Fixed rate mortgages can range in years from 1 to 10, each one can have different features and amortization but in the end the desired result is to know exactly what you will be paying for your mortgage for the desired amount of time.
Fixed rate mortgages are by far the most popular by consumers in today’s markets. Two things have contributed to their popularity. One being today’s rate are at historical lows and second being a rule change by the insuring companies and the government that if you want to qualify with a lower rate you must take a 5 year fixed mortgage.
If you are taking a fixed rate mortgage you need to be aware of the features that come with it. Sometimes the features are reduced to give you a better rate or the penalties have been increased if you have to break the mortgage. One of the best features is that in most cases you can make lump sum payments to the account throughout the life time or term of the mortgage. These lump sum payments can run from 10% to 20% depending on the lender. This allows you to pay down the principle of the mortgage without incurring any penalties and therefore pay it off sooner.
Penalties on a fixed rate mortgage may vary as well and the longer the term the bigger that penalty might be in the event you need to break the mortgage. Penalties on a fixed rate mortgage come in two forms, one being the 3 month interest and the second being an interest rate differential penalty, its important to check which is more likely to happen on your mortgage should you need to break the term. The interest rate differential can be a very expensive penalty especially if you have to break your mortgage in the early stages of the contract.
A fixed rate mortgage would most likely suit a first time buyer best, the reason being that most first time buyers are starting out and need to be aware of what their budget is each month and how much they will be paying. The fixed rate will be the same from day one until your last payment at renewal so not too hard to budget.
Our team at Brokers for Life is well versed in the fixed rate mortgage and will be sure to get you the features that you need in your mortgage in Edmonton.
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