Mortgage Types and Terms You Need To Know

What Kind Of Mortgage Should I Get?

Most Common Types Of Mortgages

Fixed Rates

For Buyers that want security or want to lock into an extremely low rate. Normally people lock into a 5 year fixed term as the banks are most competitive in the 5 year term. This is the most common type of mortgage.

Variable Rates

This is a mortgage type that changes constantly when the prime rate of Canada changes. The prime rate is currently 7.2% in Canada and the Variable Rate is Prime (7.2%) – 1%. So you rate would be 6.2%. If Prime goes down, so does your rate. Many people prefer this because historically this has been the option where you pay the least interest. Furthermore, the penalties are much lower with a variable rate. It is particularly good for those in a shaky relationship or have short term plans. Right now some are choosing this because they believe the fixed terms will go down. They will stay on the variable until they can lock in for a really low fixed rate. The penalty for this is 3 months interest usually.

Open Mortgage

This is for people that have very short term plans and do not want to pay a penalty to break a mortgage.

Reverse Mortgage

This is for retirees or seniors that want access to equity easily in the form of an income.

Blanket Mortgage

This is for investors to cover multiple properties. The rates are not always the best with a blanket.

Commercial Mortgage

For Commercial Properties.

Convertible Mortgage

This is a mortgage type that you can change from variable to fixed any time.

Construction Mortgage or Draw Mortgage (Self Build)

Very few banks provide this type of financing. Ask us about this. This is a mortgage type that you will need if you are building a property yourself, or with a builder that requires draws. Normally there are 5 draws throughout the construction process. This is where you provide receipts for work done and are paid back from the bank.

Completion Mortgage

This is a mortgage type you will need if you are building with a builder that wants all of their money on the possession date. Different lenders have different rate hold periods.

HELOC

This is a Home Equity Line Of Credit. Low interest rates, and it can increase as you pay down the mortgage.