If you live in Canada, you have various types of mortgages to choose from if you are looking forward to purchasing your new home. However, it can be confusing to know which mortgage option is ideal for you, how each of them works, or how many mortgages you can have.
Knowing about various types of mortgage options in BC, Canada can help ensure that you apply for the right one.
1. Conventional Mortgages
Conventional mortgages are the most common type of mortgage and are available to most homeowners. Conventional mortgages are based on a borrower’s creditworthiness and the value of the property being purchased.
To qualify for a conventional mortgage, you will need to meet the minimum requirements for your lender, which includes having a sufficient down payment, meeting any asset requirements, and having a satisfactory credit history. Most conventional mortgages also require private mortgage insurance (PMI) if you do not have at least 20% equity in your home. Many conventional mortgages have a fixed interest rate, but they are often accompanied by a premium.
2. Fixed-Rate Mortgages
A fixed-rate mortgage is a mortgage for which the interest rate stays the same for the entire term of the loan. A fixed rate mortgage is usually more expensive than an adjustable rate mortgage, but it is also easier to predict what your monthly payments will be. If you are purchasing a home and want to minimize the risk of your mortgage interest rate increasing, a fixed-rate mortgage is the way to go.
3. Variable Rate Mortgages
Variable rate mortgages have a rate that changes according to the movement of a benchmark rate. Because variable rate mortgages have rates that change, they tend to have lower interest rates than fixed rate mortgages.
If you have a variable rate mortgage and interest rates fall, your monthly payment will fall too. You can also get a variable rate mortgage with an interest rate that resets every few years, which allows you to take advantage of any drop in interest rates as well.
4. Alternative Mortgages
Alternative mortgages are mortgages that aren’t conventional mortgages, often because they target a different type of borrower or offer a different financing structure. Some alternative mortgages are niche products that are suitable only for a small segment of the housing market. But others are available to a broad range of potential borrowers, and they’re often a good option for people who can’t get a conventional mortgage for one reason or another. You can explore alternative mortgages with any private lender in Vancouver.
Conclusion
There’s no doubt that mortgages are a big responsibility, and it’s important to make sure you’re working with a reputable lender when you decide to take out a loan. Make sure you know the details of your options, and don’t rush into a decision. If you’re looking to refinance, you can likely save money on your current loan, or if you decide to take out a new mortgage, don’t rush into that decision as well. At the very least, work with a mortgage broker who can help you find the best option for your situation.
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