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Mortgage Types



 

Mortgage Information 

A FIXED RATE MORTGAGE provides a set interest rate over the term of the mortgage, while a VARIABLE RATE MORTGAGE has an interest rate that will fluctuate during the term. Fixed rate mortgages are the most popular type of mortgage. You benefit from the security of locking in your mortgage interest rate, for lengths of time ranging from 3 months up to 25 years. The rates are slightly lower than for an OPEN MORTGAGE for the same term. Let’s be honest, Variable (Adjustable) Rate Mortgages are hot. With interest rates being at rock bottom the past few years, many consumers have saved a lot of money by having a variable rate mortgage. Variable rates are usually based on the lender’s prime rate, meaning that your rate goes up when the prime rate goes up.

Most variable rate mortgages start off at a peculiarly low interest rate that is called a teaser rate. This low teaser rate actually makes it easier to qualify for the mortgage. Another benefit of an adjustable rate mortgage is that some offer an option to change the mortgage into a fixed-rate mortgage.

Mortgage lenders now offer several hybrid mortgages that combine the features of an adjustable rate mortgage and a fixed-rate mortgage. They provide customers with some of the security of a fixed-rate mortgage at lower interest rates. Some of these mortgages are fixed at one interest rate for several years then convert into an adjustable rate mortgage. Some are fixed to one interest rate for a term then are fixed to another for the remainder of the mortgage.

CLOSED MORTGAGE - A Closed Mortgage limits your ability to pay off your mortgage early, whereas an OPEN MORTGAGE gives you the option of paying off your mortgage in full at any time . An Open Mortgage allows you to pay off part or the entire mortgage at any time without penalties. Open mortgages usually have short terms of six months or one year. The interest rates are higher than those for closed mortgages with similar terms.
 


 
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