More options = more confusion. But not with Alberta Mortgage

There are a variety of financing options available to home buyers/owners today that did not exist a generation or even a year ago. Alone, navigating one's way through the selection of similar but VERY different home financing alternatives can be difficult and can lead to costly mistakes. Therefore, before setting out on your quest for home financing (whether with the help of a qualified mortgage broker or on your own) it is important to learn at least a little about your available home financing alternatives.

Just as in any other domain, knowledge is power when selecting an appropriate home financing alternative. By understanding the differences between many of the existing home financing products, you can help yourself avoid the complications and/or costs that can be associated with a product that does not accurately reflect your needs --both today and, and those in the future. In the following discussion, we will explain some of the differences between existing home financing products, and illustrate when and form whom they are best suited. Should you have any questions or concerns after or while reading the selection, please contact any one of the qualified mortgage professionals at Alberta Mortgage.

Fixed Rate Mortgages vs. Variable/Adjustable Rate Mortgages
With a fixed rate mortgage, the interest rate and payment amount quoted on the mortgage documentation will remain the same for the life of the mortgage term selected by the borrower. In contrast, variable rate mortgages (sometimes referred to as adjustable rate mortgages) are not fixed in terms of payment amount or interest for the term selected by the borrower. In a variable rate mortgage, the interest rate paid by the borrower is set against the Prime interest rate dictated by the Lender (bank, trust company, credit union, etc) at the begining of every month. Should the Prime rate move up or down, the borrower's payment and interest rate would accordingly move upwards or down to reflect the new rate. While variable rate mortgages carry greater risk (should interest rates rise dramatically), they can be attractive because the Prime interest rate often falls below existing fixed interest rates. As a result, payments and interest costs can be lower for entire term of the mortgage with a variable rate mortgage. With the help of a mortgage broker you can learn more about the difference between the two options, and determine which will best meet your needs.

Open Mortgages vs. Closed Term Mortgages
An open mortgage functions just as you would imagine; the terms dictated in the commitment(mortgage documents) will remain indefinitely, until the mortgage is paid out in full. With an open mortgage, the borrower is generally able to pay off the entire mortgage at any time without paying any additional penalties. A closed term mortgage is different because its terms(interest rate, payment/pre payment priveledges, options, etc.) are only valid for the length of the mortgage term. In addition, closed term mortgages have payout penalties for paying off the mortgage before the chosen mortgage term has expired. While an open mortgage may seem attractive initially, closed mortgages generally have lower interest rates attached to them, as well as portability(move mortgage to another house if you sell the one with the mortgage). With the help of a qualified mortgage broker, you can learn more about the difference between these two mortgage types and determine which will best meet your needs.

Mortgage vs. Secured Line of Credit
Simply put, a Mortgage works like a car loan, whereas a Secured Line of Credit works like a credit card. With a Line of Credit, borrowers are able to take equity back out of the home after making payments on the line similar to any credit card. In addition, LOCs often allow for the borrower to make interest only payments as opposed to higher, principal and interest payments, and can also be paid out in full at any time without any penalty. However, while LOCs provide attractive incentives, they often have higher interest rates, and generally require a down payment or existing equity of 25% of the value of the house. In contrast, mortgages are available with the best rates with as little as 0% down payment. Mortgages are able to arrange for both mortgages as well as secured lines of credit, and can assist you in selecting the alternative (or combination of both) that will best meet your needs. Should you have any questions or concerns, feel free to contact one of the mortgage brokers at Alberta Mortgage or apply online today.

Keep In Mind
All home financing products are not equally suitable for all borrowers. While most mortgage lenders have designed products in order to help borrowers own real estate, not all financing products provide equal benefits for all types of borrowers and their particular lifestyle of situation. It is important to fully understand the terms and conditions of the mortgage loan, line of credit or any other financing product you find yourself using. Mortgage brokers are specifically trained to not only find the product(s) that will best meet your needs, but to also communicate the details of the arrangement and answer any questions you may have. For more information regarding this page or any other financing related inquiry, please contact any one of the qualified mortgage brokers at Alberta Mortgage or apply online today.