Mortgage Types In Canada To Choose From
These days, a potential customer can choose from various mortgage types
. Mortgages are loans given to people who wish to buy or build commercial properties or homes. Some individuals don't have cash money to purchase such properties. Mortgage loans may offered by banks or other lending institutions.
The size of the loan, repayment period, interest rate and method of repayment are negotiated by the borrower and the lender. It may vary from one lender to another. The different types of mortgages are discussed below.
Fixed rate mortgage: The interest rate remains the same throughout the duration of the mortgage. The amount to be paid per month is usually calculated using the years of repayment, amount of loan and the interest rate. You may negotiate with the lender for a fixed period of 20, 15, 10 years or even more. If you plan to stay in the house for ten years or even more, this type may be ideal for you.
Adjustable rate mortgage: Such mortgages don't have fixed interest rates. The interest rates differ depending on the financial indexed which are normally dictated by current rates of interest in the market. The monthly payments could therefore decrease or increase depending on changes in the indexes.
Two-step mortgage: This type offer an interest rate that is initially fixed for a certain period. After this the rates are adjusted to the prevailing market rates. One of them is 10/1 year ARM whereby interest rates are normally fixed for the initial 10 years after which they change yearly according to the index. The other is 7/1 year ARM where interest rates are usually steady during the first 7 years after which they change depending on the index. ARM may be good for people who don't mind risks of paying higher or lower monthly rates according to the indexes.
Balloon mortgage: The borrower can negotiate the duration of loan for example 3, 5, 7 year balloons. Payment is at a rate of interest that is fixed for the life of mortgage. At the end of the balloon, all the outstanding loan amount has to be paid in full. This type could be ideal those who plan to move before the expiry the life of such a mortgage expires. In such a case, the mortgage loan can be passed to another buyer.
These mortgage types may help those who wish to take mortgages to make the right choice. There are many companies that give mortgages. Most of them are ready to negotiate terms to suit the borrower.
by: Samantha Judd
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