Buying a house in Toronto? Where do you start when you are looking for information on home mortgage loans in Toronto? How do you dissect through all the terminology and get a great mortgage product that will fit your needs?
Variable vs. Fixed
Perhaps, this is the most important debate when it comes to mortgage products. A fixed rate mortgage is exactly how it sounds. Your mortgage payment is fixed until the completion of your term and there are no changes to your mortgage until your term is complete. A fixed rate mortgage is always priced higher than a variable rate mortgage, and the penalty for breaking the term and refinancing early can be severe.
A variable rate mortgage means that your interest rate will changed based on the prime lending rate. The first way of arranging it involves fixing the payment and having the amortization flocculate with the changes in prime. The second type of variable rate mortgage involves having your amortization change with the change. Variable rate mortgages are more risky, but can be less expensive.
It is likely that you will save the most money with a variable rate mortgage, but there is no guarantee, therefore many people choose the more stable option of a fixed rate mortgage.
Open or Closed
A lot of people seeking a home mortgage in Toronto get caught up in making sure there mortgage is open. Lenders charge huge premiums on open mortgages. An open mortgage means that the term can be ended at any time with no penalty. If you require your mortgage to be open, avoid the higher rate and obtain a secured line of credit that will give you the flexibility of an open rate without the penalty.
Low Payment
How do you get your payment lower? Isn’t this the bottom line that you are looking for? Consider getting a longer amortization period, as its always easier to pay more rather than less. If possible you can look at putting a larger down-payment down so you can avoid CMHC premiums. You will also need to evaluate when you expect to make payments. Do you want to make payments once a month? Bi-Weekly? Weekly. You will make the least amount of payments when you have a monthly mortgage payment, but you will save the most amount of interest if you make payments as frequently as possible.
Prepayment Penalties
Lenders vary from 10% to 25% in what they allow for prepayment on your mortgage every year. You can pay more than your prepayment annually, but you will pay a penalty. Before obtaining a mortgage, make sure that you know what you expect to pay extra on your mortgage, so your mortgage broker can match you with a lender that will fit your needs.
Receiving a home mortgage loan in Toronto is not as complex as it may seem, it just requires for you to determine your needs and future desires and obtain the mortgage that works.
