Mortgage Types

January 14, 2021

Open Mortgage

An open mortgage is a mortgage that you can fully pay off, refinanced or re-negotiated at any time without penalties (no restrictions in prepayment).

Closed Mortgage

A closed mortgage is one that cannot be fully paid off, refinanced or re-negotiated before the end of the term without incurring a penalty and once you purchase it, you plan to be bound by its terms and conditions for the duration of the term.

Convertible Mortgage

Convertible Mortgage is an agreement that is made at the beginning of the term which allows the homeowner to change the type of mortgage during their term. Offers lower interest rates than an open mortgage and has the option to switch to a closed mortgage.

Hybrid Mortgage

Hybrid Mortgage is when there is more than one type of mortgage contained in a single registration. The registration could include a fixed rate portion, a variable rate portion, a line of credit portion, or any combination of these.

Reverse Mortgage

Reverse Mortgage allows homeowners 55 years of age to convert the equity of their home into a full payment or monthly cash payments. When the homeowner no longer wishes to reside in their home or upon their death, the loan balance is due. The balance is paid of either from the sale of the house or by the heirs.

Short-Term Mortgage

A short-term mortgage is usually for two years or less and offer a lower cost of borrowing (interest rate) than a longer term.

Long-Term Mortgage

A long-term mortgage is generally for three years or more and cost a bit more than short-term mortgages, so the interest rate will be higher. A higher rate of interestattracts borrowers who value the steadiness and predictability of fixed expenses over a period of your time . A stable mortgage payment is simpler to budget and offers peace of mind.

Fixed Rate Mortgage

A fixed rate mortgage refers to the interest rate will not change during the term of your mortgage. There are no surprises as you will always know exactly how much your payments will be and how much of your mortgage will be paid off at by the end of your term. At the end of the term, if there is still a balance and time left on your amortization period, the lender will normally offer a renewal with a choice of a new term and the interest rate available at that time.

Variable/Adjustable Rate Mortgage

A variable/adjustable rate mortgage refers to the interest rates fluctuate with the bank’s prime lending rate, and may vary from month to month. Your payment amount remains the same when your interest rates change. However, the amount you apply to your principal will change. An automatic adjustment will arise when there is a change in the prime interest rate which will ensure that enough money will be paid toward the principal in order to have the mortgage paid off at the end of the amortization term. |