at least 62-years-old to apply for this mortgage. This is because you should have plenty of equity in your home by that age, which will also play a role in how much money you will be lent. Generally speaking, the older you are, the more money the lender will give you.
A closed mortgage allows you to pay your mortgage off quicker. If you get a fixed rate mortgage, then you can lock your interest rate for the loan’s duration. Usually, this will result in lower interest rates.
Those are the types of mortgages available in Canada. As for which one you should apply for, that is completely up to you. Compare each type of mortgage and then you can decide which one you will benefit the most from, as well as the one you’ll have the easiest time paying.