imes have certainly changed. It used to be that the toughest choice you had to make was which of the one to five year fixed rate mortgages you would choose. Now there's an array of mortgages to consider, but how do you decide which is best for you?
Should you select an open mortgage, a convertible mortgage, a variable rate mortgage, a multi-rate mortgage or the newest offering, a capped variable rate mortgage.
While individual circumstances vary, here's a general "at-a-glance" guide to this myriad of mortgage options. Not all products are available at all financial institutions. Your branch mortgage specialist is still your best point of reference for all your financing questions.
Think rates will decline further before they begin to rise again? A short-term convertible mortgage may be your answer. You benefit from the lower rate of a closed mortgage for six months, with the option of converting it to a longer term, at no cost any time during the six months. Advantage: You can leave your options open and convert at no cost.
If you think interest rates will continue to fall, this may be the right mortgage for you. If rates drop, more money is put towards your principal balance which pays off your mortgage faster. Should rates rise, more is paid towards the interest. When you feel that rates are as low as they'll go, you can always convert to a fixed mortgage for a small fee. Advantage: You can use the equity in your home to take advantage of declining interest rates.
Like other variable rate mortgages, the rate fluctuates, but with a capped variable rate mortgage,the cap limits how high your rate will go. Some capped variable rate mortgages remain at their ceiling once it's reached and won't go lower when the prime rate declines, while others drop as prime declines. Most are available for a five year term. Advantage: Protection and flexibility. You can enjoy the fail benefit of declining interest rates with limited risk to rising rates.
Fixed rate mortgages can save you money by providing safe, fixed rate financing with good repayment features. Such mortgages are available in a range of terms from six months to 10 years. Advantage: Combines the security of fixed rate financing with good repayment features.
Ideal if you will soon be selling your home. This is a fixed rate mortgage with a one-year term that can be renegotiated at any time should interest rates go down. Advantage: Pay down your mortgage at any time without administration or repayment costs.
You can "custom-build" your own mortgage by dividing your mortgage into parts, each with its own rate, amortization and term. This lets you reduce the risk of putting all of your mortgage into shorter terms by allowing you to lock in a portion of your mortgage into longer terms. Interest costs can be reduced by thousands of dollars without taking unacceptable risk. Advantage: Lets home owners pay less interest to interest rates.
With mortgages more complex than in the past, it makes good financial sense to discuss your needs with the mortgage specialist in your branch so, together, you can determine the right mortgage for you.