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Different types of Ontario mortgages

Conventional Ontario mortgage or Ontario mortgage conventional

An Ontario mortgage that does not require a mortgage default insurance fee. Typically this is a mortgage Ontario loan which is 75% or less of the purchase price or property value. The good? By having a large down payment, you can save thousands of dollars in insurance fees. The bad? When you sell there will be less buyers eligible to ‘assume‘ your Ontario mortgage because they may not have enough of a downpayment.

Non-conventional 1st Ontario mortgage or ‘first’ Ontario mortgage non-conventional

An Ontario mortgage that is used when you need Ontario lender financing which is greater than 75% of your house purchase or property value. This can also be called a ‘high ratio’ Ontario mortgage when it is a refinanced ‘first’ Ontario mortgage. The good? It allows people who don’t have large down payments the ability to buy a house. They do this by using mortgage default insurance. (See CMHC or GE Capital below). Another good? It allows you to refinance your house beyond its 75% appraised value so you can access your equity and get cash out! This allows people that are loaded up in other high interest debt (credit cards) or high loan repayments (car loans) the ability to payout these debts and conserve family cashflow. The bad? The benefit of ‘insuring’ an Ontario mortgage default costs a lot in premium costs - but, thankfully, this can be added to the ‘first’ mortgage Ontario loan. The cost is minimized if the real estate market is rising or stable as it allows people to buy real estate today - rather than waiting years to save up more of a down payment.

Ontario mortgage Second or Second Ontario mortgage (Ontario home equity loan)

An Ontario mortgage second or second Ontario mortgage (also called a Ontario home equity loan) is usually a non conventional mortgage Ontario loan. Often it is used when Ontario mortgage financing exceeds 75%. This is usually made available through private Ontario lenders rather than institutional Ontario lenders. A private Ontario second mortgage or Ontario mortgage second is used with your mortgage Ontario first priority. Your personal Ontario mortgage broker will advise you when this makes sense. The good? Sometimes, your current down payment amount available PLUS a new Ontario second mortgage allows you ’enough’ of a down payment to qualify for a non conventional purchase. You can then avoid paying mortgage default insurance altogether. And that can save you thousands in default mortgage insurance premium dollars. Also, an Ontario mortgage second or second Ontario mortgage (Ontario home equity loan) will allow you to access your cash in your home equity. This allows you to improve your monthly cash flow by paying off other higher interest debt (credit cards) AND other debt that has high monthly payments (car loan). Also there is no default insurance payable when you obtain a private Ontario mortgage second or Ontario home equity loan as the lenders are private and do not charge an insurance fee. The bad? Second mortgages always have a higher interest rate cost than a first mortgage because there is a higher perceived risk by the lender with the borrower.

CMHC or GE Capital

Mortgage Insurance companies licensed by the Federal Canadian Government to provide mortgage insurance for Ontario lenders. This insurance protects Ontario lenders against default by borrowers. The insurance is usually added to the mortgage Ontario loan. The good? This insurance enables many more buyers to enter the market which keeps housing demand strong. It allows people to be able to buy with a low down payment. The bad? Premium rates range from 0.5% to 3.75% or more of the mortgage Ontario loan balance.

‘Open’ Ontario mortgage or a ‘Closed’ Ontario mortgage

An open Ontario mortgage has terms from 6 months to 1 year This is an Ontario mortgage in which you can prepay all, or part of the original balance without penalty. The good? You can save usually 3 months interest charge penalty or more for the entire Ontario mortgage balance. This is helpful if you plan to pay down your mortgage Ontario loan with a large sum, or the entire balance of your Ontario mortgage in a short period. The bad? Ontario lenders charge higher rates than for closed terms because of this convenience. Here is a helpful tip from your personal Ontario mortgage broker. If rates are going up…and you are moving…get a closed term Ontario mortgage. You can ‘port’ your current Ontario mortgage to your new place.

A closed Ontario mortgage has terms from 6 months to 10yrs. The good? The rates are lower than ‘open’ mortgage Ontario loans. The bad? You need to be careful to pick a term that suits your needs. Your personal Ontario mortgage broker can explain to you the risks of not choosing a term that suits your needs. You may be faced with a large penalty if you try to prepay too much or try to switch your Ontario mortgage to another Ontario lender in the middle of your term.

ARM Ontario mortgage or Variable Ontario mortgage

The ARM (Adjustable Rate Mortgage) or Variable rate Ontario mortgage is all about the ‘rate’ charged with your mortgage Ontario loan. Instead of a ‘fixed’ rate the rates fluctuate. These variable Ontario mortgages can be either open or closed. Terms are from 6 months to 5yrs. Rates fluctuate with prime, usually monthly but can be every few months. Variable mortgage Ontario loans have been historically extremely popular. The good? Ontario mortgage rates are as much as 2 or 3% below the 5 year fixed rates. This can save you up to $200 or more interest per month on a $100,000 Ontario mortgage. The bad? You will pay a penalty if you want to pay it off early or switch lenders. Or you may find yourself chasing headlines when prime rates rise. Ask your personal Ontario mortgage broker for advice on obtaining the best variable mortgage Ontario loan. The good? Most Ontario lenders will let you convert to a fixed rate, closed term, without penalty. If you are lucky you can save tens of thousands off the principal and interest. This will take years off your amortization on your Ontario variable mortgage.

Portable

First a disclaimer. No Ontario mortgage or mortgage Ontario loan is portable. It is the rate and term that are portable. If you move to a new place and want to take your Ontario mortgage with you, you will need a new Ontario mortgage with the same rate, term, and amortization that was left on your old place. The good? The benefit of a portable mortgage is that you may keep your low rate and not have to pay CMHC or GE Capital fees again. The bad? You will have to re-apply - even if you are staying with your present Ontario lender. And, you will still owe a ‘pound of flesh’ as you will have to pay legal fees.

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