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Types of Mortgages

With lots of mortgage options available – which should you choose?

Here are a number of mortgage types that are defined so you can become familiar with them. A Libro Coach will help you to understand the different benefits attached to each option. Then, you will be ready to decide which is the best mortgage for you.

Open Mortgage

Open mortgages can be paid off anytime without a penalty. Open mortgages provide the greatest amount of flexibility. A rate premium may be applied.

Closed Mortgage

Closed mortgages can offer a lower overall rate. It's good to be aware that this type of mortgage cannot be paid off early without facing a penalty.

Variable Rate Mortgage

A variable rate mortgage can change because the mortgage rate is based on the prime rate. As the prime rate changes it affects your mortgage rate. When this happens, the good news are that your monthly mortgage payment amount does not change.

The only adjustment is the amount paid towards your mortgage principal and the amount paid towards interest.

Conventional / Low-Ratio Mortgage

A mortgage where the down payment is equal to 20% or more of the property’s value or purchase price. A low-ratio mortgage does not normally require mortgage protection insurance.

A conventional mortgage is attached to the property and the mortgage terms cannot be changed. A new mortgage would be required to make any changes to a conventional mortgage.

High-Ratio Mortgage

A high-ratio mortgage is a mortgage in which the home buyer is contributing less than 20% of the value or purchase price of the property as down payment. This type of mortgage requires mortgage default insurance; insurance offered by three mortgage insurance companies in Canada: Canadian Mortgage and Housing Corporation (CMHC) , Genworth Canada and Canada Guarantee.

Collateral

A collateral mortgage is an all-inclusive loan over your property and can also include lines of credit. A collateral mortgage can be up to 80% of the value of your home.

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