With conventional/low-ratio mortgages, high-ratio mortgages, open mortgages, closed mortgages, fixed-rate mortgages, HELOCs, and adjustable-rate mortgages, your head can be spinning when you are considering home loans for the purchase of a primary or secondary home or to utilize the equity in your current home. When you add to that the different terms that each mortgage lender has, such as pre-payment privileges and penalties, it can make your head spin and leave you feeling less than confident choosing one for your needs.
The first step to understanding the types of home loans is to become familiar with the terms used in the mortgage industry. For example, low-ratio and high-ratio relate to how much of a down payment you’ll be making. A low-ratio is a conventional loan where you put down at least 20% of the purchase price, whereas anything under 20% is considered a high-ratio mortgage. If you want to avoid paying mortgage default insurance, you should plan to put down 20% or more.
As for open and closed mortgages, these terms relate to whether or not you can prepay, refinance, or renegotiate the terms of the mortgage before maturity. A closed mortgage means you generally cannot, although there may be specific terms in the mortgage for special circumstances. An open mortgage provides more flexibility, but the downside is they generally have a higher interest rate.
Finally, the difference between a fixed rate and adjustable rate mortgage relates to whether the interest rate remains the same throughout the mortgage period or will be reviewed and adjusted at specified intervals to correspond with market conditions.
These are all aspects of home loans for the purchase of a property. There are also several different types of home loans, such as HELOCs that relate to borrowing on your home’s equity.
If you would like to know more about the types of home loans and have a source for finding the best loans from more than 20 different lenders, contact us at Centum Mortgage Store, Ltd. We will be happy to discuss the options available, which you could qualify for, and how to choose the best for your situation.