In Canada, residential borrowers have two types of mortgage loans, one is a traditional mortgage loan, and the other is a high proportion of mortgage loans. There are two subtypes of these two types of mortgages, open or closed mortgages.
In order to clarify the various options that may arise when purchasing a mortgage loan, this article is divided into two parts;
The first part discusses the difference between traditional mortgage loans and high-rate mortgage loans, and the second part deals with these two types. Available different mortgage types. However, these are quite general explanations - just as there are many different lending institutions, so you can almost get different types of mortgages. This is another good reason to consult a mortgage broker. According to your situation, a mortgage may be more suitable for you than the other.
Traditional Mortgage:
If your purchase price (or less than the estimated value of the purchase price) is at least 20% as a down payment, you can apply for a traditional mortgage.
Some lenders may need CMHC, Genworth or AIG insurance because of the location or type of property, even if you own 20% or more equity.
Loan issuance:
to 65% 0.50%
65.1 to 75% 0.65%
75.1 to 80% 1.00%
80.1 to 85% 1.75%
85.1 to 90% 2.00 %
90.1 to 95% 2.90%
95.1 to 100% 3.10%
Please note: If the amortization period exceeds 25 years or there is more than one advance payment, the premium is higher. This usually happens when you build your house or build a house for you. Please consult your mortgage broker to find out what the applicable premium is.
The premium is calculated by multiplying the mortgage amount required for the applicable percentage.
Example:
If the purchase price is $112,000, the required mortgage is $100,000. You divide 100,000 by 112,000. This is equivalent to 89.29%.
Look at the above chart - When the loan rate is 89.29%, the premium is 2.00%.
The next step is to multiply the mortgage amount by the premium. Using our example, this means $100,000 X 2.00% = $2,000. Your actual mortgage will be before 102,000 USD.
CMHC's 5% down payment plan was originally provided for first-time buyers, but it has been expanded in May 1998 and is now only available to all home buyers (primary residences) who meet normal requirements. Until now, borrowers can now even borrow up to 100% of the purchase price under the new CMHC's down insurance plan.
CMHC may set the maximum purchase price under these plans based on the city, so please consult your mortgage broker for price limits in your area.
If the property is a duplex property (and you are purchasing both parties), one of the owners, the minimum down payment is 5.0%.
Mortgage brokers and lenders must confirm that the borrower has a 5% down payment and a 1.5% purchase price to cover the transaction fee. The only exception to the 1.5% is that buyers are eligible for exemption from land transfer tax (Australian) or property transfer tax (BC) or similar provincial tax exemption. In these cases, the mortgage broker or lender must ensure that there is sufficient funds to cover all remaining settlement costs.
Open Mortgage:
Open Mortgages allow you to pay off part or all of your mortgage at any time without penalty. Open mortgage loans are usually short-term six months or one year. Closed mortgages with interest rates higher than similar terms.
Variable Rate Mortgage / ARM (Adjustable Rate Mortgage):
At the beginning of a variable rate mortgage, the lender calculates a mortgage that includes principal and interest. For mortgage terms, your payment will usually not change. However, due to changes in the prime rate, your mortgage interest rate will change
If interest rates fall, the interest paid each time will be reduced, while the interest will be more. If the interest rate rises, your payment will be more interest, and less money will reduce your principal.
Some of these mortgages are fully open (you can repay all or part of your mortgage at any time without penalty). Others offering "subtracted" interest rates (such as the Prime Minister - 0.375%) may be fined.
The interest rate of most floating rate mortgages is compounded monthly.
CAPPED RATE MORTGAGES:
These are floating rate mortgages where the lending institution "limits" interest rates. In other words, the exchange rate will fluctuate with gold, but the agency guarantees that you will not pay more than the specific rate set by them.
These mortgages are often punished for paying the full amount in advance. And usually not portable.
Closure of Mortgage / Fixed Rate Mortgages:
The expression "Closed Mortgage"
originated in the 1980s when this type of mortgage was closed "#. You contract with the lender for you You will not be able to pay any additional fees for the selected period of payment, and in addition to selling your property, you will not be able to pay off the full amount for any reason.
Now, there are many ways to repay mortgage loan owners faster, despite The name "Closed" mortgage still exists. See the prepayment option to pay off your mortgage faster.
Fixed rate mortgage is the most popular type of mortgage. You benefit from the lock on the mortgage rate The length of time ranges from 3 months to 25 years.The interest rate is slightly lower than the public mortgage of the same period.
If you think that the interest rate may increase, you may need to choose a longer period, such as 5 or 10 years If you think that interest rates are falling, you may want to gamble in a shorter period of time. Discuss with your mortgage broker.
Major lending agencies are Different prepayment options are allowed under the contract.These options allow you to pay off your mortgage more quickly.You can also repay most closed mortgages before the end of the term, or pay a part of your outstanding balance.However, the lender will therefore A fine of
Please note that some lenders will not provide any advance payment options. It is wise to know what options are available before signing any mortgage contract
Convertible collateral:
These fixed rate mortgages For 6 months or 1 year, not all lending institutions offer convertible mortgages. With a convertible rate mortgage, you can lock in a longer period within the current period of the mortgage without penalty - but only The same lender.For example, if after several months you hear that interest rates will go up, you may change to a long-term mortgage, such as a 5-year period
REVERSE MORTGAGE:
CHIP - Canadian Family Income Plan is The name of the company that offers reverse mortgage loans in Canada.
Reverse mortgage allows homeowners to house The asset in the transaction is converted into cash without the need to sell the property or pay monthly.
To qualify, the homeowner must be at least 62 years old, have important property rights, and live in British Columbia or Ontario. The amount borrowed depends on the age of the homeowner. Reverse mortgages are 10% to 40% of the assessed value of the home. The older the homeowner is, the more they can borrow.
Homeowners retain ownership and possession of the home. The mortgage company reverses the mortgage on the property registration, and the loan and accrued interest must be repaid in the event of death or sale of the property.
The biggest unfavorable factor in reversing the mortgage loan is that the interest is continuously established on the amount of the borrowing (from the highest 40 % since loan). This means that if you borrow $50,000 this year and your interest bill is $5,000, your interest will be charged $55,000 next year, and so on. The longer the loan, the more interest bills must be paid.
Home sales may require 100% of sales proceeds to repay the loan.
If the homeowner dies, the estate will have to pay off the loan and accrue interest. This may eliminate the inheritance rights of the landlord heirs.
Another method is to establish a stock credit line. This allows you to get funds only when you need them, so it may bring in the least interest and no accident.
Consult a financial advisor for more options.
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Orignal From: Mortgage Types in Canada
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