You’ve finally found your dream home and your offer has been accepted! Now it’s time to choose what mortgage rate is best for you. It’s important to know exactly what you’re signing up for. Essentially, how will the interest be handled within your mortgage payment? The main thing to keep in mind is that a mortgage is a long term investment. Take some time to consider your financial situation and what that may look like five and ten years down the road. This will be a great indicator of what rate would be an ideal choice. There are three main types of mortgage rates that you can choose from:
In the case of fixed rates, the interest rate is set at a fixed level for a set period. Generally this period of time is two or five years long. Your rate will not change during this time. This option is ideal for homeowners who appreciate certainty in their payments. Many find it easier to budget when they know exactly what they will be paying each month. Little risk is involved with this choice, so if you’re planning on settling down in your home for a long time, you may want to seriously consider a fixed rate mortgage.
Instead of having a constant rate, a variable rate will be based on something called the prime rate, plus or minus a certain percentage determined by the lender. The prime rate is based on the Bank of Canada’s overnight lending rate. That being said, this rate will fluctuate with little to no notice. If the economy is not doing well, the rates tend to reduce. On the flip side, if the economy is bustling, the rates tend to increase. Variable rates can be an attractive choice because they are generally lower than fixed rates. This would be ideal for homeowners who can afford a sudden leap in interest rates. Typically a variable rate means less interest paid over the duration of the mortgage.
The third and final rate that we are going to discuss is discount rates. These offer a temporary discount on your interest rate, set below the lender’s standard variable rate (SVR). After the discount period, the rate generally reverts back to the lender’s SVR. However, it is important to be aware that you will be locked into the mortgage during the discount period. Paying it all off during that time will result in costly early-redemption charges. Homeowners that don’t intend to pay off their mortgage right away and would like a great way to save money will love this choice.
So there you have three of the most common rates. It is also possible for these three options to be combined in some way. Here at Source Mortgage, we know that each homebuyer is unique. With different life circumstances and different needs, it is so important to have different options. If you’re considering homeownership, Source Mortgage is here for you for all of your mortgage needs!
Source was absolutely great to work with - went above and beyond to help us get everything done when buying our new home. Highly recommended!! Chad and Jenelle Richards Jan 09 2013
Chad and Jenelle Richards
Added January 23rd 2013
|V.R.M.||Prime-.65 or 2.35%|