Thursday, February 17, 2011

Fixed VS Variable Rate Mortgages

Mortgage Options: Understanding Fixed vs Variable Rate Mortgages

Choosing mortgages that's right for you is a big decision, and it's one that you can make with the help of a mortgage professional. By better understanding the different mortgage options available you'll be better informed before you begin the decision process. There are variable and fixed rate mortgages, and each of them has their own advantages and disadvantages.

Advantages of a Fixed Rate Mortgage:

1. Consistent payments for the term of your mortgage - your monthly payment doesn't change until the end of your fixed period. You never have to worry about lack of affordability and can stick to a reliable budget.

2. No impact from rising interest rates - with a fixed mortgage, it doesn't matter whether rates increase during your fixed term. Current rate will only affect you when it comes time to renew.

Disadvantages of a Fixed Rate Mortgage:

1. You can pay more than the current posted interest rate - interest rates can fall lower than your fixed rate, but on a fixed rate mortgage, you can't take advantage of them.

2. You always pay more than the standard variable rate - you pay more to get the advantage of consistent, fixed payments.

Advantage of a Variable Rate Mortgage:

1. You always pay the base interest rate - following a base interest rate means that you have a lower monthly payment when rates fall.

Disadvantages of Variable Rate Mortgages:

1. Your monthly payments can increase - if interest rates rise, it's possible that your payments will increase substantially.

Before settling on the type of mortgage that's right for you, discuss the options with a mortgage professional.

By: Ginette Pelletier
Did you find this article informative by Ginette Pelletier. She is an Ontario mortgage agent for the Mortgage Centre in Mississauga, Ontario. She can help you with your mortgage needs in the Brampton, Collingwood, Barrie, Wasaga and all of Ontario. She can help you facilitate any of your mortgage needs. Visit her site today for the best mortgage rates for your needs.

Tuesday, February 1, 2011

Things You Should Know About Second Mortgage

A second mortgage is an additional mortgage on a property where a primary mortgage already exists. They are secured against the same equity as the first mortgages. Therefore is based on the property's current value and the amount that is still owed. They are often granted by the lender of the first, but can be obtained from a different lender.

When choosing a second mortgage, there are typically three different types available. A traditional, where there is usually a fixed rate, and a term of 15- 30 years; a home equity line of credit, where the rate is typically adjustable and the funds are drawn as needed; and a home equity loan in which the borrower uses the equity of their home as collateral.

In a home equity loan, the equity of the home is usually reduced. To help determine which loan type is best, it is wise to speak with a competent mortgage broker.

In most cases, these mortgages are loaned at higher rates than those of first mortgages. The reason for this is due to the fact that the lender of the second mortgage is entering into a higher grade of risk. This increased risk does not directly correspond to the credit of the home buyer, but rather to the availability of funds the mortgagee can claim.

In the event of a default the property is sold, and the proceeds are applied to the repayment of the loan amount. Primary mortgages always take precedent over secondary mortgages; therefore mortgagee's have to await settlement of the first mortgage before any left over proceeds can be claimed.

This is what defines the second mortgage as a higher risk mortgage. In these mortgages not only is there a higher interest rate, but the second mortgage is also written for a shorter term than that of the first mortgage. Therefore, it is important to take appropriate precautions to ensure that the mortgage can be repaid on time.

This risk should always be carefully weighed when any mortgage, whether first or second, is being sought. A second mortgage can help relieve stress from financial crisis. A second mortgage can allow access to a home's equity. It is often acquired to make repairs or enhancements on a home, thus increasing the value of the property.

However it can be used for other non-related financial situations, such as paying off college tuition or lowering your debt load.

By: Paul Mangion
Did you enjoy this article by Paul Mangion on second mortgages? He is an Ontario mortgage broker for the Mortgage Centre in Mississauga, Ontario.They offer seamless solutions to all your mortgage needs. Visit his site today for the best mortgage rates for your situation.