When you’re looking to buy a home in Ontario, one of the key decisions you’ll face is choosing the right type of mortgage. Each type has its own benefits and drawbacks, and understanding these can help you make the best choice for your financial situation.
- Fixed rate mortgages: A fixed-rate mortgage means your interest rate stays the same throughout the term of your loan. This stability makes it easier to plan your finances because your monthly payments won’t change. See more.
- Variable Rate Mortgages: A variable rate mortgage means that the interest rate can change over time. It is tied to the prime lending rate, which can fluctuate based on economic conditions. This means your payments might change, but it also offers the chance to benefit from lower rates. See more.
- Open Mortgages Vs. Closed Mortgages. : An open mortgage offers flexibility, allowing you to pay off your mortgage in part or in full at any time without incurring penalties. This is ideal if you anticipate receiving a large sum of money, such as an inheritance or a bonus, which you can use to pay down your mortgage. A closed mortgage typically comes with lower interest rates but less flexibility. You’re committed to the terms for the duration of the mortgage term, and making extra payments or paying off the mortgage early can result in penalties. See more.
- Conventional Mortgages: A conventional mortgage is a home loan that is not insured or guaranteed by the government. This means that the borrower typically needs to have a good credit score and a stable income to qualify. The key feature of a conventional mortgage is that it requires a down payment of at least 20% of the home’s purchase price. See more.
- High Ratio Mortgages: A high-ratio mortgage is when you make a down payment of less than 20% of the home’s purchase price. This means you’re borrowing more than 80% of the property’s value. Because this type of mortgage is considered riskier for lenders, you’ll need to get mortgage default insurance. See more.
- Reverse Mortgages: A reverse mortgage allows homeowners aged 55 and over to borrow money against the value of their home. Unlike a traditional mortgage, you don’t have to make regular payments. Instead, the loan is repaid when you sell the house, move out, or pass away. See more.
