Choosing the right mortgage

(NC)—Mortgage options can be confusing for first time home buyers. Choosing what's right for you depends on a number of factors, including your comfort with interest rate risk and when you plan to sell your home.

“First time home buyers should sit down with a professional and ensure they know exactly what each mortgage option means to them,” says Chris Wisniewski, Associate Vice President, Real Estate Secured Lending, TD Canada Trust.

Wisniewski suggests some options to consider:

Fixed or variable rate?

When you take out a fixed rate mortgage, your interest rate will not change throughout the entire term of your mortgage. As a result, you'll always know exactly what your payments will be and how much of your mortgage will be paid off at the end of your term.

With a variable rate mortgage, your rate is set at the start of each month so it can change from month to month.

Short- or long-term?

The term is the length of your mortgage agreement, which usually ranges from six months to 10 years. Often, the shorter the term, the lower the interest rate.

Short term mortgages have a term of two years or less while long term mortgages' terms are three years or more. A short term mortgage suits a buyer who thinks interest rates will drop when their term is up. Buyers who believe that the current rates are reasonable and want to budget long term are often better suited to long term mortgages.

Open or Closed?

Open mortgages can be paid off at any time without penalty. Usually negotiated for very short terms with buyers who plan to make lump-sum payments, they often don't appeal to first time home buyers. However, if you plan to sell your home in the near future, you might consider an open mortgage.

Closed mortgages don't allow borrowers to pay back the loan before the maturity day without penalty. However, the interest rates for closed mortgages are often lower.

More information can be found online at

Carol Ireland

Carol Ireland

Sales Representative
CENTURY 21 Millennium Inc., Brokerage*
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