MAXIM BAGINSKIY
REAL ESTATE BROKER / INVESTMENT ADVISOR
“PLATINUM“ PRE-CONSTRUCTION BROKER
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Mortgage Types

 Fixed-Term Mortgages

With a fixed-rate mortgage, the interest rate is set for the term of the mortgage so that the monthly payment of principal and interest remains the same throughout the term. Regardless of whether rates move up or down, you know exactly how much your payments will be and this simplifies your personal budgeting. In a low rate climate, it is a good idea to take a longer term, fixed-rate mortgage for protection from upward fluctuations in interest rates.

 The Adjustable Rate Mortgage (A.R.M.)

The Adjustable Rate Mortgage (A.R.M.) provides a lot of flexibility, especially when interest rates are on their way down. The rate is based on prime minus  and can be adjusted monthly to reflect current rates.  When interest rates are falling, you pay less. If rates are rising, you pay more .

Secured Lines of Credit

Use the equity in your home that you have built up to purchase investments (where interest costs would be deductible against the earned income), finance home renovations, buy a car, or any other reasonable needs, with rates as low as prime. They can be arranged up to 80% of the purchase price or value of the home, and should you need more, we can arrange another secured line of credit as a Second mortgage up to 90%. Accessing the available credit is as simple as writing a cheque, or using the issued credit and/or debit card. You do not have to draw the money until you need it, and once you make a withdrawal, you can pay of your balance at any time or make monthly payments as low as interest only. As you pay down the balance, you have that much more available credit (revolving credit). 

 Equity Mortgages

These are mortgages that are assessed on the equity of the home (market value minus the mortgage amount). They can be as high as 80% of the purchase price or value of the property and if more is required, you can look at a small Second mortgage. These are generally offered to applicants that do not meet the normal income and/or credit qualifying guidelines. You may have little or no income verification, self-employed, and/or your credit may be less-than-perfect.

Current mortgage rate in Ontario

Pre-Approved Mortgage

A Pre-Approved mortgage is a Free and No-Obligation deal that lets you know before you go looking for your home or signing an offer to purchase, how much you can afford to borrow based on your qualification and personal credit rating. If rates go higher, your rate will not be affected, and if rates go lower, you get the lower rate. This protection is solely responsible for savings thousands of dollars for many people who obtained a pre-approval and the rates increased afterwards. 

 Conventional Mortgage

A conventional mortgage is a loan that does not exceed 80% of the purchase price or appraised value of the home, whichever is less. This type of mortgage does not have to be insured against default.

 High-Ratio Mortgage - CMHC Insured / GE Capital Insured

A high-ratio mortgage is a loan that is up to 95% of the purchase price or appraised value of the home. These mortgages must me insured against loss by either Canada Mortgage and Housing Corporation (CMHC), a Federal Government Corporation, or GE Capital, a private insurer. The premiums can be added to the mortgage amount or paid at closing.

 First Mortgages:

A First mortgage is the first debt registered against a property that is secured by a first "charge" on the property. If a default on the mortgage occurs, the first lender has first right on the property to recover the outstanding principal and interest costs, and any other costs incurred during the process. Second Mortgages: A second mortgage is a debt registered after a first mortgage has been registered. In most cases, the interest charged on the second is higher than the first, reflecting the higher risk to the lender, but over a short term, still more cost effective than paying the high cost of the CMHC/GE Capital insurance premium. They can be used to finance up to 95% of the purchase price or value of the home.

 Open Mortgages

An open mortgage allows you the flexibility to repay the mortgage at any time without penalty. Open mortgages are available in shorter terms, 6 months or 1 year only, and the interest rate is higher than closed mortgages as much as 1%, or more. They are normally chosen if you are thinking of selling your home, or if you are expecting to pay off the whole mortgage from the sale of a another property, or an inheritance (that would be nice).

Closed Mortgages

A closed mortgage offers the security of fixed payments for terms from 6 months to 5 years. The interest rates are considerably lower than open, and if you are not planning on any one of the above reasons, then choose a closed mortgage. Nowadays, they offer as much as 20% prepayment of the original principal, and that is more than most of us can hope to prepay on a yearly basis. If one wanted to pay off the full mortgage prior to the maturity, a penalty would be charged to break that mortgage. The penalty is usually 3 months interest, or interest rate differential (I.R.D. - please refer to glossary for detailed explanation).