Mortgage Types

The Different Mortgage Types Defined

There are several types of mortgages to help suit your needs. In order to select the best
mortgage for you, it’s important to research each one carefully before making your decision.
Note: some mortgage types require you to add insurance which will impact your monthly rate
and percentages may vary on what institution you choose to get your mortgage through.

Conventional / Low Ratio Mortgages

A mortgage where the down payment is equal to roughly 25% of the property’s value/purchase
price. Conventional or Low Ratio mortgages are typically the most popular mortgage plan.

High Ratio Mortgages

A mortgage where the borrower is contributing less than 25% of the value/purchase price of the
property as the initial down payment, increasing the monthly . Purchasing insurance is a
common way of qualifying for a mortgage when you have less than 25% equity.

Open Mortgages

A mortgage which allows you the flexibility to repay the mortgage at any time without penalty.
Open mortgages usually have shorter terms, but can include some variable rate/longer terms as
well. Mortgage rates on Open Mortgages are typically higher than on Closed Mortgages with
similar terms.

Closed Mortgages

A mortgage agreement that cannot be prepaid, renegotiated or refinanced before maturity, there
may be exceptions which will be listed according to its terms.

Fixed Rate Mortgages

The interest rate of a fixed rate mortgage is determined and locked in for the term of the
mortgage. Lenders often offer different prepayment options allowing for quicker repayment of the
mortgage and for partial or full repayment of the mortgage.

Variable Rate Mortgages (VRM) / Adjustable Rate Mortgages (ARM)

These mortgages differ from a fixed rate mortgage in that the mortgage rate may be changed
during the term of the mortgage by the lender’s discretion. Generally, these mortgages are
initially set up like a standard loan, based on the current interest rate. The mortgage is reviewed
at specified intervals and if the market interest rate has changed, either changing the size of the
payment or the length of the amortization period (or a combination of both), the lender then alters
the mortgage repayment plan.

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