Red Deer Mortgage Products
Are you uncertain whether an open or closed mortgage is right for you? Are you unsure whether a fixed rate or variable rate mortgage will save you more money over the long run? Is your Red Deer mortgage renewal coming up but you don’t know if you should accept your lender’s default offer? Or do you want to refinance your Red Deer mortgage with someone else but aren’t sure what penalty you’d owe if you did? Don’t sign up for a Red Deer Mortgage loan when you don’t know the long-term cost. Consult with a Red Deer mortgage specialist to get all the answers. Call Whalen Mortgages Red Deer’s top mortgage brokers for free, independent advice no matter what you want to learn about mortgages in Red Deer.
Give us a call if you want to talk to a live mortgage specialist in Red Deer. There are lots to know about mortgages not only the product but the lender. Are you with a collateral charge lender does your lender have posted rates that will in turn leave you a big penalty if paid out early? What does all of this even mean? Call Whalen Mortgages Red Deer your Trusted Red Deer Mortgage Brokers to get free independent advice. Remember we work for you not the banks!
Open and. Closed Mortgages , what is the difference?
What is an open mortgage? It is one that is 100% open for prepayment. You can make a prepayment of the principal on the loan at any time and in any amount. You could pay off the mortgage in full at any point without penalty. You do pay for this privilege, though. Lenders charge you a higher interest rate to offset the potential loss of interest paid when you prepay the loan.
Open mortgages are a good choice if you’ll be selling the home in a few months. They’re ideal for those who expect to sell their home quickly, since you’d have to pay a prepayment penalty when you pay off the home loan with the proceeds of the property sale. However if you are keeping the home for more than a few months a variable rate mortgage may make more sense because the rate is way lower and the penalty is small only three months interest would be the penalty. Red Deer Whalen Mortgages can run the scenarios to see what the best option for your situation is.
What is a closed mortgage? A closed mortgage has strict limits on when you can prepay the mortgage principle, though the restrictions vary from lender to lender. The standard limit is on how much of the original principal amount you can pay per year. This is set somewhere between 10% and 20% of the original loan balance. Another restriction lenders set is when you can make these prepayments. Some allow 15 percent monthly top up on the mortgage payment along with double up your payments every month and 15 percent lump sum annual payment. Other lenders allow multiple prepayments but may limit how many such principal payments you can make or when you can make them.
A fixed rate mortgage has a set mortgage rate that remains the same regardless of the latest news on increases or decreases from the Bank of Canada. If you have a 3.34% fixed rate mortgage, it will remain at that rate throughout the term of your mortgage. Mortgage lenders tend to charge a slightly higher interest rate for longer term loans such as 7 or 10 year mortgage terms, since they’re taking the risk that interest rates will go up over the duration of the mortgage. (If interest rates rise beyond the interest rate you’re paying, they’re losing money.)
A fixed rate mortgage gives home owners peace of mind. You don’t have to worry about being able to pay your mortgage if interest rates increase. You have the security of knowing what your house payment will be month after month until you renew the mortgage or choose to refinance the loan. Call your trusted Red Deer mortgage brokers at Whalen Mortgages Red Deer to discuss your options today.
Fixed rate mortgages aren’t without their downsides. The penalty for breaking a fixed rate mortgage is typically four times as much as breaking a variable rate mortgage. A variable rate mortgage charges a penalty of three months’ worth of interest on the loan, no matter where you are in the loan term when you break it. Fixed rate mortgage penalties are higher, but they can be substantially higher in some cases. The earlier you are in the loan when you pay off the loan or refinance, the steeper the penalty. If you are with a big bank who use posted rates in calculating the penalty it will also be way higher than a non-bank lender.
In contrast, a variable rate mortgage changes along with the Bank of Canada’s prime rate. When the prime rate goes up, so does your mortgage payment. If the prime rate goes down, your house payment goes down or you’re sending more money toward the principal. This does create the risk of being unable to afford your house payment as interest rates rise unless you refinance to a fixed rate mortgage. Because you’re taking this risk, lenders tend to offer borrowers the lowest available interest rate on their mortgage.
Talk to a Red Deer mortgage broker like Whalen Mortgages Red Deer to understand all of your options and determine which one is right for you.
The Mortgage Term
The term mortgage means contractual pledge with the lender. When you’re locked into a 5 year mortgage term with a 25 year amortization, it can seem like you’ll be making the house payment forever. However, the mortgage term can be anywhere from a year to ten years. The “term” of the mortgage is simply however long the mortgage contract will be in effect with the current lender. Note that the mortgage term is generally shorter than the actual amortization of the loan. It may take 25 years to pay off the mortgage loan balance, but the loan itself is often three to five years. At the end of that term, you can renew the mortgage with your current lender, re-negotiate the loan terms with the help of a Red Deer mortgage broker like Whalen Mortgages Red Deer and her dedicated experienced team members, refinance the loan or switch lenders. One of the most expensive mistakes people make is simply renewing with their current lender instead of finding out if they qualify for a lower interest rate with someone else or even with their current lender. It may be worth it to leave the current lender to get a lower interest rate with someone else. Allow your top Red Deer mortgage specialist help you run the numbers and explore all your options.
Short Term vs. Long Term
In the debate between short term and long term mortgages, it is important to get the definitions straight. Short term typically means three years or less. Long term mortgages are mortgage contracts for three years or more.
Why would you want a short term mortgage? You want to lock in today’s low interest rates but think interest rates may fall further. Or you think your credit profile will improve in two or three years, so you’d like the ability to renegotiate the mortgage at that time. A long term mortgage is a good choice when interest rates are low, you qualified for low interest rates, and you want to lock in these great mortgage rates for the long term.
A long term mortgage does not necessarily mean that you’re locked into your current mortgage forever. You could pay the penalty and refinance your mortgage at any point. Or you could secure a five or ten year mortgage, knowing you can shop around at the end of that “long” term.
Mortgage lenders expect to be paid, but they are often flexible on when and how often you pay them. Weekly mortgages aren’t common, but they are an option. Bi-weekly mortgages are paid every two weeks and you can make it accelerated so you pay an extra year principle off every year, while bi-monthly mortgages are paid twice a month. With an accelerated bi-weekly mortgage, you’ll make two more house payments per year than with a bi-monthly or non-accelerated bi-weekly mortgage payment. And the more mortgage payments you make, the faster you generally pay off the loan. And then there’s the classic monthly mortgage payment.
Reach out to Red Deer Whalen Mortgages to discuss the options that will work best for you on your Red Deer Mortgage we are your Trusted Mortgage Brokers in Red Deer.