HOME BUYERS GUIDE

A comprehensive guide to home ownership presented by the "The House Team"

MORTGAGE TYPES

Term of a mortgage:

The actual length of time money is loaned at the contractual rate of interest. Terms range from three months to twenty-five years. Traditionally the longer the term, the higher the rate.

First mortgage:

Mortgage given first priority at the registry office. Usually the only financing required. Gives borrowers the best rate of interest.

Second mortgage:

A higher interest rate loan that provides borrowers with additional financing if the first mortgage does not meet their total financial Requirements. Mortgage Intelligence’s fixed or variable rate i secondTM mortgage can provide the money that is needed at competitive and flexible terms, including a rate maximum. It is ideal for those looking for secondary financing to bypass mortgage insurance, port an existing mortgage, or for debt consolidation.

Fully open mortgage, with no penalty of notice:

With this type of mortgage, the entire principal or any part of it can be prepaid to the lender at any time, without having to pay any penalty or bonus interest to the lender.

Open mortgage, with a predetermined penalty or notice:

All or part of the principal can be prepaid at any time by paying a penalty or giving a set amount of written notice. The amount of the penalty or the notice period would have been predetermined at the time the mortgage was arranged.

Partially open mortgage, with no penalty or notice on that open portion:

This type of mortgage is partially open, but not fully open. The mortgage contract permits a limited, fixed percentage to be returned to the lender each year (up to 10%, 15% or even 20% depending on the lender), in addition to the regular payment without any penalty being paid or notice being given. There may also be some restrictions as to when during the year this prepayment can be made. The balance of the mortgage (80% - 90%) is closed and can only be prepaid if the lender allows – and then on the lenders terms!

Partially open mortgage, with a predetermined penalty or notice on that open portion:

As above, this mortgage is partially open, but not fully open. The mortgage contract would allow for a fixed percentage of principal to be prepaid, but subject to a predetermined penalty (i.e. 3 months interest) or with a preestablished amount of written notice. The lender may also have some restrictions as to when the prepayment can be made during the year. The balance of the mortgage is closed and does not allow for automatic early prepayment of the loan.

Fully closed mortgage:

These types of mortgages have no pre-payment privileges at all. All mortgages fall into this category unless the prepayment privileges appear right in the mortgage documents. Although, all mortgages are fully open on maturity.

Convertible mortgage:

You can get the low rate typically associated with the short term, but the freedom to lock in at anytime for longer, if you think rates are headed up. To win, however, you’ve got to be an assiduous rate-watcher. These mortgages are usually offered with a 3-month, 6-month or 12-month term.

Variable rate mortgage:

A loan whose interest rate is changed monthly or more frequently to keep it in line with the general interest rate trends. Lenders often set the rate based on their prime-lending rate. While the loan rate changes, the payment may stay level each month. In that case, the amounts going to pay interest and principal each month are adjusted to reflect the rate. VRMs are handy mortgages when rates are falling because those rate breaks get passed along quickly as rates are adjusted. However, if you fail to act quickly when rates begin to rise, you may also miss the chance to switch to a fixed-term mortgage. Increases in interest rates could create problems if your VRM monthly payment doesn’t include any cushion for rate hikes. In that case the lender may require you to increase your payment to prevent a “deficit interest” situation.

Hybrid (mutant) mortgages:

Lenders have different product names for their own mortgages to try to make them sound unique or for marketing purposes, but all mortgages fall into one of the above categories. Variations between and within each category help distinguish different lender’s packages. Let your Mortgage Intelligence consultant arrange the financing package best suited to your needs. Mortgages for recreational & investment properties Mortgage Intelligence offers mortgages for specific needs such as recreational or investment properties. With the i relaxTM mortgage, you can realize your dream of vacation property ownership with as little 15% down. With the investment property mortgage, you can qualify for the funds you need without costly insurance premiums, or leveraging the equity in your principal home.

Mortgages for impaired credit:

Mortgage Intelligence has a mortgage that can help clients who are considered to have impaired credit because they have maximized their credit cards and other debt. Even though they may be able to make their payments each month, they may be considered a high risk borrower. This mortgage allows them to consolidate debts and restore their credit rating. They can also save on interest costs and have a more manageable monthly payment.

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