All mortgages in Vancouver can be separated into two categories: conventional mortgages and high-ratio mortgages. Conventional loans are for less than 80 per cent of the home’s value, explains Chris Landry mortgage broker in Vancouver, in this quick article.
Comparing Mortgage Types Available In Vancouver – Chris Landry Mortgage
Mortgages that cover more than 80 per cent of a home’s value are called high-ratio mortgages. These are also known as National Housing Act mortgages, because the act made this type of loan possible. Before the act was passed, lenders could easily lose money on this type of loan. Today, lenders are protected in high-ratio mortgages, because borrowers are required to purchase mortgage loan insurance to protect the lender from a loss.
Both conventional and high-ratio home loans are offered with variable or fixed interest rates. A fixed rate loan has the same interest rate for the term of the loan. The most popular term for fixed-rate loans in Vancouver is five years. While these mortgages usually have a higher interest rate than variable loans, they provide security and financial assurance that is not available in a variable loan. Brokers such as Chris Landry at VERICO Paragon Mortgage Group in Vancouver help you compare rates to find a fixed-rate loan with an affordable rate.
A variable rate mortgage has an interest rate based on the lender’s current prime rate, meaning it can vary from month to month. Although the interest rates for these loans are usually lower and most people save money over the term of the loan, sometimes this variance can be hundreds of dollars from one month to the next. For people on a budget or those who like to plan financially, this can be stressful.
As a further distinction, loans can be either open or closed. This refers to the level of flexibility of the loan. An open mortgage allows you to make changes without penalty. This includes paying off the loan early, refinancing or changing the term. A closed mortgage usually has a lower interest rate but charges hefty fees for changes before the mortgage matures. Your mortgage broker will help you weigh the pros and cons of a closed loan, and decide if you should opt for the lower interest rate option.
It is not always easy to determine which type of mortgage is best for your needs. If you are looking for a mortgage broker in Vancouver, Chris Landry mortgage broker at VERICO Paragon Mortgage Group can help you find the home loan that works best for you.
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Here’s a great video about mortgage basics in Vancouver