Learn about Mortgages

All mortgages are of two basic types:

CONVENTIONAL:

The buyer can borrow up to 75 percent of the value of the property or the purchase price, whichever is less. The buyer has to pay 25 percent down payment.

INSURED OR HIGH - RATIO:

Under certain qualifications, some lenders will allow a buyer to borrow up to 100% of the property value or purchase price of the property, whichever is less. In most cases, however, a buyer must have 5% downpayment, plus 1.5% for "closing costs". This program applies strictly to owner-occupied properties.

MORTGAGE OPTIONS

You can choose any of the following mortgage options which fit into the two mortgage types. Lenders may even customize these options to suit your needs.

First Mortgage:

Usually the only financing required.

Also gives borrowers the best rate of interest.

Second Mortgage:

A higher interest loan that provides borrowers with additional financing if their first mortgage does not meet their total financial requirements.

Open Mortgage:

This allows borrowers to repay all or part of the total amount of their mortgage at any time without incurring a cash penalty. Because of flexibility, this is ideal for borrowers who plan to sell in the near future or who want to switch from a short term mortgage to a longer term when rates fall, or for situations where a large sum may be available to reduce the balance in the near future. Rates are usually somewhat higher than a closed mortgage.

Closed Mortgage:

Usually the lowest interest rate available, but lacking the flexibility of other mortgages. This is a good choice for those who want the security of a fixed payment, over a longer term. Repayment options are available but they are subject to conditions. Prepayment of 10-20% of the original amount is usually allowed each year without penalty.

Portable Mortgages:

This mortgage offers flexibility. With consent of the lender, borrowers can take their existing mortgage to a new home.

This is an attractive option if the rate on the existing mortgage is lower than current rates.

Assumable Mortgages:

With consent of the lender, this mortgage allows a subsequent buyer to take over the mortgage without penalty to the original borrower.