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Residential Mortgage Types
In today's mortgage market there are a variety of
mortgage products offered by lenders. Some
mortgage products may not be available to all
applicants as lender guidelines and Canadian
Government Mortgage Regulations will apply.
When choosing a mortgage there are several
conditions to take into consideration to protect your
bottom line. These may include conditions such as
whether the mortgage is portable to another
property in case you decide to move, if the mortgage
is a collateral charge against your title which may
prevent you from switching lenders when your term
is complete without having to pay legal fees again,
how the prepayment penalty is calculated and other
lender conditions that may be present.
Fixed Rate Mortgages A Fixed Rate Mortgage is a
mortgage with a set interest rate for the length of the
term. Fixed rate terms vary in length and are most
commonly terms of 1, 2, 3, 4, 5, 7, and 10 years.
Variable Rate Mortgages A Variable Rate
Mortgage is a mortgage with an interest rate that
changes with the Lender's Prime Lending Rate. The
Prime Lending Rate changes with the Target for the
Overnight Rate which is set by the Bank of Canada.
The Bank of Canada generally announces rate
changes eight times per year at predetermined
dates. Variable rates offered may be discounted or
have a premium depending on the lender, the
borrower's qualification and the property itself.
Variable rate terms can be either Open or Closed
Terms. With an Open Term the borrower will be able
to pay off the mortgage without having to pay high
prepayment penalties, however small fees may apply
and the interest rate is generally higher than closed
term variable mortgages.
Closed Term Variable Rate Mortgages will generally
but not always have a three months interest penalty
if the borrower chooses to completely pay off the
mortgage before the maturity date. Some lenders
will also allow pre-payment options under the
mortgage contract allowing you to make lump sum
payments towards your principal during the term of
the mortgage.
With most variable rate mortgages the borrower
may be allowed to lock-in to a fixed rate without
paying a penalty. It is recommended that if you are
considering locking in your variable rate that you do
talk to an independent Mortgage Broker to find out
your best options.
50/50 Mortgages A 50/50 Mortgage is a hybrid
mortgage that is a half fixed rate and half variable
rate closed term mortgage product.
Home Equity Lines of Credit A Home Equity Line
of Credit otherwise known as a HELOC is a secured
line-of-credit against your home. You may have just a
HELOC registered on your title or you may have a
combination of mortgages and HELOCs registered.
HELOC's are a variable rate product and can be
interest only payments. HELOC's are useful for home
owners who want to have access to their equity for
other purposes such as renovations, other
investments or more.
There are mortgage products that offer a mortgage
and a HELOC product together and when you pay
down the principal of the mortgage portion the
available credit on the HELOC increases. To find out
more about available Home Equity Lines of Credit
call us today!
Cash Back Mortgages Cash Back Mortgages are
mortgages where the lender advances a percentage
or specified amount of cash at closing of the
mortgage to the applicant. Cash Back Mortgages
generally carry a higher interest rate and penalties if
the mortgagor breaks the mortgage during the term.
Construction or Draw Mortgages Construction
Mortgages otherwise known as a Draw Mortgage or
a Progress Advance Mortgage are mortgages that
are used to construct a house on a property. The
funds are advanced at various stages of construction
to cover the steps in the building process.
The process for Construction Mortgages is more
complex than a standard mortgage and upfront
preparation is required. Lenders generally require
completed plans, estimates, copies of permits and
more.
Mobile Home & Chattel Mortgages Mobile
Homes, Modular Homes and Float Homes are
considered Chattels as they are movable structures.
Mobile homes are generally required to be tied-
down or permanently affixed to a foundation.
Mortgage financing for homes in park setting
commonly have higher interest rates and tighter
approval guidelines associated with the financing as
they incur higher risk for the lender.
If a Manufactured home is on its own land more
opportunities exist for mortgage financing. For
example if the mobile home is de-registered from
the BC Mobile Home Registry then some lenders will
treat the home like a regular constructed home.
Second & Third Mortgages The first mortgage
placed on the Land Title of a property is called a first
mortgage. Any subsequent mortgages will be
referred to by the order in which it is placed on the
Land Title. The position of the mortgage on the Land
Title adds strength to the mortgage, first position is
more favourable. Due to the risk of having a Second
or more charged on a Land Title the lender often
charges a higher interest and fees to account for risk.
Reverse Mortgages A reverse mortgage allows you
to access equity in your home and instead of you
paying a monthly payment you will receive a monthly
payment from your available equity. There are many
conditions associated with a reverse mortgage and
we can help you determine if a reverse mortgage is
your best option.
Private Mortgages Sometimes a private mortgage
is required by a borrower when they do not qualify
for a mortgage from a financial institute. Private
mortgages are generally more expensive and should
be used as short term financing. An exit strategy
should be discussed prior to accepting a private
mortgage. Private mortgages almost always include
extra costs such as a broker fee, lender fee, and
lender legal fees.