Your home is likely to be the biggest purchase of your life, and a mortgage (also called a home loan) your biggest financial commitment. Choosing the right home loan and repaying it quickly can save you thousands of dollars. It can also free you up to achieve other goals faster.
Tips for getting a mortgage
Tip: Choosing the right loan and repaying it quickly can save you thousands of dollars.
You’ll probably look at many properties before you find the home you want. It pays to be just as careful when choosing your home loan.
- Shop around for the best mortgage – you’re under no obligation to go with your regular bank.
- Negotiate – for example, another bank may offer a better rate on the condition that you switch your everyday and savings accounts to them.
- Mortgage brokers deal with a number of lenders, so they can save you time shopping around.
- Don’t over-commit – that 95% loan may sound great, until you come to pay it off.
- Only borrow what you need – some lenders may try to tempt you into borrowing more.
- Make your repayments as high as you can afford – the sooner you pay off your mortgage, the less you’ll pay in interest.
- Beware of ‘revolving credit’ – your home is not an ATM! – this type of loan requires a lot of discipline.
Should I get an open or closed mortgage rate in Alberta?
Open and closed mortgages vary both in their interest rates and their terms and conditions. Open mortgages often have higher interest rates, but allow borrowers to make changes to their mortgage payments without restriction. An open mortgage also allows borrowers to make unrestricted lump-sum payments to reduce the principal of their mortgage.
Closed mortgages generally have lower interest rates than their open counter parts. They are the more popular choice in Alberta. You can usually make some increases to monthly payments, or make lump sum payments, however the amounts are restricted and penalties for overpayment will apply.
What is the difference between a variable vs. fixed mortgage rate in Alberta?
Variable mortgages have lower rates than fixed mortgages at the beginning of the mortgage term. Variable interest rates will rise or fall over the term of the mortgage contract because their interest rates are tied to prime.
Fixed mortgages offer the stability of a set mortgage rate for the entire mortgage term. This stability is attractive to many homeowners who rely on the predictable mortgage payments for household budgeting. Historically, 66% of all mortgages in Alberta are fixed.