Fixed Rate vs. Variable Rate
In Ontario, Canada there are fixed rate mortgages and variable rate mortgages. So what is the difference? Fixed rate Ontario mortgages offer an interested rate that does not change. The interest rate you secure when you first sign your mortgage agreement is the interest rate you will have throughout the duration of the loan period.
Variable rate Ontario mortgages do not offer the same stability as fixed rate mortgages. Instead, the interest rate of a variable rate mortgage will rise and fall with the changes in the primes interest rate. With that being said, it is important for you to keep in mind that mortgage with the lowest interest rate may not be well suited for you ten years from now.
Before committing to anything, it is crucial to ask the mortgage broker about refinancing, and if there are penalties for making additional loan payments when you have extra money to do so. To determine the best mortgage rates Ontario for you, it is important for you to be informed about every aspect of the mortgage terms.
Open vs. Closed Mortgages
Before committing to a mortgage agreement, you need to know if it is an open mortgage agreement or closed mortgage agreement. You may be asking, what does this mean exactly? A closed Ontario mortgage is exactly as it sounds; the mortgage cannot be renegotiated or refinanced until the mortgages reaches full maturity.
While this sounds strict, it is not as cut and dry as it sounds. Most mortgage lenders will allow you to make a lump sum payment once a year up to a certain percentage of the mortgage, or increase monthly payments by a certain percentage without slapping you with fees. An open Ontario mortgage gives you the option to be prepared either part or the full amount of the loan before the terms of the mortgage are reached without charging you additional penalties.
If you were to try to pay a closed mortgage in full before the terms of the loan have been reached, the lender would charge your penalties and fees associated with the closing of the mortgage. The major downfall to an open mortgage is you are charged premium rates to secure the option to pay off your loan whenever you want.