Whether you are looking at buying your first home or are selling your current home and purchasing another, you are likely considering your mortgage options. As leading mortgage lenders, the team at PHL Capital Corp understands how important is to understand the different types of mortgages. That is why our team has compiled some information on the most common types of mortgages to help you choose the best option for your future. Please note that PHL Capital Corp only provides open mortgages. The following information is intended for general educational purposes only.
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The following types of mortgages are the most common in Canada:
Open mortgages allow you to make large payments on your mortgage or pay off the entire sum without penalty, offering maximum flexibility. Many homeowners are willing to accept some fluctuation in the interest rate for the flexibility of paying off part or the entire mortgage before the term is complete.
A closed mortgage is a commitment with a pre-determined interest rate over a pre-determined period. Buyers will likely have to pay the lender a penalty if the loan is fully paid before the end of the closed term. With a closed mortgage, you can typically select a fixed rate or variable/adjustable rate depending upon your preferences. Closed mortgages generally have lower interest rates than open mortgages, helping to offset the penalty for paying the mortgage off early.
A convertible mortgage is an agreement made at the beginning of a term that allows homeowners to change the type of mortgage they hold during a set period. If you want to start with an open mortgage and then lock into a closed mortgage, a convertible mortgage may be your best choice.
Reverse mortgages allow homeowners 55 and older to convert their home equity into either a lump-sum payment or monthly cash payments. When the homeowner no longer wishes to occupy the property as their principal residence, or upon their passing, the loan balance is due. The balance of the loan is settled from the proceeds of the sale of the property either by the owner themselves or their heirs outlined in their will.
A hybrid mortgage refers to having more than one type of mortgage contained in a single registration. The registration could include a fixed-rate portion, a variable rate portion, a line of credit portion, or a combination of various types. Each lender will have their own unique name for this type of mortgage, allowing anywhere from 2 to 100 different products contained in the registration. This product is often only recommended for an experienced borrower who will use this as part of their overall financial plan.
To learn more about the different types of mortgages in Canada or inquire about our lending solutions, get in touch with the experts at PHL Capital Corp. We can be reached through our online contact form and will be happy to answer any questions you may have.