You should never be afraid to ask when there’s something that you don’t know about how the home buying process in Canada works. Many folks don’t understand the mortgage types they can choose from when they first start out on the journey and of course there’s no shame in that. It’s a great idea to understand the waters you’re getting into including the mortgage requirements so the process goes more smoothly.
Basically, there are a few different mortgage types you’ll need to sort through so you can make the decision that works for you.
Fixed Term Mortgages
Like the name implies here, these are the products that have the same interest rates throughout the term so the payments stay the same. When the rates have been low for a while, it’s always a good idea to take a long term fixed rate mortgage as protection against the inevitability of rising rates. The fixed rate product is also a good idea when you’ve bought that first home and need to budget and get used to the new payment you need to make.
The Adjustable Rate Mortgage
This is the route you’ll want to take when the rates are on their way down. The idea here is pay less interest and more on the principal so technically the house you’ve bought gets paid off faster. Typically this is a good choice when you have the ability to keep an eye on the interest rates so you can lock in when it appears the numbers are heading upward.
Don’t forget you’ll need to get preapproved right from the start. This is where the lending institution you’re thinking about getting the money from will take a serious look at how your finances stack up against the benchmarks they use as mortgage requirements.
