There are two types of mortgages, and a fixed rate mortgage is the most sought after for a really great reason: the low rate you can secure for yourself now will last for the next 30 years if you play your cards right. You’re going to need a great Toronto mortgage broker (read: us!)who knows what you can and can’t expect out of your mortgage application. Here we’re going to talk about fixed rate mortgages and what the benefits are. Just remember that if you don’t qualify for this type of mortgage there are always more lending fish in the big wide financing sea.
What is a Fixed Rate Mortgage?
Fixed interest rate mortgages keep the same interest rate over the course of the loan. Adjustable rate mortgages on the other hand can float up and down with the economy and you can wind up paying thousands of dollars extra in interest every year. Interest rates are at all-time lows right now, and you’ll be able to lock in a single digit interest rate for years to come.
Fixed rate mortgages do come with their own problems, however. If you are hit with a penalty your interest rate could double or triple overnight. Penalties can range from pre-payment (paying your bills early for example), late payment penalties, and more. This is why it’s important to get a mortgage broker on your side. The language in a mortgage, no matter what type of interest rate it bears, can be so thick and difficult that it can be hard to understand just what you’re signing.
What are the Benefits of a Fixed Rate Mortgage?
There are many benefits aside from not having a changing interest rate. Many fixed rate mortgages are portable mortgages that allow you to move the financing from one house to another if you move. Some will feature easier access to Canadian home equity loans, just in case you ever need to draw equity out of your house. Others will cater to those who have a less than perfect credit history. Whatever you’re looking for you’ll be able to find it with a fixed rate mortgage.
Is a Fixed Rate Mortgage Right for You?
This really depends on what you plan to do with your home. If you want to use the home you’re buying as a primary residence and live there for a lengthy period of time, a fixed rate mortgage is a great choice. You’ll want to speak with one of our Toronto mortgage brokers to see which type of mortgage is the right one for you.
On the other hand, if you’[re buying a second home to use as a rental property or as a fixer upper top make a profit later, you will want to think about an adjustable rate mortgage instead. Make sure you do your research so you know which one of these will be the right choice for you and your needs.