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Choosing Your Mortgage

London, Ontario Area

Finding the right mortgage goes hand-in-hand with finding the right house to call home. We can help arrange your mortgage through any one of the country's mortgage lenders.

Open mortgages

....offer the ultimate in flexibility. You can pay all or part at any time, without penalty. It automatically renews every six months, with NO RENEWAL FEE. The interest rate is adjusted every six months to the then current rate, historically, this has been lower than long term mortgage rates.

Fixed term mortgages

....offer a fixed interest rate over your choice of terms from 6 months to five years. Two special prepayment options give you an opportunity to save interest costs and pay off your mortgage years sooner; each year you can pay off from 10 to 15 percent of your mortgage principal, without penalty; and each year you can increase your regular payments from 10 to 15 percent depending on the financial institution.

The split level mortgage you tremendous control and flexibility with the best of both open and fixed term mortgage features. You can "split" your mortgage into smaller chunks and choose a different term for each part. You don't have to put all your mortgage eggs in one basket.

You can lock-in one part to get the security of a guaranteed rate, and leave the other part open to take advantage of any decrease in rates.

You could also focus on paying off the open part and eliminate your mortgage one bite-size chunk at a time. These unique features are available all in one mortgage, with just one regular payment.

Convertible mortgage

A closed, short term mortgage, usually 6 or 12 months, which allows the borrower to switch into a longer term at any time without penalty. The rate is usually lower than the open mortgage because the only option available is to convert.

There are two types of convertible mortgages. The Closed (with conversion options) allows the borrower the option to convert to a longer term at any time during the term of the mortgage or roll over to a similar term at maturity.

It may also be paid off or transferred out at the end of the 6 or 12 month term. Since these mortgages are registered as 6 or 12 month terms, they are best suited for people who want to watch the market over the short term before deciding if and when to lock in.

The Convertible (Lock and Roll or Wait and See mortgage). These mortgages are usually registered for a 3 to 5 year term with the rate adjusting every six months.

The borrower has the option to keep "rolling over" at current 6 month rates or "locking in" to the longer term at any time. They usually have lower interest rates than the closed/convertible mortgage because they cannot be transferred out (without a penalty) prior to the maturity of the full registered term.

Since the terms and options of convertible mortgages vary greatly form one lender to the next, it is best to inquire about the mortgage details from each lender. This mortgage is best suited for people who know they want to lock in to a longer term mortgage but who want to watch the market over a 6 or 12 month period to determine the best time to lock in.

Variable rate mortgage

The rate of interest changes from time to time as money market conditions change, but usually no more often than once a month. This type of mortgage was developed in order to provide maximum flexibility to borrowers in time of volatile or fluctuating interest rates. Although the interest rate fluctuates, the amount of the regular payment usually does not change throughout the term of the mortgage.

Because of this, the rate fluctuation will affect the way each payment is applied. Since payments are made up of both principal and interest, when rates go down, more of the regular payment will be applied towards the principal.

If interest rates rise dramatically, the regular payment may not cover all of the interest. In this case, the borrower may be required to make up the difference, or it could be added back onto the mortgage itself. Long periods of rising interest rates can result in eroding your equity in the house. Since most variable rate mortgages offer conversion options, it may be wise to consider locking into a fixed term at that time.

519-471-8888    London, ON
Sutton Preferred Realty Inc., Brokerage
Independently Owned and Operated
181 Commissioners Rd W
London ON
N6J 1X9
Copyright © 2007 Joyce Byrne Realtor
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