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Mortgage Options
By Tisha McKenna
Royal lePage Benchmark

Mortgages come with a variety of different features and characteristics, giving you the flexibility to customize your mortgage to suit your needs.

Amortization is the amount of time needed to reduce the loan to $0. A conventional mortgage is 25 years, but amortization can range anywhere from five to 35 years. The shorter the amortization, the higher your regular payments will be, but the less you'll pay in interest over the life of the loan. Generally, amortization is several mortgage term periods.

The mortgage term is the period of time that the mortgage agreement is in effect. These typically run from six months to 10 years. At the end of the term, you will either repay the full mortgage amount, or renegotiate a new mortgage. Depending on the length of your mortgage terms, you will likely go through three or four different term periods in order to amortize your mortgage fully.

You will need to decide whether you want an open mortgage or a closed one. An open mortgage lets you pay off some or all of the mortgage at any time without penalty. With a closed mortgage, the prepayment options are generally limited to a certain percentage of the mortgage amount each year, or increasing your payment amount up to a certain limit.

With a variable-rate mortgage , the interest rate changes as market interest rates change. With a fixed-rate mortgage , the interest rate is set for the length of the mortgage term. Variable rates are generally lower than fixed-rates for a mortgage of the same size and term, but if interest rates go up, so will your interest cost. Fixed rates, while slightly higher, offer security. Even if interest rates in general rise, your mortgage rate is locked in for the length of the term.

You can also choose the payment frequency. You can choose to make your mortgage payments monthly, semi-monthly (twice a month), bi-weekly (every two weeks) or weekly. Paying more frequently helps to reduce the mortgage principal more quickly.

For more information on mortgages, get in touch with your mortgage broker or personal bank.

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Tisha McKenna
tel: (403) 869-9730

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