When choosing what mortgage would best fit your financial needs, the most important tool at your disposal is a mortgage calculator. A mortgage calculator is a program available on the websites of all of these banks and many others. This tool enables the user to quickly determine the financial implications of changes to variables in a mortgage financing arrangement. The major variables include loan principal balance, periodic compound interest rate, number of payments per year, total number of payments and the regular payment amount. Prior to the availability of this software, borrowers wishing to understand the implications of changes to these variables had to turn to compound interest rate tables. These tables require a working understanding of compound interest mathematics. Mortgage calculators make answers to questions regarding the impact of changes in mortgage variables available to everyone.
The two primary mortgages RBC offers is a simple fixed rate mortgage and a variable rate mortgage. Neither type of mortgage is best for everyone: each one has distinct differences that serve of needs of different borrowers. A fixed rate mortgage has a rate that is locked-in over the term. The upside of a fixed-rate mortgage is that the holder of the mortgage will know exactly how much his or her payment will be every week or month in order to pay off the mortgage in its entirety at the point of its amortization. The downside of a fixed rate mortgage is that RBC will charge a higher interest rate than a mortgage with a variable rate. A mortgage with a variable rate charges interest rates that vary according to the Prime Lending Rate. Though the rate on a variable mortgage moves with the Prime Rate, its relationship to the Prime remains constant. Like a fixed-rate mortgage, the payments remain the same. But the final payment on your mortgage changes with the fall and rise of the Prime Rate. If the Prime Rate falls, more of your payments will go towards paying down your mortgage’s principal balance. But if the Prime Rate goes up, less of your payments will go towards paying down the principal and more to serving interest costs. Another factor to consider when shopping for a mortgage is whether to choose a mortgage that is open or closed. The interest rate on a closed mortgage is generally lower than on an open mortgage. However, if the purchaser chooses to renegotiate for a lower rate at the end of a term or pays off the mortgage prior to the end of the term or date of amortization, there will be charges and fees levied. An open mortgage on the other hand allows its holder the option to renegotiate rates. Open mortgages can also be paid in part or in full at any time without any charges. This mortgage may be appealing to those looking to pay off their mortgage in the near term. Yet given the potential loss the bank may face from the mortgage being paid off more quickly than expected, these kinds of mortgages typically carry higher interest rates than closed mortgages. In the case of RBC, the interest rate for an open Fixed-Rate Mortgage with a term of one year is 6.3%. Aside from open and closed mortgages, convertible mortgages are also an option. A convertible mortgage is a closed mortgage that allows the holder to change the length of the mortgage’s terms at any time without any charges or fees.
A unique mortgage product offered by CIBC is the Better than Posted Mortgage. This product provides guaranteed rate reductions on posted CIBC rates. The holder of this mortgage can repay up to 10% of the mortgage balance every year, which lowers all future interest payments. CIBC also offers Open Fixed-Rate Mortgages. These are available for terms of 6 months and one year. The interest rate on this type of mortgage is 6.3% on a mortgage with yearly terms versus a closed rate mortgage with an interest rate of only 3.09%. Perhaps the most financially attractive product CIBC offers is the Variable Flex Mortgage. Although this mortgage requires that its terms have durations of five years, the interest charged during these terms is only 3%. In addition, the holder can make prepayments on his or her balance of up to 20%. Finally, there is the option of converting this mortgage into a closed fixed rate mortgage with a term of 3 years.
