Selecting the Right Mortgage

The basic choices to look at in selecting a mortgage include:

A conventional mortgage is a loan for no more than 75% of the appraised value or purchase price of the property, whichever is less. A high ratio mortgage is usually for more than 75% of the appraised value or purchase price. This type of mortgage is often referred to as an NHA mortgage because it is granted under the provisions of the National Housing Act and must, by law, be insured through CMHC for which the borrower pays the insurance premium, application, legal and property appraisal fees.

A closed mortgage usually offers a lower interest rate than an open one of the same term, but the open mortgage lets you pay off as much as you want, any time, without penalty.

The term you select is important too. Short term mortgages are appropriate if you believe interest rates will drop come renewal time. Long term mortgages are suitable if you feel current rates are reasonable and you want the security of budgeting for the future. This is especially important for first time homebuyers. The key is to feel comfortable with your mortgage payments

You can choose a fixed or variable interest rate. A fixed rate mortgage allows you to budget precisely for whatever term you select...anywhere from one to occasionally 25 years. A variable rate fluctuates with the market.

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