When it Comes to a Mortgage, You’ve Got Options!
At Tandia we offer a variety of mortgage types and terms to suit your needs, all with competitive rates. Not every type of mortgage is right for every person. Choosing the best mortgage for you and your family depends on your unique situation, and a bit of sleuthing into the different terms and types goes a long way when determining what that looks like.
What is a Fixed-Rate Mortgage, and how is it different from a Variable-Rate Mortgage?
These names refer to the interest rate you pay on your mortgage and how it is calculated. With a fixed-rate mortgage, the interest rate remains the same for the entire term of the loan. This is a great option for someone who prefers security and predictability since your monthly payments will remain consistent. This type of mortgage can also provide some peace of mind during a volatile market environment since you know what you’re in for from the get-go.
With a variable-rate mortgage however, the interest rate fluctuates periodically based on changes in the market. Depending on current interest rate conditions, a variable rate can be an attractive option, but always keep in mind that payments could change over time.
What about Closed and Open Mortgages?
These product names refer to the amount of flexibility you have around things like prepayment, paying off your mortgage early or making changes during the term. With a closed mortgage, you would incur penalties if you paid off the mortgage early, refinanced your mortgage or renegotiated terms before the mortgage period ended. Because they are ‘locked in’, closed mortgages tend to have lower interest rates (compared to open mortgages) since they offer the lender or financial institution more predictability with the interest income.
An open mortgage, however, allows the holder more flexibility, as they may pay off the entire mortgage balance at any time without penalties. Because of this, open mortgages typically have higher interest rates (compared to closed mortgages) since they don’t offer the lender as much predictability or stability of payments throughout your mortgage term.
High Ratio vs. Conventional Mortgage
These terms are referring to the amount of money, known as a down payment, you are able to put towards the property you are purchasing. A high ratio mortgage is a mortgage loan higher than 80% of the lending value of the property – meaning that the loan’s value is large in comparison to the value of the home. This mortgage type may allow a homebuyer to enter the market earlier, without a traditional 20% down payment, but they will likely require mortgage insurance and there may be other costs associated with this type of mortgage to consider as well.
In contrast, a conventional mortgage is a loan for no more than 80% of the appraised value or purchase price for a property. If you’ve saved up 20% or more of the purchase price on your home to put towards your purchase, you may qualify for this type of mortgage.
We hope you found this guide handy! Be sure to check out our current rates to see what mortgage product may be the right fit for you, and remember to book an appointment, either by phone or at your Tandia branch, to go over your options. Get in touch with us any time, we’d love to help you make the right move. Happy house hunting!
