There are several kinds of mortgages:
- Assured
- Conventional
- Floating rate
- Fixed rate, open or closed
The above main categories cover hundreds, if not thousands of mortgage products available from different lenders. Choosing the right mortgage can be very daunting for the new home buyer. However, below is just a selection of the commonly available mortgage categories available on the market. Although mortgage types shown below are just an outline of the many products available out there, further study and research into the mortgage market is highly recommended.
Conventional Mortgage:
This is a mortgage with a Loan to Value that is less than or equal to 75% of the market value of the property. This means that the mortgage does not need to be insured by CMHC and no premium is added to the loan amount.
Insured mortgage:
If the Loan to Value exceeds 75% of the market value of the property (and it may even go up to 100% of the market value of the property) then the mortgage must be insured and a premium is added to the mortgage.
Because it is CMHC or Gentworth which insures loans, they must give their approval before the mortgage can be approved.
Generally, a loan fits securely in one or two categories
Rates closed:
This is a loan whose rate remains the same throughout the duration of the term. Upon renewal, a new rate is determined for the mortgage and the new option taken..
Variable rates:
This is a loan rate that is based on the prime rate of the national bank. Payments of a variable rate mortgage fluctuate when the national bank of a country decides to change the prime or base interest rate.
These are the main types of loans. However, there are many more loans that are designed for more specific situations such as first mortgages and junior, to make the self-construction for self-employed borrowers.
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