Getting a mortgage is a big step in anyones life. Not only are you about to make one of the biggest investments in your lifetime, you are also going to sign up for one of the longest loans that you will ever get. So what are your options? Lots! Don’t just look at the rate and take the lowest 5 year rate possible. This may not be the best product for you. There is a wide variety of mortgage options:
1 – 10 year fixed mortgages
1 year Open Mortgages
Home Equity Line of Credits (HELOC’S)
Open and closed variable mortgages
No Frills Mortgages
Draw or Construction Mortgages
Cash Back Mortgages
Flex Down Mortgages
Not every lender will offer all of these options to you when you go see them. Most lender are not going to tell you the product you need is something they do not carry.
As a mortgage broker it is my job to make sure that you are getting the right mortgage that you need. We have access to over 40 different lenders with every mortgage product you may need.
Why would you go into a 5 year term right now if your plan is to move in 2 years? Lenders may try to get you to sign up for this so you have to break the contract then they charge you a payout penalty. Sometimes it makes sense to do this if you are planning on porting your mortgage. This is where you should sit down and discuss your mortgage, not get rushed into a decision.
Home Equity Line of Credits (HELOC) can be one of the fastest ways to pay down a mortgage, but is a HELOC fit your lifestyle. HELOC’s are a readvancable product, similar to a Credit Card, which can get a person into a lot of trouble if they are not handled properly. On the other hand, they are a fully open product where you can through any amount of money you want against it to pay it off at your own pace.
Variable mortgages work different from one lender to the other. You could go to one lender and the repayment is based on what the current variable rate is at the time. Another lender will tell you that your payments are based on the qualifying rate that was used to qualify the mortgage. As of April 19, you must qualify using the Bank of Canada’s benchmark rate which is similar to the 5 year posted rate.
No frills mortgages often have the lowest rates on the market. With these low rates can come some steep conditions. No lump sum payments against the mortgage, and no increases to your current monthly payment. Often these options are not utilized to their potential by most people, but still. Do you plan on making the same amount of money in 5 years time versus now? For that matter how about 2 years down the road? Everyone expects their income to increase. When you get your mortgage this would be considered extra income. You never had this income before so what do you do with it? Savings is always a good choice, but after you have a comfortable amount is your savings, why not put that against your mortgage. Drop those amortized years down.
Quick close mortgages are going to come with a condition that your mortgage must fund within a specified date, or within 30 to 45 days. for this the bank will often give you .10 off their regular discounted rate. Is this worth it?
Construction (draw) or completion mortgages are mortgages that are out there for those that are looking at building a new home. This is often a request that is made by your builder. A construction or draw mortgage is requested by the builder when they may not have the funds to build the home and need funds a certain points of the build. These can also be handy for you as some banks will lock in your rate at the first draw so you do not have to worry about any rate increases.
The days of the zero down mortgage is gone. There is other ways to get into a home if you do not have a down payment saved though. The Flex down or Cash back options are there for those with strong credit but do not have the savings right now. Of course there is conditions that go along with this in order to qualify for this.
Did you know that there are two bi weekly options? One option is the regular biweekly and the other is rapid biweekly. A regular biweekly payment is not a lot different from a monthly payment as far as paying your mortgage off faster. By simply by changing your monthly payment to a Rapid biweekly payment can take up to 4 years off your 25 year mortgage? Or 7 years off your 35 year mortgage?
There is so many options from getting the mortgage you want to the options within the mortgage. You should be getting the mortgage that you want, not the one the Lender wants you to have.
Call or email Scott anytime with any questions, firstname.lastname@example.org or 866/403-343-1125.
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