What is meant by mortgage term?
Term is the difference between the start and maturity date of the mortgage. You can choose terms of 6 months to 25-year term. At the end of the term you can either pay off your mortgage, or renew at terms of your choice.
What is better – short-term or longer-term mortgage?
Usually you should take a longer-term in order to lock in low interest rates. Whenever the interest rate fluctuation between short term and long-term mortgage rates are significant it is always better to take the shortest term possible.
What is the difference between a fixed and variable rate mortgage?
Fixed rate means that the rate of interest charged for the term of your mortgage is a set amount and does not change over the term of your mortgage. A variable rate mortgage is one in which the rate of interest will fluctuate in accordance with a bank trend setting rate. A drop in interest rates will mean that more of your mortgage payment will go towards reducing your mortgage principle. If interest rates rise then less money will be used for reducing your principle and will instead be taken up in the higher interest costs.
What if I have variable interest rate mortgage and interest rates start to rise?
If you think the interest rate rise is a long-term trend then you would exercise the option and switch to a fixed rate.
What is a high ratio mortgage?
It is a mortgage for more than 75% of the property value. Whenever you need a mortgage loan that is greater than 76% to 90% of the current market appraised value of your home it is considered a high ratio or insured mortgage. If you are a first time home buyer then you can borrow up to 95% value and only need to come up with a 5 percent minimum down payment.
What is the advantage of a pre-approved mortgage?
The purpose of a pre-approval is to confirm in writing the maximum amount of money that you can rely on for mortgage purposes. When interest rates are fluctuating, it?s an advantage to know what your borrowing limit is before you start house hunting. With a pre-approval, a lender will guarantee you for a specific mortgage amount for a period of time.