An adjustable-rate mortgage has an adjusting interest rate, which fluctuates based on changes in the market and to the prime lending rate. Your interest rate can go up, or it can go down, and the amount you pay each month will adjust accordingly.
Bad Credit Mortgage
A bad credit mortgage is a specialized mortgage agreement designed for people with low credit scores. Usually, they come with a bigger down payment amount and a higher interest rate.
A commercial mortgage is a loan for a commercial property. Compared to residential mortgages, commercial mortgages typically feature lower loan-to-value ratios and higher interest rates.
First-Time Home Buyers
First-time home buyer (FTHB) is both a legal and industry-specific term, referring to someone buying a home for the first time in their life. First-time homebuyers can take advantage of several government initiatives—including the GST/HST Housing Rebate, Home Buyers’ Plan, FTHB Tax Credit, and the FTHB Incentive—to help them secure a mortgage.
Unlike an adjustable-rate mortgage, a fixed-rate mortgage does not have a floating interest rate. Instead, the rate is agreed upon at the outset of the mortgage terms, and it stays the same throughout the period of the agreement.
Home Equity Line of Credit
A home equity line of credit (HELOC) is a form of credit based on the equity of a home. It is a revolving credit: You can withdraw money, pay it off, and keep taking out more, so long as you do not exceed your credit limit.
HELOCs can be combined with a mortgage, a standalone product, or even used as a substitute for a mortgage.
Investment Property Mortgage
An investment property mortgage (also known as an income property mortgage) is a mortgage taken out on a property that’s intended to provide some form of cash flow, often by renting it out. Vacation homes, tenements, and bed and breakfasts are all examples of such types of property.
A mortgage broker is a third party that connects mortgage lenders with mortgage borrowers. A broker does not sell mortgage products but instead acts as a mediator so that borrowers can find a suitable lender for their financial circumstances.
A mortgage rate is the rate of interest charged on a mortgage’s principal balance. There are three different types of mortgage rates: adjustable-rate, fixed-rate, and variable rate.
Refinancing allows consumers to replace their original mortgage with a new one. The money taken out on the second one is used to pay off the first, and the remainder is freed up for whatever purpose the borrower may have in mind: home renovations, big purchases, education, or other investments.
A mortgage renewal occurs when a mortgage agreement reaches the end of its term but still has an outstanding balance. The lender will usually ask the borrower to agree to the same conditions as the original agreement, but this is not always in the borrower’s best interests. When renewing a mortgage, it often pays to try to renegotiate and seek better mortgage terms.
Lenders often have exclusive mortgage products for newcomers to Canada. These are called new-to-Canada mortgages, and they usually feature a low down payment amount and a more extended amortization period.
Despite the name, a pre-approved mortgage isn’t a mortgage per se. Rather, it is a statement by the lender that you qualify for a specific loan amount. Getting pre-approval is a great way to know how large of a loan you can take out and start weighing your options.
A purchase-plus-improvements mortgage is for someone who wants to buy a home and make improvements to it. The purchase-plus-improvement mortgage factors the price of home improvements into the amount of money borrowed, allowing the borrower to start renovating immediately.
A reverse mortgage allows the homeowner to take out a loan secured by the value of their property. It gives consumers a way to access their equity without having to sell their home, making it particularly useful for seniors who are looking to retire.
A second mortgage is an additional mortgage taken out on the same piece of property. It is subordinate to the original mortgage, and it usually comes with a higher interest rate than the first.
Like an adjustable-rate mortgage, a variable-rate mortgage has a floating interest rate, which varies according to fluctuations in the market.
But unlike an adjustable-rate mortgage, a variable-rate mortgage will always require the same payment amount each month. Your payments will stay the same, no matter what happens to the prime lending rate. What will change, however, is the length of time you will need to pay off the loan. If the prime rate increases, you’ll need more time to pay off the loan. If it decreases, you’ll pay it off sooner.