TD Bank offers a variety of different types of fixed rate mortgages as well as variable ate mortgages. Aside from conventional fixed rate mortgages, a fixed rate mortgage at TD can come as a six-month convertible mortgage. As a kind of closed mortgage, the interest rate will remain fixed for this mortgage for six months. However, the holder of the mortgage can renegotiate a lower rate at the end of its six-month term at no additional cost. The maximum share of the mortgage principal that can be repaid per year is 15%. TD offers both open and closed variable rate mortgages. The payments made to pay down a TD open variable rate mortgage can be increased to any amount over the term without any charges. However there are fees for fully paying it down within the first 2 years. TD Bank does offer a closed variable rate mortgage but it is only available for 5-year terms. Like an open variable rate mortgage, the interest rate is set on the first day of each month. The maximum share of the principal that can paid be off each year on this type of mortgage is 15%. The greatest advantage of TD’s open and closed variable interest rate mortgages is that they requires a down payment of as little as 5%. All other mortgage products offered by TD require a down payment of no less than 20% on the value of the mortgage. Unique to TD, the bank also offers a CashBack Mortgage. When purchasing this kind of mortgage, TD will give the borrower the cash equivalent of 5% of the value of the mortgage. The larger the mortgage, the greater the cash offer. The rate on a CashBack mortgage is fixed for their term.
Closed fixed rate mortgages offered by Scotiabank require a prepayment of 15% but allows the borrower to make payments of up to 15% on the mortgage principal every year. Scotiabank also provides flexibility when paying down your mortgage. If it is not financially possible to make a mortgage payment at the specified date, the mortgage’s holder can miss a payment as long as he or she has matched the payment previously in their term. A special variable rate mortgage Scotia offers is the Ultimate Variable Rate Mortgage. Unlike other variable rate mortgages where the borrower is vulnerable to possible future increases in the Prime Rate, the rate on UVRMs cannot go higher than Scotia’s cap rate. The cap rate equals Scotia’s 3-year posted rate at the time of the mortgage’s origination. In addition, the borrower has the option of converting this mortgage into a closed fixed rate mortgage at any time with a term of three years or longer. Below are the terms and rates available for Scotiabank’s variable rate products:
BMO offers fixed and variable mortgages that are both open and closed. This bank’s most popular product is the 5 Year Fixed Low Rate Mortgage. It allows the borrower to exceed their regular payments by 10% as well as make payments equal to 10% of the mortgage principal every year. The amortization on this mortgage can be 25 year or less. BMO’s website also offers a direct comparison between different mortgages of the same terms. These mortgages can also be used a source of credit. Under BMO’s Homeowner ReadiLine, the borrower can access a line of credit of up to 80% of the value of their mortgage after making a 20% down payment. As you pay down more of the mortgage, your credit limit grows and so does your access to funds. Because this is a revolving credit account, there is no deadline to repay the principal, only the interest. For a more conservative financing mechanism, there is the Homeowner’s Line of Credit. This is a line of credit with a term of repayment for both the interest and the principal amount that is being borrowed against the value of mortgage. Up to 65% of the value of the mortgage can be accessed as a loan, less what you owe on your mortgage’s principal.
Whatever type of mortgage is chosen at whatever bank, there are additional costs that borrowers should be aware of when purchasing a mortgage. Some of these are mandatory while others are optional. These include: The home inspection fee. This is for a home inspector to evaluate the structure and systems that make up your home and provide a written report. Real Estate Appraisal: A property valuation fee goes towards measuring the market price of the mortgage you are acquiring if it was sold at an auction. The Land Transfer Tax: This tax is levied whenever property changes hands. Nearly every province in Canada charges this tax and some cities also levy municipal transfer taxes. GST/HST: Sales taxes are generally applied on the purchase of new homes but not on resale properties. Default Insurance: For borrowers interested in purchasing a mortgage with a down payment of less than 20%, one must purchase insurance. This is a one-time payment (between 0.5% and 2.75%m of the mortgage principal) that can be paid at the time of origination or added to the principal amount. Mortgage Life Insurance: This product protects the financial security of your family in the event of premature death by you or your spouse. This can be paid by attaching it to your regular mortgage payments. Title Insurance: In the event of conflicts arising over the issue of ownership, such as encroachment, existing liens against the property’s title, title fraud or other issues arising from previous owners of your mortgage, this insurance will cover legal costs.
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