If you are looking forward to buy a new home but lack the required finance then mortgage is an option you must consider in Canada. Mortgages have indeed played a major role in helping many people in Canada fulfill their desire to own a house. However, to gain from the available mortgage plans, it is imperative to understand your financial needs, ability as well as the various mortgage products available in the market.

It must be understood that just as there are a number of institutions offering mortgages, there are different types of mortgage products with unique features. Discussed below are different mortgage plans available in Canada.

Conventional Mortgage

To be eligible to apply for this mortgage plan it is mandatory that the applicant makes 20% of the purchase price (or appraised value in case it is lower than the purchase price) as down payment. In some cases the lender might also ask for CMHC Genworth or AIG insurance as well. This is based on the property’s location or type.

Open Mortgage

This is a short term plan normally for six months or one year. It allows the applicant to pay off a part or the entire mortgage at any point of time without any penalty.

Variable Rate Mortgage

Under this plan the lender calculates the mortgage payment which is inclusive of the principal and interest rate in the beginning itself. For the rest of the term the payment rate does not change. However, if the interest rate drops the mortgage rate gets altered as well. Furthermore, more of the payment goes towards principal amount and less towards interest. On the contrary if the interest rate rises exactly the reverse happens. Some of the variable rate mortgages are entirely open (paying off of the whole or part of the mortgage is allowed at any time without any penalty). On the other hand, there are some which offer a ‘prime minus’ interest rate and which might levy penalty for doing such a thing. Another thing to note here is the fact that on most variable rate mortgages interest rates are compounded monthly.

Capped Rate Mortgage

In this mortgage plan the rate fluctuates with prime. However, the lending institution does not charge more interest rate set by them. In many cases capped rate mortgage plan has the provision of a penalty in cases of early ‘full payments’. They are also not portable.

Closed Mortgage

Under this mortgage plan it becomes mandatory for the borrower to make the payments within the contracted period of time. The borrower cannot pay anything additional. Nor can he pay the entire amount together. Such a move however is allowed only in cases when one decides to sell of his property.

Convertible Mortgage

Convertible Mortgage plan is a fixed mortgage plan for a term of six months or one year. Under this plan the borrower is allowed to lock into a longer term during the current term of his plan without attracting a penalty. However, such a provision is valid only with the same lender.

Reverse Mortgage

To qualify for this mortgage plan it is mandatory that the applicant has attained the age of 62 years. It is also a must that he has significant equity in his property and is a resident of B.C or Ontario. This plan allows homeowners to convert equity in their homes into cash without them having to sell their property or make monthly payments.

So, choose a mortgage product that best suits your loan requirements, existing monthly incomes and outgoings and other important considerations like your age, nature of job etc.

For more information, you may contact:
Allegro Mortgages Corp. – Best Broker for All Your Financing Requirements
(416) 987-0008

Check out www.amortgages.ca for more information on different refinancing options.

Author Bio: Please visit the website Amortgages.ca if you are interested to learn more about the different mortgage products. The site also provides valuable information about mortgage Woodbridge and mortgage Maple.

Category: Finances
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