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Back to Mortgage section Learning Centre - Mortgages
Mortgages: The Features and Benefits

Selecting the right mortgage is about as important as selecting the right home.

In considering what type of mortgage you would like, review the benefits adjacent to the mortgage features. Typically mortgage lenders in Canada provide most of the following mortgage features, additional options and/or special features.
Fixed Rate Mortgage
Features
Benefits
Considerations/Suitability
Open.
6 Months up to 5 years
You can prepay all or part of the mortgage at any time without any interest rate penalty. Keeps your options open.
When you feel rates are low, it allows you to lock-in for a longer term or mortgage option.

Short term mortgages offer flexibility if rates are in decline.

You think interest rate variations are NOT a concern.
If rates do rise, your normal living costs will not suffer. You believe rates will stay the same or go lower.
Mortgage amount is less than 50% of home's value. You are expecting to pay down large sum(s) against the principle within a short period.
Convertible.
6 Months up to 1 year
Can be converted at any time a closed term without penalty.
Keeps your options open.

Allows you to lock-in to a longer term mortgage when rates are low.

You think rates are on the way down. You wish to minimize the risk of varying payment amounts, while keeping your options open. Mortgage amount is 50% - 75% of home's value.
Closed.
6 months, 1 to 5 years 7 and 10 years.
You have a fixed interest rate for the length of the term you choose. The mortgage rate and payment remain the same throughout the term, making budgeting easier.

Provides peace of mind over a long period of time knowing that if rates go up, your payments stay the same.

You feel you must have an exact mortgage payment.
You believe interest rates are going to rise over the years to come.
Mortgage amount is 75% of value of home.
Variable Rate Mortgage
Features
Benefits
Considerations/Suitability
Variable Open Interest rate changes with the fluctuations in the money market.
You can prepay your mortgage at any time without any interest rate penalty.
When you feel rates are low, it allows you to lock-in for a longer term or mortgage option.
Each time rates go down, more of your monthly payment is applied against the principal outstanding.

You think interest rate variations are NOT a concern.
If rates do go higher, your normal living costs will not suffer. You believe rates will stay the same or go lower.
Mortgage amount is less than 50% of home's value.
You are expecting to pay down large sum(s) against the principle within a short period.
Variable Convertible Interest rate changes with the fluctuations in the money market. Can be converted at any time to another mortgage option throughout the term.
Keeps some options open.

Allows you to lock-in any time to more favorable terms.

Mortgage amount 95% of home's value 3 years - 5 yrs.
Variable Protected Interest rate changes with the fluctuations in the money market.
Rate is capped for term of the mortgage.
As Interest rates go down, more of your monthly payment is applied against the principal outstanding. Also, if rates go up, the interest will not rise above a predetermined limit. You feel you must have an exact mortgage payment.

You believe it is to your advantage to have the flexibility of a variable rate. If rates go down, more of the principal is paid, but your rate is capped if rates increase.
Mortgage amount 75% of home's value.
High Ratio Insured Mortgage Low minimum down payment

Allows down payment as low as 10%. First time buyers can borrow up to 95% of the maximum allowed by CMHC and GECapital

 

Other Features
Benefits
Pre-approved Mortgages Secure mortgage financing prior to the home purchase.
You will know how much you can spend
Up to 90 day rate guarantee

Fix the mortgage rate up to 90 days before closing.

If rates go down you get the lower rates, if they rise, your rate is fixed. (90 days on new construction - Builder secured financing).

Automatic renewal on 6 month mortgages Takes away the need to make a new application.
Waver of mortgage switch fee Some Institutions charge to switch mortgage from one home to another
Buydown of Mortgage rate

Making your mortgage a sales feature by buying down the mortgage rate to a lower percentage point

Assumability Have a new buyer take over the existing mortgage
Prepayment amount up 100%

Increase your mortgage payment up to 100% per year and/or prepay as much as 10% of your mortgage every calendar year


Additional options/features
Benefits
Accelerated payments Make weekly payments or 13 payments per year
Mortgage life insurance If you die, the insurance pays off the debt
Skip a mortgage payment If you are short of cash one month, you can miss a payment
Extend and blend

If your rate is high and new rates are lower, you can blend the old rate with a new rate over an extended term.

Portable mortgage

Having a great rate and moving it to a new home

Things worth remembering...

Pay down your mortgage faster by choosing a shorter amortization period, or by paying an extra $50 per month and/or rounding up your mortgage payment. For example, pay $900 instead of $824 each month for your mortgage period. You will find that instead of paying a mortgage payment for 25 years, it could be 22 years. You could be mortgage free 3 years earlier.

The type of payment option that you choose can save you lots of interest over time. The following chart will illustrate how the payment option chosen and the length of time that the mortgage (years) is to last can affect the interest.

Payments
per year

Payment option

Payment
amount

Amortization
period (years)

Potential
savings

12

Monthly

$662.38

25

None

12

Accelerated - Monthly

$717.58

19.5

$30,500.67

24

Semi-monthly

$330.58

25

$360.

24

Accelerated Semimonthly

$358.58

19.46

$30,955.43

26

Bi-weekly

$304.50

25

$785.

26

Accelerated Biweekly

$331.19

19.3

$32,127

52

Weekly

$152.12

25

$946

52

Accelerated - Weekly

$165.59

19.3

$32,497

Table note: We have used an $80,000 mortgage at 9% per annum, compounded semi-annually, assuming no pre-payments. Pre-payment would further increase the savings illustrated.

Applying for a Mortgage...

Independent Mortgage brokers and ) are in the business of securing mortgage funds/applications for you the consumer. They do that by shopping your mortgage application across a broad base of financial institutions, having those financial institutions bid on your business.

We do that in two ways, firstly by polling the institutions for their offering rates and then using a .

You ask, why a Broker?

A competent mortgage broker provides a broader range of choice and product for residential real estate loans than any single lender is willing to provide. As you have just seen from the above tables and mortgage variables, you need somebody to find the way through the maze of options features. A can help you find the perfect mortgage that provides the flexibility and security your family needs.

When you reach the point where you are ready to apply for your mortgage, consider using an independent mortgage broker or If you are the type of person that knows exactly what you need, then all you need to do is to... [ Make a Mortgage Application ]

Looking for the perfect mortgage also includes obtaining this special report on being prepared: "7 Things You Absolutely Need To Know Before You Apply For A Mortgage Or Loan". It's free - you can request a copy to be delivered to your e-mail address by completing the form at right. Please note that FiscalAgents.com will under no circumstances share your e-mail address with any third party companies.

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