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If your down payment is less than 25%, then you qualify for a high-ratio mortgage. This type
of mortgage requires loan insurance, which can cost an additional 0.5% to 3.75% of the mortgage
amount. With this type of mortgage you could also be limited to a maximum house price.
Second Mortgage
Of course, if you cannot add on to your mortgage, you may consider a second mortgage. Each
mortgage uses your home as security and gives the mortgagee the right to take your home if you
default on your loan. The first mortgagee gets paid first in cases of default and has the best
chance of recovering all of its money. So it only goes to figure that subsequent mortgages
usually come with a higher interest rate.
Mortgage Features - Here are some mortgage options you should know about:
Every lending institution is different, and each will have their own customizable mortgage
options. When you're hunting for a lender and a home, see how the following features could be
beneficial to you.
Prepayment
This is a wonderful option if you receive regular bonuses or if your income fluctuates
throughout the year. With a pre-payment privilege, you have the right to make payments toward
the principal portion of your mortgage over and above the monthly payments. A mortgage with a
pre-payment option is closed. An open mortgage means you can pay the entire principal sum
without notice of bonus.
Portability
If you still have time remaining on that fantastic loan you negotiated, portability is one
option you'll want to discuss with your lender. Quite simply, it means transferring the balance
of your current mortgage at the existing rates and with the existing terms and conditions, to
your new home.
Assumability
Let's say that the vendor has negotiated a dynamite mortgage. With an assumable mortgage
you, the purchaser, simply assume the obligations of the mortgage. This is a wonderful feature
especially if the terms are more favourable than the existing market conditions would allow.
Remember, when it is time for you to sell, you may still be liable for any mortgage you allow
the buyer to assume. This means if the buyer stops making payments, you could be accountable
for the payments. Be sure to have the subsequent buyer approved for the assumption of the
payments, thereby avoiding this potential land mine.
Expandability
If you need additional funds down the road, will your mortgage terms allow you to increase
the principal amount? Usually, your new rate will be a blended amount of the initial mortgage
rate and the prevailing rates. It's a great option to discuss with your lender if you foresee
large expenses in your future like renovation or education costs.
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