Since most people don’t have the cash available for a home, a mortgage is a loan that can help cover the balance. When you take out a mortgage you agree to pay back the sum at an agreed interest rate.
Before we dive deeper into the world of mortgages, let’s go over a few of the key concepts to help you make informed decisions.
An open mortgage can be repaid in part or full at any time without having to pay a penalty. Because of this flexibility, open mortgage rates tend to be higher than the rates available through closed mortgages. It’s ideal if you’re confident you can pay off your mortgage in the near term.
Choosing a closed mortgage means you’re essentially saying that you have no plans to pay off your mortgage in full, or more than prepayment privileges will allow during your mortgage term. A closed mortgage will offer a lower interest rate than an open mortgage, giving you the opportunity to pay less in interest.
Your down payment is the amount of upfront money that you put towards the purchase of a home. A larger down payment could mean having a more manageable mortgage. The minimum down payment is 5% but if you can put down 20% or more, you’ll qualify for a conventional mortgage and avoid paying mortgage insurance.
The amortization period is the length of time available to you to pay off your mortgage. For high-ratio mortgages, the maximum amortization is 25 years. Longer amortization periods mean lower payments, but they increase the total amount of interest you pay. A shorter amortization period will lead to big interest savings. Plus, you could become mortgage-free sooner.
The mortgage term is the length of time you commit to a particular type of mortgage. It can range from 6 months to 10 years. You may want to choose a longer-term mortgage when interest rates are low to keep your payments the same. A shorter-term strategy works best if interest rates are either high or falling, so you can renew at a lower rate.
Choose monthly, semi-monthly, accelerated bi-weekly or accelerated weekly payments. Accelerated payments will save you interest over the length of your mortgage, and could mean you’ll be mortgage-free sooner. Also, our prepayment privileges allow you to make lump sum payments towards your principal to build equity in your home faster and substantially reduce interest.
Life insurance can help your loved ones remain in your home if something happens to you.
There are 2 kinds of life insurance you might consider: Life insurance and mortgage life insurance.
Life insurance can be used by your beneficiaries however they choose, while mortgage life insurance can only be used to pay off your mortgage.