realtyreport
Moving This Year? Brush Up on the Basics!
It never hurts to refresh yourself on mortgage basics from time to time, especially if you're thinking of moving at some point this year.
First of all, remember the difference between a fixed rate mortgage and a variable rate mortgage, even before comparing rates.
With a fixed rate mortgage, you lock in your mortgage interest rate to a specified figure for a term usually ranging from six months to ten years. Variable rate mortgage rates, on the other hand, are based on the fluctuating Bank Prime rate — the base interest rate from which the Bank of Canada sets all the rest of its interest rates. While your monthly mortgage payments don't change for the term of your mortgage, your interest rate will fluctuate as the Bank Prime goes up and down, meaning that the amount applied to your loan will also continually change.
Another bit of terminology you'll need to be familiar with is the difference between a closed mortgage and an open mortgage. With a closed mortgage, there are certain restrictions on the amount you can pre-pay, over and above the amount of your regular payments, on your mortgage balance. For example, if you come into an inheritance or financial windfall during your mortgage term and want to pay more than allowable under your pre-payment options, you may be subject to a pre-payment penalty. An open mortgage, on the other hand, means that you can pay your mortgage down or off entirely without incurring a pre-payment penalty.
PLEASE CALL TODAY FOR MORE MORTGAGE REFRESHERS, OR FOR INFORMATION RELATING TO YOUR OWN SPECIFIC LOAN CIRCUMSTANCES.
