Working with a mortgage broker is the best way to find the home you love at the rate you can afford—if you ask the right questions. At Northwood Mortgage™ , we want to ensure you get the best value from your broker. For this reason, we recommend asking the following questions:
- How long is my term to maturity?
- Should my mortgage be open or closed?
- Should my mortgage be fixed or a variable rate?
- Am I getting the best options?
Let’s begin with the first most important question.
1. How long is my term to maturity?
In Canada, mortgages are structured in increments. While it may take you 30 years to pay off the loan in full, your payments will be calculated against shorter “terms,” lasting anywhere between 1-10 years, depending on your preference. Most Canadians choose terms between 2-5 years long, as these offer the most flexibility and the best value.
For the length of these terms, you are obligated to maintain recurring payments until your mortgage matures; then, you can do any of the following:
- Enter a new term at a new rate with the same financial institution.
- Renew your mortgage with another financial institution at whatever rate they are offering you.
- Negotiate the sale of your current home and move its mortgage to another property you just bought or will buy.
- Pay off the remainder of your mortgage and end payments.
Which of the above options you choose is dependent, in part, on the kind of mortgage term that is maturing.
2. Should my mortgage be open or closed?
If your mortgage is in an open term, it will charge you a higher interest rate, but will allow you to prepay without penalty. Meanwhile, if your mortgage is in a closed term, you will enjoy a lower interest rate, but at the cost of flexibility and greater commitment.
3. Should my mortgage be fixed or a variable rate?
Canadian mortgages fall into two broad categories:
- Fixed rate: These mortgages charge a specific and unchanging interest rate for the duration of the terms.
- Variable rate: With these mortgages, the customer makes the same recurring payment for the duration of the term, but with an interest rate that can move up or down depending on market conditions. When interest rates drop, a greater proportion of your recurring payment will go towards the principal on the loan. When interest rates rise, less of your recurring payment will go towards the principal.
Deciding which type is right for you is an important conversation to have with your broker.
4. Am I getting the best options?
At Northwood Mortgage, we have over 50 years of experience helping clients get the best rates on homes in Toronto. Our team of professional brokers aren’t tied to any financial institutions. Our commitment to delivering value ensures the advice you receive is never biased and always puts your needs first.
Don’t wait any longer. Get all your home-buying questions answered when you call Northwood Mortgage, your mortgage broker in Ontario, at 888-495-4825. You can also contact us online here.