Michelle Dolenc, First Calgary South Trail branch manager.
Photograph by: Paula Trotter , For Neighbours
Paula Trotter, For Neighbours
Mortgages are not one size fits all. There are numerous choices to help you build a mortgage that’s best for you.
“We really tailor a mortgage to a person’s needs and to what fits their lifestyle,” says Michelle Dolenc, First Calgary Financial South Trail branch manager.
Conventional vs. high-ratio
If you’re putting down less than 20 per cent of the purchase price of the home, you’ll have a high-ratio mortgage, which must be insured.
A conventional mortgage requires a down payment of at least 20 per cent.
Remember, the minimum down payment you’re required to make is five per cent.
With interest rates at an all-time low, Dolenc says there is no benefit in renting while trying to save for that 20 per cent.
Open vs. closed
An open mortgage gives you the flexibility of paying down as much as you’d like at any time and is most suitable if you’re expecting a large sum of money to come in. However, interest rates are generally higher, she adds.
Most first-time homebuyers opt to make consistent payments through a closed mortgage.
First Calgary allows individuals with closed mortgages to make additional payments of up to 20 per cent of the original mortgage amount, without penalty, per calendar year.
You can choose between a six-month- or one-, two-, three-, four-, five-, seven- or 10-year term with a closed mortgage.
Six-month and one-year terms are available for an open mortgage. The longer the term, the higher the interest rate, although the difference is currently negligible between three and five year terms — 2.79 per cent to 2.95 per cent, respectively.
When choosing a term, it’s important to ask yourself how long you plan to stay in the home.
Even if you’re in for the long haul, Dolenc recommends choosing a term that takes advantage of future life changes.
“It’s really important to think about your cash flow,” says Dolenc, noting if you’re paid on a semi-monthly basis, you may want to consider making semi-monthly mortgage payments.
You must also factor in your expenses. Weekly, bi-weekly, semi-monthly or monthly mortgage payments are available.
Fixed vs. variable
A fixed interest rate will stay the same for the duration of your mortgage term, whereas a variable interest rate will fluctuate based on market conditions.
People may be more willing to gamble with variable when interest rates are high. But seeing as they’re at a 50-year low, Dolenc suggests locking in with a fixed interest rate.
PLANNING FOR THE FUTURE
How does buying a home fit into your future goals?
This is another important question that Dolenc suggests you consider when purchasing your first home — and plan for with the guidance of your personal banker.
“It’s not just about your immediate needs, but also your future needs,” she says. “We’ll help you implement your next goals into your cash flow
Read more: http://www.calgaryherald.com/Part+Mortgage+types+regulations/8322839/story.html#ixzz2SFJ6uVtv