Choosing the house or property of your dreams is the toughest task. There are many factors that need to be considered before buying a property. Once a good deal has been negotiated, the next step comes of choosing the right mortgage plan. Mortgage is the loan taken for the purchase of the property or condo like M City Condos. The amount borrow is then paid as an instalment each month for a fixed period of time, until the complete amount is paid back.
There is a need to know the basic options and mortgage plans available in order to make the right choice. The basic mortgage plans and terms are explained below.
Conventional Mortgage plan.
The Conventional Mortgage plan refers to the plan that takes up to the 80% of the actual value. This means that the borrower has made the down payment of atleast 20% of the actual purchase price.
High Ratio Mortgage Plan.
If you are unable to make a down payment of up to 20% of the purchase price of the property, you might have to choose the high ratio mortgage plan. This plan allows mortgage for up to a maximum 95% of the purchase price. These loans have to be insured by Canada Mortgage and Housing Corporation (CMHC).
Fixed, Variable and Adjustable Interest Rates
The fixed interest rate means the rate is locked-in for the entire term of the mortgage. You cannot change the rate nor can you make advance or early payments.
Variable interest rates mean the payments remain the same for each month of the term but the interest rate is applied according to the market. This means the rate fluctuates as the markets falls or rises.
Adjustable rates mean both the payments and the rates vary according to the market. The prevailing condition in the market decided the payment and interest rate for each month.
Open And Closed Mortgage Plans
A closed mortgage plan means you have to make a fixed payment throughout the term. Some flexible plans allow making a lump sum repayment but it is not a common option. This is a good option for people who do not want a change in the payment plan.
An open mortgage plan allows making a repayment through lump sum amount whenever possible before the maturity without imposing any penalties. This option is good for people who are expecting a house sale in near future or any other source of big cash in flow.