If you are planning to purchase a house with a mortgage in Vancouver, you should have a basic understanding of the different types of plans available to you. We will discuss each one in detail in future posts.
Conventional Mortgages
These mortgage plans are also known as Low Ratio Mortgages and require a down payment of 20% or more of the total purchase price or market value of the home you wish to buy. These moans do not always require mortgage protection insurance.
High Ratio Mortgages
These mortgages require you to put a down payment of 20% or less than the total purchase price or market value of the property. They require mortgage protection insurance, which will be provided by one of three mortgage insurance companies in Canada. These are Canada Mortgage and Housing Corporation, Genworth Financial, or Canada Guarantee.
Closed and Open Mortgages
Closed mortgages cannot be prepaid, transferred, or used as collateral for future loans before maturity. They usually have a lower interest rate than their counterpart does.
Open mortgages are more flexible and allow you to prepay the mortgage without any penalties. They typically have shorter repayment terms, but you can negotiate for longer terms and variable rates.
Fixed Rate Mortgages
These mortgages have a fixed interest rate for a portion of, or for the entirety of the mortgage repayment period. Most lenders offer different repayment plans, which allow you to achieve complete or partial settlement before the end of the repayment period without penalties.
Adjustable Rate Mortgages
Adjustable Rate Mortgages or Variable Rate Mortgages are those whose interest rates can be changed during the repayment term. These are typically created like standard loans at the current interest rate however; the loan is reviewed at pre-determined intervals. If the market interest rate has changed the lender can adjust the mortgage repayment terms based on the remaining balance of the loan or repayment time, and sometimes based on both.
