Different mortgage types are featured on the financial market in Canada. Among them are repayment mortgages, endowment mortgages, and interest only mortgages. Mortgage brokers take your individual requirements and preferences when recommending one of these varieties. For instance, if you prefer to pay back a little at a time, your mortgage broker will advise on choosing a repayment mortgage. If you prefer to pay back the full amount at the term of your mortgage, an endowment or interest only mortgage may be a better choice.
If you go with a repayment mortgage, you will be paying back the principal amount, along with the interest. The debt will be cleared at the term of the mortgage. When it comes to repayment, this mortgage variety entails the least risk. A variation of the repayment mortgage is the continuous repayment mortgage whereby the outstanding amount is paid using a continuous annuity.
With interest only mortgages, the mortgage holder pays off only the interest over the term of the mortgage. The capital is due at the end of the term. This type of mortgage has become increasingly popular among first-time buyers and buy-to-let investors. The reason is that interest only mortgages are cheaper compared to the repayment mortgage. While interest only mortgages are popular in the US and UK, they are not common in Canada. With regular amortizing mortgages, holders are entitled to one or a couple of interest only payments. With that in mind, Canadians cannot benefit from interest only mortgages. One drawback of the interest only mortgage is that borrowers do not think of the moment when they have to pay back the principal.
As an alternative option, your broker may advise you on choosing an endowment policy. Borrowers make use of an endowment policy as to save funds and get life insurance. The funds help pay back the mortgage loan at the end of the term, which is normally between 20 and 25 years. Endowment mortgage is a term used mostly in the UK referring to this type of arrangement. It should not be considered a legal term.
Bad credit mortgages are a special variety, intended for applicants with poor credit rating. In the past years, many creditors started offering bad credit mortgages to persons who are classified as sub-prime borrowers. These mortgages are usually offered at a higher rate to borrowers who had fallen into arrears on their mortgages and those who declared bankruptcy. Borrowers who have had debt problems before can also apply for a bad credit mortgage.
Those who want to calculate their mortgage payments can use a mortgage calculator, and different types are available online. Just enter the interest rate, the amount required, and the repayment period. Some mortgage calculators allow you to include the purpose of the loan (refinancing or new purchase), together with your credit profile poor, fair, good, or excellent.
