Different Mortgage Options - What to Choose?

 

What is an open mortgage?

An open mortgage can be prepaid, in part or in full, during the term of the mortgage without paying a prepayment charge. The interest rate on an open mortgage is often higher than the interest rate on a closed mortgage. An open mortgage can provide flexibility until you are ready to lock into a closed term.

What is a closed mortgage?

A closed mortgage is one that cannot be prepaid, renegotiated or refinanced before the end of the term without paying a prepayment charge. However, most closed mortgages contain certain prepayment privileges, such as the right to make a prepayment of 10-20% of the original principal amount each year, without paying a prepayment charge.
A closed mortgage often has a lower interest rate than an open mortgage.

What is a fixed interest rate mortgage?

• With a fixed interest rate mortgage, in most cases your interest rate does not fluctuate during the mortgage term. Your regular mortgage payment amount does not change.
• You know exactly what your regular payments will be and how much of the principal balance will be paid off during the term.

What is a variable interest rate mortgage?

• With a variable rate mortgage, the interest rate changes with changes to the CIBC Prime Rate. In addition, your regular mortgage payment amount is fixed and does not change.
• When the CIBC Prime Rate decreases, the amount of interest you pay will also decrease. A smaller portion of your regular mortgage payment will be applied to pay interest, and a larger portion will be applied to pay down the principal amount of your mortgage.
• When the CIBC Prime Rate increases, the amount of interest you pay will also rise. A larger portion of your regular mortgage payment will be applied to pay interest, and a smaller portion will be applied to pay down the principal amount of your mortgage.

Why choose a short term mortgage?

A short term mortgage generally offers a lower interest rate than a longer term mortgage. When current rates are high and you think rates may drop, choosing a short term mortgage allows you to lock in for a shorter period. A short term mortgage may also be a good option if you plan to sell your home or pay off the mortgage early.

Why choose a long term mortgage?

A long term mortgage generally offers a higher interest rate than that of a shorter term mortgage. When current rates are reasonably low, choosing a longer term mortgage secures the interest rate for a longer period of time and makes budgeting easier.

Free On-Line Mortgage Pre-Approval

Steven Porter - Mortgage Advisor, CIBC - 1-888-885-8962, steven@stevenporter.ca
www.FreeMortgageInfo.ca