Many first-time home buyers opt for a 5-year fixed rate since their finances don’t have much room for interest risk. However, if you have good credit, are financially stable, and are able to save at least 5 percent of your monthly income, consider choosing a shorter fixed term and variable rates.
If you choose variable, find an option that keeps your payment the same, even with interest rate fluctuations. This will give you peace of mind when the rates begin to climb.
If you can’t decide between the two options, you should consider a hybrid mortgage. It allows you to split your mortgage into two different rates (perhaps half variable and half fixed) so you can take advantage of lower rates while cushioning yourself when the rates climb.
For home buyers looking for a home where they intend to settle for more than five years, then portability, or the ability to move their mortgage to a new real estate without penalty, is not a top concern. If there is a chance that you will relocate after a couple of years, you should find the best portability options that provide you with:
If you’re not considering making huge prepayments, refinancing, or moving in the next five years, you should consider low-frill mortgages. This option gives you a cheaper rate in exchange for bigger prepayment charges (penalties), smaller prepayment privileges, and in some cases, a restriction on refinancing with other lenders until your renewal date has passed.
When approaching your bank for a real estate mortgage in Toronto, you will be limited to the mortgage products that are specific to that bank, yet there may be many other, better suited options for you. No matter how big you think your bank is, it is always smart to involve an experienced mortgage broker, like a member of the team at Northwood Mortgage, to help you get the best mortgage deal in Toronto.
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