What type of mortgage services in Edmonton are right for you?

One of the most important financial decisions you’ll make in your life as a homeowner in Canada will be choosing the mortgage services that work best for you. The options range from one type of home loan to another, so it’s essential to understand which mortgage service will get you the best rate and help you save more money in the long run. 

There are many reasons why people choose to buy homes instead of renting. Some people want to live in the dream house they’ve always wanted, some hope to increase their family, and others hope to realize their investment by putting it on rent.

Whatever your reason may be, there are specific steps you need to take to get the mortgage that best fits your financial situation. So whether you are looking for residential mortgages or commercial mortgages – you’re bound to find the right expert for your mortgage services in Canada with the help of experts.

Here are the most common types of mortgages, plus all the information you need to make an informed decision about what kind of mortgage services in Canada is right for you!

First things first — a mortgage isn’t a loan. It’s a legal agreement between you and your lender that allows you to borrow money so that you can buy something of value like a house or vehicle. All mortgages have three main components: principal, interest, and term, and several costs you should expect.

The principal amount (the price of whatever you’re buying) plus interest are repaid over time, usually with monthly payments. The term indicates how long it will take to repay your loan; standard terms include one year and 30 years, but if required, they can be stretched out even further by refinancing your mortgage. 

However, you should know that the Government offers a number of financial incentives to help you throughout the homebuying journey.

What should you know when getting a mortgage service?

There are many types of mortgage services in Edmonton, and it can be a bit daunting to figure out which one is best for your needs. 

When deciding which type of mortgage service will work best, consider: what kind of investment property do you want to purchase, how much can you afford monthly, how long do you want to pay off your loan, and what interest rate are you comfortable with? 

Depending on your answers, here are some popular types of mortgages that might be right for your situation.

Types of mortgages services in Edmonton

Mortgages services are designed to help consumers meet their homeownership needs in Edmonton. There are various mortgage services available, including variable-rate mortgages, fixed-rate mortgages, and open/closed mortgages. 

Open Mortgages

An open mortgage refers to a fixed-rate mortgage that does not have an amortization period longer than 25 years. Open mortgages are typically used by people with large down payments who want lower monthly payments and a house they plan to own for several decades. 

In this case, the interest rate is usually higher than on a closed mortgage. However, it allows maximum flexibility if you plan on putting extra money toward your mortgage.

Open mortgage services also don’t require a prepayment penalty, which means borrowers can pay off their principal without suffering any late fees or penalties.

Closed Mortgages

A closed mortgage means that your monthly payments stay constant throughout your entire loan. Your first month’s payment will be higher than normal. But after that, you pay a fixed amount every month, regardless of what interest rates do. 

The good news with closed mortgage services is that they’re generally less risky and offer better security if you lose your job or get injured. The downside, though, is these loans don’t provide as much flexibility—and they can be pricey if interest rates go up dramatically or even if they just inch upward by a few points.

Conventional Mortgage

Conventional mortgage services come with a high-interest rate and only require a small down payment. If you can put 20% or more down on your home, getting a conventional loan could make sense because it will save you money over time. 

Lenders want 20% equity in their investment—the higher the equity, the lower their risk and, therefore, usually lower interest rates. You are not required to purchase mortgage insurance in this case, although your lender will likely require that you buy home insurance as a condition of the mortgage.

High-ratio mortgages

When you can’t put a down payment of 20%, then your mortgage is considered a high ratio. In this case, you’re required to get mortgage default insurance. Contrary to popular belief, mortgage services default insurance doesn’t protect you.

A high-ratio mortgage is typically available to people who have a good income but lack substantial savings and are therefore considered mortgage risks. 

This kind of loan has an interest rate higher than conventional loans because they pose a greater risk to lenders.

Fixed-rate Mortgages

These allow homeowners to lock in their interest rate and payment amount for an agreed period of time. The most common terms are two, three, five, and ten years. Locking into a fixed-rate mortgage could make sense if interest rates are expected to rise. 

However, suppose rates drop substantially after your term is up. In that case, your monthly payments will shoot up as well, and it may be more cost-effective to renew your existing contract at a lower rate instead of opting for another fixed-term agreement.

What type of mortgage services should you get?