Are you new to mortgages? If so, we understand how complex the process can seem initially. Don’t worry, though. Our team of experts who specialize in Milton mortgages is here to help give you a quick rundown of three of the most popular types of mortgages to get you started!
Firstly, two of the most popular types of mortgages are fixed-rate mortgage and variable-rate mortgages. Each has their own benefits and each can be extremely useful. A fixed-rate mortgage is when a rate is locked in for the duration of the mortgage term, which is typically five years. This rate is locked in no matter if the general rate increases or decreases and is beneficial to people who want to pay a set amount each month and are anticipating a rate hike.
Variable-rate mortgages mean that your mortgage rate will change based on the fluctuation of rates in the market over the term of your loan. These are beneficial to people who are willing to take more of a risk and are anticipating rates to decrease over the term of their loan.
Secondly, a conventional or high-ratio mortgage is seen in residential mortgages. A conventional mortgage happens when a homeowner is able to pay over 20% of the price of a home purchase. This kind of mortgage does not require mortgage insurance.
A high-ratio mortgage is used when a homeowner cannot put more than 20% down on a home purchase. It is the opposite of a conventional mortgage, and the smallest down payment you can do with this type of mortgage is 5% for homes that are $500,000 or less. After this, the amount increases to 10%. This kind of mortgage could end up costing more in the long run and insurance costs may also be higher.
Lastly, homebuyers have the option of an open or closed mortgage. An open mortgage means that a buyer can put any amount of money towards the payment of their mortgage at any time throughout the term of the loan. Mortgages that are fully opened may not be as common as a closed mortgage because it allows the buyer the option to pay off their mortgage at any time as opposed to simply making set monthly payments for the duration of the loan.
A closed mortgage is the exact opposite of an open mortgage, meaning homeowners can only put a payment toward their mortgage when they are supposed to. This type of mortgage usually has a lower rate.
If you’re looking at purchasing a home and are in need of a mortgage, this should help give you an idea of the options that are at your disposal. Of course, speaking with a professional who specializes in Milton mortgages can give you additional benefits that can help save you thousands of dollars in the long run.
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