Mortgage Types

Term of a mortgage:
The actual length of time money is loaned at the contractual rate of interest.
Terms range from three months to twenty-five years. Traditionally the longer
the term, the higher the rate.

First mortgage:
Mortgage given first priority at the registry office. Usually the only financing
required. Gives borrowers the best rate of interest.

Second mortgage:
A higher interest rate loan that provides borrowers with additional financing if the
first mortgage does not meet their total financial requirements. It is ideal for
those looking for secondary financing to bypass mortgage insurance, port an
existing mortgage, or for debt consolidation.

Fully open mortgage, with no penalty of notice:
With this type of mortgage, the entire principal or any part of it can be prepaid to
the lender at any time, without having to pay any penalty or bonus interest to the
lender.

Open mortgage, with a predetermined penalty or notice:
All or part of the principal can be prepaid at any time by paying a penalty or
giving a set amount of written notice. The amount of the penalty or the notice
period would have been predetermined at the time the mortgage was arranged.

Partially open mortgage, with no penalty or notice on that open portion:
This type of mortgage is partially open, but not fully open. The mortgage
contract permits a limited, fixed percentage to be returned to the lender each
year (up to 10%, 15% or even 20% depending on the lender), in addition to the
regular payment without any penalty being paid or notice being given. There
may also be some restrictions as to when during the year this prepayment can
be made. The balance of the mortgage (80% - 90%) is closed and can only be
prepaid if the lender allows – and then on the lenders terms!

Partially open mortgage, with a predetermined penalty or notice on that
open portion:
As above, this mortgage is partially open, but not fully open. The mortgage
contract would allow for a fixed percentage of principal to be prepaid, but
subject to a predetermined penalty (i.e. 3 months interest) or with a preestablished
amount of written notice. The lender may also have some
restrictions as to when the prepayment can be made during the year. The
balance of the mortgage is closed and does not allow for automatic early
prepayment of the loan.

Fully closed mortgage:
These types of mortgages have no pre-payment privileges at all. All mortgages
fall into this category unless the prepayment privileges appear right in the
mortgage documents. Although, all mortgages are fully open on maturity.

Convertible mortgage:
You can get the low rate typically associated with the short term, but the
freedom to lock in at anytime for longer, if you think rates are headed up. To
win, however, you’ve got to be an assiduous rate-watcher. These mortgages
are usually offered with a 3-month, 6-month or 12-month term.

Variable rate mortgage:
A loan whose interest rate is changed monthly or more frequently to keep it in
line with the general interest rate trends. Lenders often set the rate based on
their prime-lending rate. While the loan rate changes, the payment may stay
level each month. In that case, the amounts going to pay interest and principal
each month are adjusted to reflect the rate. VRMs are handy mortgages when
rates are falling because those rate breaks get passed along quickly as rates
are adjusted. However, if you fail to act quickly when rates begin to rise, you
may also miss the chance to switch to a fixed-term mortgage. Increases in
interest rates could create problems if your VRM monthly payment doesn’t
include any cushion for rate hikes. In that case the lender may require you to
increase your payment to prevent a “deficit interest” situation.

Hybrid (mutant) mortgages:
Lenders have different product names for their own mortgages to try to make
them sound unique or for marketing purposes, but all mortgages fall into one of
the above categories. Variations between and within each category help
distinguish different lender’s packages. Let your Mortgage Intelligence
consultant arrange the financing package best suited to your needs.

Mortgages for recreational & investment properties
Mortgage Intelligence offers mortgages for specific needs such as recreational
or investment properties.

Mortgages for impaired credit:
Mortgage Intelligence has a mortgage that can help clients who are considered
to have impaired credit because they have maximized their credit cards and
other debt. Even though they may be able to make their payments each month,
they may be considered a high-risk borrower. They can also save on interest
costs and have a more manageable monthly payment.