Understanding Your Mortgage Options
When it comes time to obtain a mortgage, there are a variety of options to choose from. From closed to open to convertible mortgages, each provides different features to meet varying needs. Get to know the important basics and choose the type of mortgage that best aligns to your goals and suits your needs.
Closed Mortgage:
If you want predictability and consistency with respect to interest rates, monthly payments and the length of your mortgage agreement, a closed mortgage is best for you. Interest rates are usually lower than on an open mortgage with a comparable term and remain consistent throughout the term of the mortgage.
However, closed mortgages offer limited flexibility in paying down your mortgage sooner by limiting the amount of extra money you can put toward your mortgage each year on top of your regular payment. You’ll also be required to pay a penalty if you decide to break your mortgage contract prior to when the term expires.
If you plan to keep your mortgage in place with your lender for the term of the contract and the flexibility that your mortgage offers to make additional annual payments is equal to or more than you need, then this type of mortgage may be best for you.
Open Mortgage:
If you’re looking for maximum flexibility with regards to paying off your mortgage, consider an open mortgage. No penalty is incurred if you decide to make lump sum payments or pay off your entire mortgage before the contract term expires. You are also free to renegotiate your mortgage or break your contract to change lenders before the end of your term.
However, this flexibility often comes with a higher interest rate than a closed mortgage with a comparable term – which can result in higher monthly payments.
This type of mortgage is best suited for those looking to pay off their mortgage as quickly as possible; planning a move in the near future or thinking that they may have extra cash from time to time to put toward their mortgage.
Convertible Mortgage:
Want the best of both worlds? Then consider a convertible mortgage. Convertible mortgages are flexible yet offer minimal risk. Often with a lower interest rate than an open mortgage, convertible mortgages provide the opportunity to take advantage of lower interest rates and switch to a closed rate without penalty.
Now would be a good time to speak with a mortgage professional. You’ll have questions that you’ll want answers to – along with professional advice. Set up an appointment to review your mortgage strategy. As specialists in their field, they’ll help you navigate the entire process, provide sound, professional advice at each step along the way and ensure your mortgage meets or exceeds your short and long term financial goals.
To provide our clients with exceptional mortgage services, we’ve partnered with one of the top mortgage advisors in the business. Give us a call any time at 416-606-2158 and we’ll facilitate a meeting for you at your earliest possible convenience.
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