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Open or Closed Mortgage?

Open or Closed? Do you know which option is right for you?

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Open or Closed Mortgage?

Closed mortgages provide lower interest rates than open mortgages. Nonetheless, open mortgages include a smaller amount of fees.

What is a Closed Mortgage?

Closed mortgages cannot be prepaid, renegotiated or refinanced prior to maturation without paying a penalty. The majority of closed mortgages do provide a little flexibility by allowing you to pay back the principle through lump sum payments, or by enhancing your monthly payment amount for your best mortgage rate.

When to Consider a Closed Mortgage

Given that closed mortgages have considerably lower interest rates, they are more appealing to the average homebuyer.

When NOT to Consider a Closed Mortgage

If you believe that you will need to break your mortgage early.

What is an Open Mortgage?

Open low mortgage rate terms vary from 6 months to 1 year for fixed rates, and 3 to 5 years for variable rates. They may be settled prior to maturation without penalty.

When to Consider an Open Mortgage

If you are anticipating to get a large amount of money, an open mortgage will offer you the flexibility to settle your loan sooner.

The Beauty of Prepayments with Closed Mortgages

The majority of closed mortgages allow prepayment options, consisting of: lump sum payments as much as a portion of your annual principal, or enhancing your regular monthly Canadian mortgage rate payment.

How Much Does a Closed Mortgage Penalty Cost?

If you do choose to break your closed mortgage prior to completion of your term, you could possibly pay a penalty. The penalty you pay is the higher of either:

3 months of interest.

Or the Interest Rate Differential (IRD): the difference between today’s interest rate and the rate you currently pay.

Preparing For Your First Mortgage

Four moves to make when getting ready for your first mortgage.

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You First Mortgage

Step 1: Know What You Want

Should your mortgage be fixed or variable?

Fixed Mortgage Rate:

Enables you to “lock in” a predetermined rate for a set amount of time (term).

Variable Mortgage Rate:

This type of mortgage rate changes monthly according to the mortgage lender’s prime rate. Anyone handling a variable Canadian mortgage rate has to have the ability to manage modifications to their monthly payments.

Open or Closed Mortgage?

If you are not prepared to pay a sizable lump sum in the coming future, typically a closed mortgage would be the best option for you.

Open Mortgage:

An open mortgage is a versatile alternative that enables you to make substantial payments or settle the whole mortgage without a penalty. Open mortgage rates are more than closed mortgage rates. This form of mortgage allows you to settle large amounts of your loan prior to completion of the mortgage term.

Closed Mortgage:

Not too many individuals need the flexibility to settle their best mortgage rate prior to completion of the term. If you have a closed mortgage you are going to be penalized if you try to pay off the loan early and the charge can be rather substantial.

Step 2: Knowledge is Power!

Searching for the best rates can save you money on your low mortgage rate.

Step 3: Speak with a Mortgage Broker

Brokers are able to assist in determining what you will be able to manage, what your options are, and help you through the process.

Step 4: Discuss Your Mortgage

As soon as you have prepared, you are ready to put your mortgage broker to work by having them negotiate a rate.
Take the first step towards homeownership now. Get pre-approved for a low mortgage rate.

Bank Or Broker?

Who should you consult for your mortgage pre-approval?

Handle your mortgage like every other major purchase– that is, be sure you make the effort to compare rates and shop around. Not every Canadian mortgage rate is the same.

Bank Rates

When you visit a bank, it’s worth bearing in mind that their loan officers are paid to sell you their products. They will do whatever is required of them to keep you from considering other options.

Mortgage Broker

A mortgage broker is a self-employed agent who works only for you. They are qualified professionals that will help you find the most effective mortgage rate for your unique situation. They compare products from a variety of banks and specialty lenders, and arrange the best low mortgage rate for your needs. The broker works for you, the customer, and most importantly, they are completely free. The lenders pay brokers once they close the mortgage deal.

More Reasons Why Mortgage Brokers Are a Great Choice

  • Protect Your Credit Score
    • Brokers help to protect your credit rating by only pulling one credit report and using it for all lenders.
  • Give You Expert Information
  • Save You Money
    • A good mortgage broker can offer tips on how to save money on interest while managing to keep your low mortgage rate payments reasonably priced.

Bank vs. Broker

Which ones suits your needs better– bank or broker?

Types of Mortgages

There are a variety of mortgage products available on the market. Typically, mortgages fall under one of the following three categories, open, closed or convertible. A mortgage broker will help you understand the various options.

Make your mortgage hunt less troublesome– contact a mortgage broker today.

Ottawa’s Mortgage Rules: One Year Later

It was roughly one year ago that Finance Minister Flaherty announced his fourth round of mortgage restrictions in as many years. The reason for these changes was simple: cool down an out-of-control housing market. By tightening lending rules, Flaherty hoped to lower the risk to taxpayers and curb excessive rates of household debt.  Continue reading →

A Dragon Enters the Mortgage Biz

Rumour has it that the mortgage business is about to get a little hotter, thanks to the addition of a Dragon. According to a tweet sent on Sunday from CBC’s Dragons’ Den star and investment superstar Kevin O’Leary, the Lang & O’Leary Exchange is getting into the mortgage industry via O’Leary Mortgages .

Continue reading →