An Introduction to Mortgage Types
Buying a property in Ontario or Vancouver is no more a dream. There are different ways to finance the property and keep on paying an amount that is within your means on monthly basis. Mortgage is being paid for a specific time period to cover the interest rate and principal amount. Mortgage Bidders is reliable company that discusses the issue with the customers and provides them the best lenders with less interest rate.It depends on the income of buyer how much he can pay in a year.While defining the amount of mortgage, there are various terms which are mentioned to make the process easy.
These are known as
1- Floating or Fixed Rate Mortgage
The interest rate (2.25 percent) is regulated by the Bank of Canada which can ebb or flow when the Bank makes some changes. The adjustment in Prime rate is the result of inflation. Bank of Canada will raise the rate when there is inflation. On the other hand, fixed mortgage rate is regulated by Chartered Banks according to bond market position. Fixed rate is not same for all customers however when you sign up an agreement, the amount of interest rate will never get increased for the promised time period. It is significant that fixed rate mortgage offer an opportunity to pay additional amount to cover the loan in short time span.
2- Open Vs Closed Mortgage
Basically Closed Mortgage requires to get agree with some terms and conditions. The time period starts from six months and goes up to 10 years. In case of back out, the customers are required to give penalty in the form of additional interest rate. The customer is bound to pay for three months depending on the amount which is taken as loan.
For instance, you have received cash through lottery, bond prize or company bonus; you cannot pay the amount to lower down the rate of interest. In such cases, the customers are liable to give three month interest rate as penalty. You may get surprised, why people opt for closed mortgage when they cannot pay extra amount? The reason is low interest rate that is enough to attract the customers facing financial issues.
As the name shows, Open Mortgage is free of rules and regulations. It is up to customers to pay the mortgage whenever they have enough resources. It is possible to purchase a property in April and sell to other party in July. No penalty or additional interest rate will be levied to make the situation worse.
In case of variable open Mortgage, bank allows the customers to get loan for property and put it on the market to get money off package. Though the terms are a bit confusing but online calculator is helpful in giving the exact values. You can discuss Open Vs Closed Mortgage with our specialists. They inform you the benefits and drawbacks of both types and suggest the best according to your current financial condition. Visit the Mortgage Bidders website or send an email to get response.
