Mortgage Types and Rates
Mortgages have been changed in many ways with new features that are advantage to consumers. In order to enjoy your new home, you have to be comfortable with all aspects of your mortgage. There are a lot of different kinds of mortgage solutions and providers available to consumers today. Below is a sampling of the most common types of mortgages in North America today.
Variable Rate Mortgage
This is a mortgage with an interest rate that changes with the market. The rate may change each month, which means that the portion of your monthly payment that goes towards interest may go up or down each month. However, your total monthly payment will probably be the same.
High-Ratio Mortgage
When you have less than 25% of the total purchase price to put down as your down payment, it is called a high-ratio mortgage. This kind of mortgage must be insured.
Closed Mortgage / Fixed Rate Mortgage
This is the most common type of mortgage that has a fixed interest rate (usually lower than an open mortgage rate) and a set, unchangeable term. You must pay a penalty when you want to pay off a closed mortgage before the agreed end date.
Some fixed rate mortgages you will probably hear about are:
- 30-Year Fixed Rate Mortgages
- 15-year Fixed Rate Mortgages
- Biweekly Mortgages
- “Convertible” Mortgages
10 to 50 years ago, people thought of a mortgage of a 30-year fixed rate mortgage. The 30-year fixed rate mortgage may still be the best mortgage for your conditions. It offers the lowest monthly payments of fixed rate mortgages. Some lenders offer 25, 20, and even 40-year term mortgages as well. But don’t forget, the longer the term of the loan, the more total interest you will pay.
Convertible Mortgage
Depending on your financial needs, with this kind of mortgage, you can switch from short-term to long-term.
Open Mortgage
The interest rate for an open mortgage is usually higher than a closed mortgage rate but with this mortgage, you can pay off, renew or refinance at any time.
