TYPES OF MORTGAGES
- LOAN TO LENDING If you have at least 25% of the purchase price (or appraised value if this is lower than the purchase price) as a down payment, you can apply for a conventional mortgage. Some lenders will require CMHC insurance because of the property’s location or type, even though you have 25% or more equity.
- CONVENTIONAL MORTGAGE If you have at least 25% of the purchase price (or appraised value if this is lower than the purchase price) as a down payment, you can apply for a conventional mortgage. Some lenders will require CMHC insurance because of the property’s location or type, even though you have 25% or more equity.
- CAPPED RATE MORTGAGES These are variable rate mortgages that the lending institution has rate ‘capped’. In other words, the rate will fluctuate with prime, but the institution guarantees that you will not pay more than a certain interest rate, set by them. These mortgages often have a penalty for early ‘payment in full’ and are often not portable.
- CONVERTIBLE MORTGAGE These are fixed rate mortgages for terms of 6 months or 1 year. Not all lending institutions offer convertible mortgages. With a convertible rate mortgage you can lock into a longer term during the current term of your mortgage without penalty – but only with the same lender. For example, if after a couple of months you hear that interest rates are going to increase, you may change to a longer term mortgage such as the 5 year term.
The information provides a generic explanation about the difference between a conventional mortgage services and a high-ratio mortgage and the different types of mortgages available.
