Frequently Asked Questions About Mortgage Products
Fixed-Rate vs. Variable-Rate Mortgages
Q: What is the difference between a fixed-rate and variable-rate mortgage? A: A fixed-rate mortgage has a fixed interest rate for a specific term, while a variable-rate mortgage's interest rate fluctuates based on the prime rate.
Q: Which is better, a fixed or variable-rate mortgage? A: The best choice depends on your risk tolerance and financial goals. Fixed-rate mortgages offer stability, while variable-rate mortgages may have lower initial payments but carry interest rate risk.
Q: Can I switch from a fixed-rate to a variable-rate mortgage? A: Typically, you can switch mortgage types when your fixed-rate term ends, but there might be penalties involved. You can, however, typically convert from a variable-rate to fixed-rate mortgage at any time, without penalty.
Mortgage Terms and Amortization
Q: What is a mortgage term? A: A mortgage term is the length of your initial mortgage contract, usually five years in Canada, with option ranging from 6 months to 10 years.
Q: What is mortgage amortization? A: Amortization is the total time it takes to repay your mortgage, which can be up to 25 or 30 years.
Q: Can I make extra mortgage payments? A: Many lenders allow prepayments, which can help you pay off your mortgage faster and save on interest. These can take the form of one-time lump-sum payments, higher regular payments, or some combination.
Mortgage Renewal and Refinance
Q: What happens when my mortgage term ends? A: You'll need to renew your mortgage. You can choose to renew with the same lender or shop around for a new mortgage.
Q: Can I refinance my mortgage? A: Refinancing involves replacing your existing mortgage with a new one, potentially with a different interest rate or term. This can be used as a tool to consolidate debt, lower monthly payments, improve your credit, use your home equity to invest, to purchase a rental property, or any number of strategies.
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