MoMortgage Specialist Solutions Fort McMurray
If you are unsure whether closed or open, fixed or variable is right for your Fort McMurray mortgage. Read the information below for a far better understanding. We are still just a phone call away in case you want to talk to a live mortgage broker/specialist. Call Jodi Whalen your Trusted Fort McMurray Mortgage Broker/Specialist.
Open vs. Closed Mortgages
Are you are selling your Fort McMurray home soon and want to avoid a mortgage penalty? An open mortgage is completely open for prepayment at any time throughout the term of the mortgage. This means that you can repay any or all of the outstanding mortgage balance at any time without a penalty. An open mortgage may be beneficial if you plan on repaying your mortgage loan in the near term. For example, you may be selling your home within a few months and will be paying it out in full, or you may be expecting other money that will allow you to make large prepayments to the mortgage loan more then the prepayment privileges allow. By going into an open term on your Fort McMurray mortgage this will avoid any penalty when you sell your home. We are your Fort McMurray mortgage brokers who specialize in every unique situation.
A closed mortgage in Fort McMurray has restrictions on how much of the principal you can repay without penalty within the term of the mortgage. Most closed mortgages allow you to repay a certain portion of the principal amount every year without penalty. The amount you can prepay depends on the lending institution but usually ranges from 15% to 20% of the original principal amount per year. You may get to do 20% monthly increase in your mortgage payments and 20% annually. Some other Fort McMurray mortgage lenders allow 15% monthly increase and 15% annually and double up your mortgage payment. There may be restrictions on when the prepayments can happen and how many times per year you can prepay on your mortgage in Fort McMurray. For example, you may only be able to make prepayments once a year on the mortgage anniversary date or the prepayment may need to be on a regular payment date. Your Fort McMurray mortgage specialist Jodi Whalen will inform you on these policies as each lending institution’s policies can widely vary.
Fixed Mortgage Rate vs. Variable Mortgage Rate
With a fixed rate mortgage on your Fort McMurray home the interest rate is set at the time you get your mortgage and will not change for the entire term of the loan. It is locked in and guaranteed for the term and will not change during the term. For example, if you take out a 5-year term, fixed rate mortgage at 3.04% you know that your rate is fixed at 3.04% for entire five years and can not change. This type of mortgage offers you peace of mind and security, you know exactly what the interest rate and payments will be. You will pay a higher rate for a fixed rate compared to a variable rate. Penalties if breaking your mortgage early can be way higher then a variable mortgage. Penalties on fixed rate mortgages closed are calculated off the interest rate spread and can have high penalties up to $20,000 if breaking your mortgage 2 years into a 5 year closed fixed mortgage .If you are at a big bank the penalty on a fixed closed mortgage can be 4 times the amount compared to another lender. Big banks have posted rates and use these in calculating penalties which result in crazy high penalties. We are your trusted Fort McMurray Mortgage Brokers and believe in explaining all of this to you!
A variable rate mortgage changes when the bank of Canada raises or decreased their overnight lending rate and is tied to the banks prime rate. If the prime rate increases or decreases your payments will follow suit. Variable rate mortgages offer the lowest rates because you are taking a risk if prime rises therefor the banks offer lower rates on these products. For example you may get a rate on your Fort McMurray home of prime -.5% if prime is at 3% this would be a 2.5% rate if the bank of Canada raises prime by .25% to 3.25% your new rate would be 2.75%. They also have really low penalties and are very transparent. At anytime you pay out your Fort McMurray mortgage early the penalty is only 3 months interest at all times.
There are lots of options for rates and terms. At Whalen Mortgages Jodi Whalen your trusted local Fort McMurray Mortgage Broker will help you review all of your options for your next Fort McMurray mortgage whether it is a new purchase or a transfer from one lender to another to get the best interest rate.
The Mortgage Term
The term of your Fort McMurray mortgage is the contractual life of your mortgage loan. The term represents the length you agree to stay with that lender under the specific mortgage you accepted. As you select your mortgage, the term is one of the decisions you will need to make. The term of the mortgage for example 5 year fixed rate closed is usually shorter than the actual life, or amortization of your Fort McMurray mortgage this might be 25 years. Once the term has expired, the mortgage can transfer to a new lender for a better rate. At that time, you have the right to find a new lender if you wish on your Fort McMurrary home and your financial institution has the right to re-qualify you before renewing your mortgage. In practice, as long as your mortgage is current and all payments have been made as agreed, financial institutions will often automatically renew your mortgage, and not require that you re-qualify.
Short Term vs. Long Term
A short term mortgage is typically three years or less. Short term mortgages might be great if you suspect interest rates are going to be lower at renewal time. A long term mortgage is typically longer then three years. Long term mortgages are a great options if you believe mortgage rates will rise or you need a stable payment. This is often important for first time home buyers. The key in selecting between short term or long term is to feel comfy with your mortgage payments.
Most lenders permit many choices for payment frequency (how you set up your mortgage payments). Most allow you to select monthly, bi-weekly, accelerated bi-weekly, semi-monthly, weekly or accelerated weekly payments. Choosing which type of payment to make will be a matter of convenience, but there may be advantages to paying an accelerated payment. When you make accelerated payments you will pay down a month of principle payment every year. Contact Whalen Mortgages your local trusted Fort McMurray mortgage broker to discuss the options that will work best for you.