> Mortgage Features
Here are some mortgage options you should know about:
Every lending institution is different, and each will have their
own customizable mortgage options. When you're hunting for a lender
and a home, see how the following features could be beneficial
to you.
Prepayment
This is a wonderful option if you receive regular bonuses or
if your income fluctuates throughout the year. With a pre-payment
privilege, you have the right to make payments toward the principal
portion of your mortgage over and above the monthly payments.
A mortgage with a pre-payment option is closed. An open mortgage
means you can pay the entire principal sum without notice of bonus.
Portability
If you still have time remaining on that fantastic loan you negotiated,
portability is one option you'll want to discuss with your lender.
Quite simply, it means transferring the balance of your current
mortgage at the existing rates and with the existing terms and
conditions, to your new home.
Assumability
Let's say that the vendor has negotiated a dynamite mortgage.
With an assumable mortgage you, the purchaser, simply assume the
obligations of the mortgage. This is a wonderful feature especially
if the terms are more favourable than the existing market conditions
would allow. Remember, when it is time for you to sell, you may
still be liable for any mortgage you allow the buyer to assume.
This means if the buyer stops making payments, you could be accountable
for the payments. Be sure to have the subsequent buyer approved
for the assumption of the payments, thereby avoiding this potential
land mine.
Expandability
If you need additional funds down the road, will your mortgage
terms allow you to increase the principal amount? Usually, your
new rate will be a blended amount of the initial mortgage rate
and the prevailing rates. It's a great option to discuss with
your lender if you foresee large expenses in your future like
renovation or education costs.
Open Mortgage
This type of mortgage offers a great deal of flexibility, as
it can be repaid in part or full at any time without penalty.
This is a great mortgage if you believe interest rates are moving
down or if you plan to move in the near future. The term may be
limited to six months or one year.
Closed Mortgage
Here the interest rate is fixed for the full term of the mortgage,
and you will have to pay a penalty to change the agreement conditions.
This type of mortgage is ideal for buyers who suspect that interest
rates will rise and who are not planning to move in the near future.
This type of mortgage is usually available in a wide variety of
terms.
Convertible Mortgage
With this mortgage, you'll enjoy the same peace of mind as a
closed mortgage, plus the flexibility to convert to a longer closed
mortgage at any time without penalty. If you think rates will
drop, this will allow you to wait until you feel they have hit
bottom, or if rates rise, you can lock in.
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