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Mortgage Features & Options

     There are essentially two types of mortgages, the conventional mortgage, and the high-ratio mortgage.

     The conventional mortgage will allow the purchaser to receive no more than 75% of the amount of the home, with a minimum 25% down payment.

     The high-ratio mortgage is meant for those who have less than 25% down payment and who are willing to assume loan insurance; which can be added into your repayment schedule.

     Depending on the lender, mortgages may come with a set of standard features that provide flexibility to the borrower. Such features include:

Assumability: This is when the purchaser can take over the mortgage of the previous homeowner, in turn, possibly acquiring lower interest rates than the current market allows. It my also be used as a selling feature when marketing your home for resale.

Prepayment: By adding a prepayment clause to your mortgage you will be allowed to pay down the amount of your mortgage without incurring any penalty fees. This is ideal for every mortgage carrier and will allow for a more rapid repayment of your mortgage, in turn, lowering the amount of interest you pay.

Portability: By including a portability clause in your mortgage you will be permitted to transfer your existing home's mortgage to your next home, if you so chose. This will keep your interest rates stable over time and will eliminate the need for applying for a new mortgage.

     There are many options when searching for a mortgage. You have the ability to assume the mortgage of the vendors, in turn eliminating the need for appraisals, lawyers and initial mortgage fees. You pay for the mortgage as a part of the purchase price and take on their existing interest rate. Another option is the Vendor Take Back Mortgage (VTB). This is when the seller lends you the money to purchase his/her home. For example if the house you are interested in is worth $200,00 and the seller has outstanding mortgage balance of $100,000 and you have a $50,000 down payment, the lend may choose to lend you the remaining $50,00, which you can pay in installments with interest rates usually lower than the bank's.

     If you choose a conventional, or high-ratio mortgage you have several options available to you:

Pre-approved Mortgage: A pre-approved mortgage is when the lender pre-approves the amount of your loan and gives you a written document confirming this amount as well as the amount of time you have to find a home (usually two to three months).

Open Mortgage: An open mortgage is when you put additional lump sums of money toward the repayment of your loan without incurring any penalty. If you're buying a home with the intention of resale an open mortgage is a good choice because, though interest rates are higher you will have a greater immediate return.

Closed Mortgage: A closed mortgage is when the conditions of repayment remain the same throughout the entire loan period. This type of mortgage offers the lowers interest rates but also allows for penalties to be placed on the homeowner if they wish to put lump sums of money toward the loan. Closed mortgages are ideal for those wishing to stay in their home until the end of the amortization period. Most lenders will allow you to switch from a closed to open loan at any time during your mortgage period.

Split or Multiple-rate Mortgage: This type of mortgage allows the borrower to split their mortgage up into two or three different terms, that way; conditions of each term can be negotiated separately as they end.