Mortgage Rates and Terms - Why It Is Important To Know All Your Options

Terms
The term of a mortgage refers to the duration of time a lender will loan mortgage funds to a borrower. This length is normally 2 to 5 years, although it ca be from 6 months to 10 years. Normally, the shorter the mortgage term length, the lower the interest rate is and the less it costs to borrow the money. When the term ends, you could pay off the due balance or renegotiate the mortgage for a new term until the full mortgage has been paid completely.

Short Term
The short term mortgage agreements or contracts are those that are normally for 2 years or less. Short term mortgages provide a lower interest rate with their cost of borrowing than a longer term. These terms are common with individuals who feel that interest rates are presently higher than they would eventually be. Short term contracts are usually chosen by people who anticipate that interest rates will be much lower at the time of renewal.

Long Term
The long term contracts are often for at least three years. These mortgages generally cost a bit more than short term mortgages and therefore the interest rate would be higher. For those borrowers who value the stability and predictability of fixed expenses over a set period of time, a higher interest rate is appealing. It could be easier to budget a stable mortgage payment and this could bring peace of mind to a lot of individuals.

The average time to fully pay off your mortgage can be quite awhile, from 15 to 25 years on average. Amortization is the process of completely paying back your loan by installments of interest and principal over a specific length of time. Lately, insurers and mortgage lenders have provided home owners longer amortization periods of 30, 35 and even 40 years.

There are a variety of ways of paying back your mortgage. Some customers like the comfort in having a predetermined fixed rate since it enables them to budget and plan for other things in their To repay your mortgage, there is a variety of ways. Some want to have predetermined fixed rates which enable them to completely plan their budget for the foreseeable future. Other customers choose more flexibility in their repayment. Some of their conditions may involve wanting to make bigger payments at any time they could put more money down because of changes in their cash flow. There are a variety of different types of mortgages which appeal to different kinds of borrowers. A mortgage expert could clarify the differences and even help you choose which type is right for you.

Rates
An interest rate means the amount of interest charged on a loan payment on a monthly basis. This amount is expressed as a percentage. It is based either on the rate that the Bank of Canada charges to lend money lenders or on bond yields. Usually, interest rates are lower if you borrow money for a short duration of time and higher if you borrow money for a longer length of time.

Fixed Rate Mortgage
Fixed rates imply that the interest rate on your mortgage will not change over the terms of the agreement. There are no surprises since you would always be able to count on how much your payments would be and determine how much of your mortgage will be paid off when the term ends.

Variable Rate Mortgage
When the borrower agrees to a changing rate over the mortgage term, it is considered a variable rate mortgage. These rates could vary from one month to the next as the interest rates fluctuate with the bank's prime lending rate. Your payment remains the same when interest rates change, then again, the amount which is applied to the principal would change. If interest rates drop for instance, more of your mortgage payment is applied to the owed principal balance. This particular kind of mortgage is a good choice for homeowners who believe that the interest rates would drop eventually if they are currently high.

Jim Fairbank is a dedicated writer who concentrates on a variety of diverse topics. A subject that he writes regularly about is the mortgage broker market. The mortgage broker industry can be tough to navigate. If you are interested in finding a little more concerning the industry, you might want to go see Mortgage Broker Richmond, as it is a wonderful resource that focuses on all of the fine details that some individuals overlook.

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