• A larger down payment means your home ultimately costs less because a smaller mortgage means less interest
• A shorter amortization (the period over which a loan is repaid)
• A weekly or biweekly payment schedule instead of a monthly payment schedule
• Additional lump sum payments

The Mortgage Term
The term of a mortgage is the length of time that certain factors, such as the interest rate you pay, are set at a negotiated level. Terms usually last anywhere from six months to ten years and longer. At the end of the term, you either pay off your mortgage or renew it, possibly renegotiating its terms and conditions. Generally, the longer the term, the higher the interest rate. Many experts suggest you select a long term if interest rates are rising. If rates are falling, you may want to select a short term and then lock in the rate when you think rates won't go any ower.

Amortization:
This is the amount of time over which the entire debt will be repaid. Most mortgages are amortized over 15-, 20-, or 25-year periods.  The longer the amortization, the lower your scheduled mortgage payments, but the more interest you pay in the long run. Click here for charts depicting payment comparisons over various amortization periods and monthly payment schedules.

Schedule of Payments
A mortgage loan is repaid in regular payments, either monthly, biweekly, or weekly.  The more frequent payment schedules can save you money by increasing the amount paid toward the total mortgage each year.  The more frequent your payments in a year, the lower the overall interest you pay on your mortgage. Click here for a sample payment schedule.

Mortgage Features:

Prepayment: Ensure that you have some form of prepayment clause in your mortgage, that will allow you to pay down your mortgage with a lump sum, or an extra payment, without penalty.

Portability: This means you can transfer the terms and conditions of your mortgage to your next home. This may allow you to keep a low interest rate if you sell one house and buy another.

Assumability: This means you may be able to assume (take over) the existing mortgage on the property, which may have attractive features, such as a lower interest rate than the prevailing market. In turn, an assumable mortgage may be a selling feature for you when you decide to move on in the housing market. (Read more under Mortgage Options)

Expandability: This lets you expand the principal on a first mortgage at the lender's agreed-upon rate of interest. This can be a cost-effective way to finance a home renovation.

Types of Mortgages: 

Conventional Mortgage: This mortgage is for an amount that does not exceed 75% of either the appraised value of the property or the purchase price, whichever is lower. Your down payment is a minimum 25% of the purchase price.

High-Ratio Mortgage: With this type of mortgage, you contribute less than 25% (as little as 5%) of the cost of the home as a down payment. A high-ratio mortgage requires mortgage loan insurance (Click here for more information).

Second Mortgage: This usually has a higher interest rate and shorter amortization than a first mortgage. Secondary financing is often used to make renovations to a home.

Open Mortgage
This means you can repay the loan, in part or in full, at any time without penalty. Interest rates are usually higher on this type of loan. An open mortgage can be a good choice if you plan to sell your home in the near future. Most lenders will allow you to convert to a closed mortgage at any time. Many experts suggest taking an open mortgage for a short term in times of high rates and converting to a longer term when rates fall.

Closed Mortgage
A closed mortgage usually offers the lowest interest rate available. It's a good choice if you would like to have a fixed rate to work your budget around for a few years. However, closed mortgages are not flexible, and there are often penalties or restrictive conditions attached to prepayments or additional lump sum payments. It may not be the best choice if you might move before the end of the term.

Split or Multiple Rate Mortgage
With this mortgage, you negotiate a portion of your total mortgage loan at one rate and term, and another portion at a different rate and term. In this way you can split your mortgage into two, three or more terms.

There are many more mortgage options available. To find out more, give me a call at
(705) 497-4123.

Click Here to read more about the U.S. subprime mortgage meltdown and what it means to Canadians (pdf document, 575k)