When it comes to buying a house, considering your mortgage options is an important part of the process. Dealing with the financial end of things can be a difficult task for many people. As a result, deciding on the best mortgage product can seem like a daunting task. There are many options when it comes to a mortgage product and there are several things to consider when deciding which is right for you.
Long-Term Mortgage Product
This type of mortgage will keep you ‘locked-in’ at a fixed interest rate for 3 or more years. This can be a good option if you are the type of person that is interested in budgeting for the future. If you are planning to stay in the home for years to come, this could be a good option. Keep in mind that if interest rates drop during the course of the mortgage term, you will not benefit from this. Think of it as ‘peace of mind’ rather than taking the risk that interest rates will change.
Short-Term Mortgage Product
Usually involving terms of less than 3 years, this the of mortgage offers you lower initial interest rates. Of course, you are taking a risk in the sense that if rates increase, so will your payment (once the term is up). However, if you are looking to a short-term investment or a quick turnaround sale on a property, this may be a good option to consider.
Ideal for people that own their own business, this mortgage product is based on your credit history. You may not even be required to show proof of income. Your strong credit history (and a 25% down payment) will get you this mortgage.
This is a good option if you would like to have all (or a portion) of your mortgage set at a fixed rate with minimal risk.
With this type of mortgage product, your interest will fluctuate based on the current interest rates of the day. This type of mortgage may save you money in the long-term but can be very difficult to budget for and may result in periods of time where your mortgage payments can be quite high (if the current interest rates go up substantially).
Cash Back Option
This type of mortgage product allows you to receive cash at the time of the mortgage dispersal which is helpful for first-time homebuyers or those that wish to invest the funds directly into the property. Keep in mind that you must carry out the entire term of the mortgage, regardless of circumstances.
There are many options available to you when it comes to financing your home purchase. Choosing the right mortgage product can be an essential factor in buying a house. Be sure to consult your financial institution to discuss the best option for you.