Variable rate mortgage
A mortgage in which payments are fixed for a period of one to two years although interest rates may fluctuate from month to month depending on market conditions. If interest rates go down, more of the payment goes towards reducing the principal; if rates go up, a larger portion of the monthly payment goes towards covering the interest.
Allow one to pre-pay some, or all of, their outstanding mortgage obligation at any time, without penalty. – Generally, open mortgages have a six-month, and a one-year term option with higher interest rates than closed mortgages of the same term length.
Generally, closed mortgages are offered in terms ranging from six months to ten years. – Generally, closed mortgages offer more stringent pre-payment options subject to various pre-set regulations. For most people, such pre-payment options can be vital to reducing the amortization of one’s mortgage and should be properly discussed with one’s
Mortgage loan insurance
Mortgage loan insurance is insurance provided by Canada Mortgage and Housing Corporation (CMHC), a crown corporation, and Genworth, an approved private corporation. This insurance is required by law to insure lenders against default on mortgages with a loan to value ratio greater than 75%. The insurance premiums, ranging from .50% to 3.75%, are paid by the borrower and can be added directly onto the mortgage amount. This is not the same as mortgage life insurance.
Fixed Rate Mortgages
A mortgage for which the rate of interest is fixed for a specific period of time (the term).
The fixed rates are set based on the yield in the bond market. The bond yields are very volatile and tend to fluctuate, often due to political and economic conditions. This volatility makes it impossible to gauge what fixed rates will do, even in the short-term.