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Mortgage Lenders in Ottawa – What Prospective Home Buyers Should Know About Mortgage

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Buying your first home is an exciting but overwhelming process. One of the major steps in buying a home is getting a mortgage. Most prospective homeowners need a mortgage when buying a home. Knowing about mortgage and the options available can help home buyers in making the right choice when selecting the type of mortgage that suits their needs. Prospective homeowners in Ottawa can consult mortgage lenders who can assist them in making the right decision. Here are a few things you should know about mortgages before you go to your mortgage lender.
 

Types of Mortgage

 
There are two types of mortgages – open and closed. Open mortgages offer more flexibility in allowing you to make prepayments, enabling the homeowner to pay off the mortgage faster. On the other hand, in a closed mortgage, the mortgage lender may have a set number of prepayments you can make in a year without any additional costs. However, if you want to make extra prepayments, there may be a prepayment charge.
 
Another notable difference between the two types of mortgage is that an open mortgage generally has a higher interest rate than a closed mortgage.  
 

Amortization Period

 
The amortization period is the time it will take to pay off a mortgage. Currently, the longest amortization period a mortgage lender can offer is 25 years. A longer amortization period means lower mortgage payments; however, a shorter amortization that is affordable can enable you to pay off the mortgage faster and save money in interest.
 

Mortgage Term

 
A mortgage term can be for up to 10 years. It is the time period that the mortgage agreement, and interest, will be in effect. There are short-term, long-term, and convertible mortgages. In a short-term mortgage, the term is over sooner, and you can renegotiate with your mortgage lender or shop around and go with another lender without paying any prepayment charges. In a longer term, you can lock in the interest rate. Mortgage lenders may offer a convertible mortgage term in which a shorter term can be converted to a longer term. The interest also gets converted to that of a long-term rate.
 

Interest Rates

 
Mortgage lenders offer fixed, variable, or hybrid interest rates. In a fixed interest rate, the mortgage payment remains the same, whether the interest rate increases or decreases. In a variable rate, the interest rate varies with the fluctuation in the Bank of Canada interest rate and this affects the mortgage payments. Hybrid interest rates are part fixed and part variable. This offers partial protection in case interest rates increase. In addition, hybrid interest rates have different terms for each portion – the variable portion may be a shorter term than the fixed.
 

Other

 
Some of the other important criteria to consider are the down payment, mortgage insurance, payment frequency, and additional costs that may be associated with a mortgage.
 
Knowing the basics about a mortgage can assist you in going to the right mortgage lender for your home financing needs. Mortgage lenders can help prospective home buyers in Ottawa select the right mortgage product that is affordable and meets their long-term goals and current requirements.  

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