A Quick Overview
There are a few different mortgage options available to potential homeowners, and it's important to understand the pros and cons of each before making a decision. Some of the most important things to consider include whether you want a fixed or variable interest rate, an open or closed mortgage, and what kind of payment schedule you're comfortable with.
A fixed interest rate means that your monthly payments will stay the same for the duration of your mortgage, even if interest rates rise. This can give you peace of mind and make budgeting easier. However, you may end up paying more in interest both monthly and over the life of the mortgage term than if you had a variable interest rate.
A variable interest rate means that your monthly payments could go up or down, depending on changes in the prime interest rate. This can make budgeting more difficult, but you may end up paying less in interest over the life of the mortgage term if rates stay low.
An open mortgage allows you to make extra payments or even pay off your mortgage entirely without being penalized. This can be helpful if you come into some extra money or if you want to be able to sell your home without having to worry about breaking your mortgage. However, open mortgages usually have higher interest rates than closed mortgages.
A closed mortgage means that you have to stick to your regular monthly payments and cannot make any extra payments or pay off your mortgage early without being penalized. This can be a good option if you're not sure you'll be able to make extra payments or if you want to lock in a lower interest rate. However, it can also mean that you end up paying more in interest over the life of the mortgage term if rates go down.
The type of payment schedule you choose can also affect your mortgage. Many people opt for monthly payments, but you can also choose to make bi-weekly or accelerated bi-weekly payments. With bi-weekly payments, you make 26 payments per year instead of 12, which can save you money in interest and help you pay off your mortgage faster. Accelerated bi-weekly payments are similar, but you make the equivalent of one extra monthly payment per year, which can really help reduce the amount of interest you pay over the life of the mortgage.
Choosing the right mortgage is a big decision, and there are a lot of things to consider. Make sure you do your research and talk to a mortgage advisor to find the best option for you.
I am a Victoria based local realtor with eXp Kiteke. My commitment to honesty, integrity, loyalty and hard work have been important pillars for me because they drive a high standard of excellent service for my clients. Helping you realize your dream is my goal!
I service Vancouver Island, but my focus is on: Victoria, Sooke, Saanich, Malahat, Shawnigan Lake, Cobble Hill, Duncan, and the rest of the Cowichan Valley.