Fixed Rate Mortgages
What it is:
A mortgage with an interest rate that stays the same for the entire term
Benefits:
- Predictable monthly payments
- Protection from rising interest rates
- Ideal for budgeting and stability
Considerations:
- Often slightly higher rate than variable at the start
- Less flexibility if rates drop
Best for:
First-time buyers, budget-focused borrowers, anyone who prefers certainty.
Variable Rate Mortgages
What it is:
A mortgage where the interest rate can fluctuate with market conditions (typically tied to the lender’s prime rate)
Benefits:
- Often lower starting interest rate
- Potential savings if rates stay steady or fall
Considerations:
- Monthly payments can go up if rates rise
- Requires comfort with uncertainty
Best for:
Borrowers who are rate-savvy and prepared for potential changes.
Adjustable Rate Mortgage (ARM)
What it is:
Similar to variable rate, but structured with fixed periods and adjustment intervals (ex. 5-year ARM)
Benefits:
- Flexibility with rate adjustments after fixed period
- Potentially lower initial rate
Considerations:
- Rate resets can mean higher payments
- Not as common in Canada as in the U.S.
Best for:
People who plan to sell or refinance before adjustment
Open Mortgage
What it is:
A mortgage that can be paid off (fully or partially) at any time without penalty
Benefits:
- Maximum prepayment flexibility
- Excellent for borrowers expecting a windfall or sale of property
Considerations:
- Typically higher interest rates
- Not usually used for long-term financing
Best for:
Short-term borrowers or those expecting cash inflows (inheritance, bonus, sale of asset)
Closed Mortgage
What it is:
A mortgage with restrictions on prepayments and portability
Benefits:
- Lower interest rates than open mortgages
- Structured long-term planning
Considerations:
- Penalties for breaking or high prepayment limits
- Must be comfortable with terms
Best for:
Long-term homeowners who value lower rates over flexibility
High-Ratio (Insured) Mortgage – New Purchases Only
What it is:
A mortgage where the down payment is less than 20% of the purchase price — requires mortgage default insurance (CMHC, Sagen or Canada Guaranty)
Benefits:
- Allows home purchase with lower down payment
- Builds equity as you pay down mortgage
Considerations:
- Insurance adds cost (Usually around 2.4-4% of requested mortgage amount, depending on down payment size)
- Generally requires strong credit
Best for:
First-time buyers or buyers with limited down payment funds
Conventional (Insurable/Uninsurable) Mortgage – Purchases or Refinances
What it is:
A mortgage with 20% or more down payment, so no mortgage default insurance is needed
Benefits:
- Avoids insurance premium
- Lower overall cost
Considerations:
- Requires larger down payment
Best for:
Buyers with savings or equity ready for 20% down
Blended or Hybrid Mortgage
What it is:
Combines fixed and variable portions (ex. 50% fixed, 50% variable)
Benefits:
- Can balance rate stability with savings potential
- Customized risk profile
Considerations:
- Can be more complex to understand
- Mixed payment structure
Best for:
Borrowers who want the benefits of both fixed and variable rates
Second Mortgage
What it is:
An additional mortgage on a property that already has a primary mortgage
Benefits:
- Access to equity for debt consolidation, renovations, investments
Considerations:
- Higher interest rates than primary mortgage
- Increased overall debt
Best for:
Homeowners needing additional funding without refinancing first mortgage
Bridge Financing (Only Available for Purchases)
What it is:
A short-term loan to “bridge” the gap between buying a new home and selling your current one
Benefits:
- Helps secure new property before sale of your old one
Considerations:
- Short term and can be costly if sale is delayed
Best for:
Homeowners in transition — buying before selling
Home Equity Line of Credit (HELOC)
What it is:
A HELOC lets homeowners borrow against the equity in their property through a revolving line of credit. You can withdraw funds as needed and only pay interest on what you use
Benefits:
- Flexible access to funds
- Interest-only payment options
- Lower rates than most unsecured credit
- Reusable credit as you repay
Considerations:
- Variable interest rate
- Uses home as collateral
- Requires sufficient equity
Best for:
Renovations, debt consolidation, investments, or ongoing access to funds
Mortgage Refinance
What it is:
Refinancing replaces your existing mortgage with a new one, often to access equity, consolidate high-interest debts and improve your financial position
Homeowners can refinance up to 80% of their home’s value (subject to approval)
Common reasons to refinance:
- Access equity for renovations or investments
- Consolidate high-interest debt
- Lower your interest rate
- Change mortgage terms
- Adjust amortization
Considerations:
- Possible penalties for breaking current mortgage
- Legal and appraisal costs
- Requires qualification
Best for:
Homeowners looking to improve cash flow, restructure debt, or use home equity strategically
Kevin McDonald
Mortgage Agent Level 2
Licence #M22003975
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