Term of a Mortgage:
the actual length of the mortgage is loaned at the contractual rate of interest; terms range from 3 months to 25 years; traditionally the longer the term, the higher the rate.
First Mortgage:
mortgage given first priority at the registry office. Usually the only financing required; gives borrowers the best rate of interest.
Second Mortgage:
a higher interest rate loan that provides borrowers with additional financing if the first mortgage does not meet their financial needs.
Fully Open Mortgage, with no penalty of notice:
with this type of mortgage, the entire principle or any part of the mortgage can be prepaid to the lender at any time, without having to pay any penalty or bonus interest to the lender.
Open Mortgage, with predetermined penalty or notice:
all or part of the principle can be prepaid at any time by paying a penalty or giving a set amount of written notice. The amount of the penalty or the notice period would have been predetermined at the time the mortgage was arranged.
Partially Open Mortgage, with no penalty or notice:
this type of mortgage is partially open, but not fully open. The mortgage contract permits a limited, fixed percentage to be returned to the lender each year (up to 10%, 15% or even 20% depending on the lender), in addition to the regular payment without any penalty being paid or notice being given. There may also be some restrictions as to when during the year, this prepayment can be made. The balance of the mortgage (80%-90%) is closed and can only be prepaid if the lender allows – and then on the lenders terms!
Partially Open Mortgage, with a predetermined penalty of notice on that open portion:
as above, the mortgage is partially open, but not fully. The mortgage contract permits a limited, fixed percentage to be returned to the lender each year, but subject to a predetermined penalty (3 months interest) or with a pre-established amount of written notice. The lender may also have some restrictions as to when the prepayment can be made during the year. The balance of the mortgage is closed and does not allow for automatic early prepayment of the loan.
Fully Closed Mortgage:
these types of mortgages have no pre-payment privileges at all; all mortgages fall into this category unless the prepayment privileges appear right in the mortgage documents, Although, all mortgages are fully open on maturity.
Convertible Mortgage:
you can get the low rate typically associated with the short term, but the freedom to lock in at any time for longer, if you think rates are headed up. To win, however, you’ve got to be an assiduous rate watcher. These mortgages are usually offered with a 3 month, 6 month or 12 month term.
Variable Rate Mortgage:
a loan whose interest rate is changed monthly or frequently to keep it in line with the general interest rate trends. Lenders often set the rate based on their prime lending rate. While the loan rate changes, the payment may stay level each month. In that case, the amounts going to pay interest and principle each month are adjusted to reflect the rate. VRM’s are handy mortgages when rates are falling because those rate breaks get passed along quickly as rates are adjusted. However, if you fail to act quickly when rates begin to rise, you may also miss the chance to switch to a fixed-mortgage term. Increases in interest rates could create problems if your VRM monthly payment doesn’t include a cushion for rate hikes. In that case, the lender may require you to increase your payment to prevent a "deficit interest” situation.
Mortgages for Impaired Credit:
TMG has a mortgage that can help clients who are considered to have impaired credit because they have maximized their credit cards and other debt. Even though they may be able to make their payments each month, they may be considered a high risk borrower.
