The types of mortgage you are able to obtain can get a little confusing. We will try not to get too complicated.
 
[I would highly suggest getting a mortgage broker in to explain these in detail. We are an agent for Mortgage Intelligence, so if you have any questions, please send us an email at leanne@skhomes4sale.com and we will have someone give you a call to answer any questions you have.]

Conventional vs High Ratio Mortgage

The first thing you need to know is the difference between a conventional mortgage and a high ratio mortgage.
 
Conventional Mortgage: If you can come up with a 25% down payment on the appraised value of your home you will be able to get a conventional mortgage. By getting a conventional mortgage you will not need to go through the Canada Mortgage and Housing Corporation (CHMC). For example, on a $100,000 mortgage your downpayment would be $25,000.
 
High Ratio Mortgage: If you can not afford a 25% downpayment you will need a high ratio mortgage. A high ratio mortgage needs to be insured by the Canada Mortgage and Housing Corporation (CMHC). You, as the borrower, will need to pay an insurance premium to the insurer. This can range from .5% to 3.75% depending upon the size of your mortgage. Most banks will just add this amount to the principal of the mortgage.

Different Types of Mortgage

Now that we have talked about the differences between a conventional mortgage and the high ratio mortgage we can continue on with the different types of mortgages that you can get.
 
[Again, I would highly suggest getting a mortgage broker in to explain these in detail. We work with Mortgage Intelligence, so if you have any questions, please send us an email at leanne@skhomes4sale.com and we will have someone give you a call to answer any questions you have.]

Open and Closed Mortgages

An open mortgage offers you more flexibility than a closed mortgage. With an open mortgage you are able to pay more money on your mortgage (over and above your monthly payment) when ever you wish, and you can do so without penalty. The mortgage rates on open mortgages tends to be a little higher than closed mortgages.
 
A closed mortgage is more restrictive than an open mortgage. The term you choose is fixed and does not tend to allow for any pre-payments without penalty. The rate on a closed tends to be a little lower than an open mortgage. A closed mortgage is great if you have a fixed type income and it offers you a secutiry of knowing what your monthly payments are over a long period of time. After the term is up on your mortgage you are able pay down on your existing mortgage balance without penalty.

Fixed Rates and Variable Rates

With a fixed rate mortgage the interest rate you pay over your term is fixed...it stays the same. This option is good if you have a fixed income that does not increase or decrease a lot over a longer period. This also protects you against rising interest rates.
 
A variable rate mortgage on the other hand does not charge a fixed interest rate. They call a variable rate mortgage a "floating" rate. As interest rates rise and fall so to does your payments. For example, for 5 months your monthly payments may be $650. If interest rates are falling, your payments may go down to $625 for next 3 months, then go down to $600 for the next three months. So, as the interest rates rise and fall your mortgage payments may do the same.

Short-term or Long-term

When you set the term of your mortgage you have the option of short or long term. The typical range is between 6 months and 5 years. If you wish you can also arrange longer financing but the norm is 6 months to 5 years.
 
A short term is less than two years and a long term is 3 years and over. The longer the term the higher the interest rate.
 
The reason you would want a long term mortgage is for security. Some people like to know what there mortgage payments are going to be for 5 years. This allows them to better budget the money they have and they feel more secure in knowing what they will be paying for 5 years.
 
A short term is great if you are buying and selling a home quickly or have a small mortgage that will be paid off soon.
 
Generally speaking, the experts say that locking in over a long period of time will cost you more thanif you were to go year by year. But...it is up to you want you want to do. Every situation is different.