What are the different types of mortgages?
Closed Mortgages
A closed mortgage is a less flexible option with likely penalty fees if you want to pay a large sum or the entire mortgage. With most closed mortgages, you pay a pre-determined interest rate, which is usually lower than the interest rate of open mortgages, over a pre-determined time frame.
Open Mortgages
While an open mortgage is considered to be the most flexible option, it does come with some fluctuation in interest rates. With an open mortgage, you can pay off a large sum or even the whole mortgage without penalty.
Hybrid Mortgages
A hybrid mortgage means that more than one type of mortgage is contained in one mortgage registration. This means that a single mortgage could contain a variable rate portion, a fixed rate portion, a line of credit portion or a mix of any of these.
Convertible Mortgages
A convertible mortgage gives you the choice to switch between the type of mortgage you have. You can start off paying an open mortgage and then switch to a closed mortgage at a later stage. This option offers more flexibility to change your mortgage to suit your financial situation at different stages in your life.
Reverse Mortgages
A reverse mortgage gives the option to convert your home equity into a lump sum or monthly payment for living expenses. There may be a pre-determined payback date to pay back this amount or the payment may be made whenever the homeowner wants to sell the home.
So, what type of mortgage is right for you?
There is no one size fits all answer to this question. We highly recommend talking to your financial advisor to assess what type of mortgage is best for your needs. If you need recommendations on professionals that we trust, we are more than happy to send you their information. Feel free to reach out to us here for more information.
