Mortgages are loans that are used to buy homes and other types of real estate. Mortgages are available in a variety of types, including fixed-rate and adjustable-rate. Mortgage rates can vary widely depending on the type of product and the qualifications of the applicant.
What is a Mortgage?
A mortgage is a type of loan often used to buy a home, land, or other types of real estate. The property is the collateral to secure the loan. Generally, a mortgage is a large loan that is paid off over many years. A mortgage allows the lender to take possession of the property if you miss payments.
Mortgage Calculator
This calculator determines your mortgage payment and provides you with a mortgage payment schedule. The calculator also shows how much money and how many years you can save by making prepayments.
Fixed-Rate Mortgage
Fixed-rate mortgages provide a locked-in interest rate and payment amount, but the portion that goes towards principal versus interest varies from payment to payment – the amount going towards principal increases as you pay off more of your mortgage, while the portion going towards interest decreases. If rates increase, your fixed rate stays the same, giving you the security of a fixed payment for the term of your mortgage.
Open Mortgages
An open mortgage allows you to pay back your mortgage, in part or full, at any time without penalty. A closed mortgage, on the other hand, requires you to maintain the payment schedule for the entire term you select, but you’re able to pay back a larger part of the principal at a specific time.
Variable-Rate Mortgage
A variable-rate mortgage allows you to take advantage of changing interest rates while providing the convenience of a fixed monthly payment. If interest rates fall, more of your payment will be directed to reducing your outstanding mortgage principal. If rates rise, more of your payment will go towards paying interest costs.
Adjustable Rate-Adjustable Payment Mortgage
Like how a variable-rate mortgage works, an adjustable rate-adjustable payment mortgage allows you to take advantage of changing interest rates. However, instead of having a fixed monthly payment, the interest and principal payment amounts may fluctuate and are automatically adjusted each month based on our mortgage prime rate.
Lock & Roll Mortgage
Another variation of a variable-rate mortgage, a lock and roll mortgage allows you to take advantage of changing interest rates. Here, the interest and principal payment amounts may fluctuate and are automatically adjusted every 6 months based on our 6-month fixed rate, less a pre-established discount.
What is Mortgage Insurance?
Mortgage life insurance is coverage that you can purchase as a mortgage borrower. It’s designed to pay off or pay down the mortgage if you die. The insurance money payable under the coverage is always applied to the mortgage balance. Optional mortgage insurance products are life, critical illness and disability insurance products that can help make mortgage payments or can help pay off the remainder owing on your mortgage. This can help your family stay in their home, even if the primary income used to make the mortgage payments is no longer there.
Why Should You Avoid Mortgage Insurance?
Mortgage life insurance can be convenient to get at the bank when you’re arranging your mortgage. It may be easier to qualify for coverage than with personal life insurance. Mortgage life insurance also features an easy application process. Since mortgage life insurance is group insurance, this can result in lower premiums because the risk is spread out over a large group of people.
- Generally, you should avoid mortgage insurance because mortgage life insurance from most lending institutions is non-convertible term insurance
- No premium flexibility. You have no flexibility when it comes to premium payments
- No ability to move to a permanent life insurance policy if your needs change
- Usually mortgage life insurance covers the exact amount of your mortgage.
- Policy coverage decreases as the mortgage is paid down
- Coverage is lost when the mortgage is paid off
- Your lender owns the policy and if you find a better mortgage rate at another lending institution, you will have to re-qualify medically for the life insurance protection
- Your lender automatically pays off the mortgage if you die
- Your beneficiary has no choice about how to use the funds, at a time when funds may be required the most
- The cost per $1,000 of coverage generally increases every year
- When you think about it, costs may increase while coverage decreases
- Generally, most mortgage life insurance is underwritten at time of claim
- Mortgage life insurance cannot be moved to another institution
- You can not change if another company is offering a better product
