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Mortgage Options

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Mortgage Options

Options let you tailor the mortgage to fit your personal needs and circumstances. Open or closed mortgages, pre-payment options,  or portable mortgages are just a few of the most commonly available options.

Open vs Closed

Open, describes the option to prepay without penalty allowing a borrower to make lump sum payments or pay off the entire mortgage without incurring extra fees. This option generally comes with higher interest rates and shorter terms.  This is a good option if you plan on selling your home soon, or need a short period of time to weigh your options before looking into a closed mortgage.

Closed may set a limit on the amount or frequency at which lump sum payments are allowed.  Should you choose to pay off your mortgage before the end of the term you will most likely be charged a penalty.  As such they are not a good option if you plan on moving in the near future.  They do however involved fixed payments allowing a home owner to adjust too a new budget that now includes regular mortgage payments.  Also, terms are normally set for longer periods allowing for greater certainty when planning for the future.

Pre-payment

Regardless of the type of loan (fixed/variable, term, amortization) most lenders will have guidelines that will allow you to pre-pay a portion or percentage of your mortgage in advance of the end of the term.  Such conditions often include an option to double up payments or pay an extra 10-20% each year on the amount of principle borrowed.  These conditions should be considered with care should you anticipate any ability yo make larger mortgage payments in the future.  Pre-payments can make a drastic difference to the interest incurred over the life of the mortgage as they are applied only to the principle amount and not divided between principle and interest as a regular monthly payment will be.

Portability

Many lenders offer products which will allow you to carry your current mortggae conditions to a new home should you decide to move.  Should you require an insured mortgage due to high ratio loans (see below), there are options for portability on the insurance that may eliminate any application fees should you require insurance on your new home.

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