When selecting a mortgage, that is a variety of different things to know to get the best rates out there. Educating yourself will ensure you’ll find one that suits your needs.
BMO Mortgages Overview
Bank of Montreal provides a large number of mortgage products that are considered to be some of the most competitive in all of Canada. Depending on what exactly you require, BMO can offer you fixed and variable rates with associated open, closed, and convertible rate mortgages.
- It is possible to pay off open mortgages at any time and you will have the option to make additional payments without penalties. Open mortgage terms vary from 6 months to 5 years and are ideally suited for people that are planning on selling their house in the near future. However, open mortgages do tend to result in higher interest rates.
- Closed mortgages are known to be a common product due to lower interest rates. BMO closed mortgage terms vary from 6 months to 10 years and you can’t pay them out in full before the term is over without getting a penalty.
- Convertible mortgages are a great choice for people that are only seeking a short-term commitment with fixed payments. They also have the added benefit of being able to convert to a longer-term mortgage at any point in time without having to worry about a penalty. BMO offers convertible mortgages in terms of 6 months.
When the unexpected happens, BMO mortgage rates offer versatile payment options. BMO provides an opportunity to’ take a break’ if you need some extra cash on hand. It allows you to miss one month of regular mortgage payments per year. In the case where you have to leave your job to look after a new baby or sick family member, BMO provides the’ family care ‘ option that allows you to miss four straight monthly payments a year.
Whether it’s your first mortgage or you’re switching mortgage lenders, a BMO mortgage specialist can direct you through the application process and help you decide on one that will best suit your budget and needs. Depending on if you are a first time home buyer or if its the second time around, comparing mortgage rates on Bestmortgagerates4u.ca will most definitely help you.
What Am I Able To Afford?
It is a good idea to find out how much you can afford before you start looking for a dream home, which is why we suggest using the affordability calculator Bestmortgagerates4u.ca.
If you know how much you can afford, you’ll know how much you’ll need to pay down. Saving up for a down payment is an important part of the process in purchasing a home. Many not know that the amount of your down payment will influence how much of a mortgage that you will qualify for. The minimum down payment in Canada is 5% on the first home price of $500,000, and 10% on any portion above $500,000, up to $1 million. A home valued at over $1 million needs a minimum of at least 20 percent down.
One risk that buyers need to be mindful of is that they have to purchase mortgage default insurance when they put down less than 20 percent of their home’s cost. If you have the ability to lay down more than 20% of your home’s purchase, then you will qualify for a conventional mortgage product from your lender. If not, then you should expect to pay an additional premium of 0.50–2.75% of the mortgage value, depending on your loan-to-value ratio (LTV) and amortization period.
The additional costs that come after the offer has been accepted are part of the affordability that doesn’t immediately come to mind when you start looking for a home. From things like closing costs, property taxes, and living costs, it really begins to add up after a while.
Should I Be Working With A Bank Or Mortgage Broker?
People that are planning on buying a house will typically turn to their bank or mortgage broker for all of their mortgage needs, but many people aren’t sure what to even look for or how to get started.
When it comes to negotiations, by going to the bank, home buyers go straight to a lender and behind the wheel. When you decide to work with your bank, all of your services are consolidated with a company you have worked with and have trust in. You might also be eligible for discounts. On the other hand, a broker gives home buyers the benefit of having access to a number of rates provided by various lenders, and they do the legwork and negotiate for you to get the lowest rate and terms available. Brokers do not always provide the same rates or products as banks, which is why we provide a detailed mortgage rate comparison in Canada, contrasting various brokers, banks, credit unions and other lenders for you.
Should I Choose A Fixed Or Variable Rate Mortgage?
When looking for your dream home, you will have to decide if you want a fixed or variable mortgage.
A fixed mortgage rate allows you to “lock-in” for a term (set time period) at a predetermined rate. Although you can get one that can last anywhere from 6 months to 25 years, the most popular term is 5 years.
Pros Of A Fixed Mortgage Rate:
- Safety and security knowing what your principal and interest will be during your chosen term
- Financial planning and budgeting is simpler
- Lower risk tolerance; a variable mortgage rate may be more unpredictable
Cons Of A Fixed Mortgage Rate:
- You might be paying more for securing and locking at a certain rate
- If you break the contract, you might end up paying more of the long-term
A variable mortgage rate is based on the prime rate of the mortgage lender. The prime rate is determined by the current economic conditions. It is the standard benchmark interest rate that is used by the big banks when pricing for short term loans. A variable mortgage rate can increase or decrease depending on if the prime rate increases or decreases.
Pros Of A Variable Mortgage Rate:
- As long as the prime rate doesn’t increase above the fixed mortgage rate, you will have lower monthly payments
Cons Of A Variable Mortgage Rate
- There is less financial security because the prime rate can increase or decrease at any point in time which will increase your monthly interest
- Budgeting and financial planning is more difficult
Difference Between A Mortgage Term And An Amortization Period
The Amortization period refers to your mortgage’s entire length, whether it is a short-term or long-term mortgage. Many mortgages will be negotiated over a period of 25 years. Throughout those 25 years, there will be a number of terms and conditions that will be negotiated. The most common length of a mortgage term is five years, which means you pay the principal and interest for five years at a negotiated rate, and negotiate another five-year term after that.
Will My Credit Score Have An Effect On Getting Pre-approved For A Mortgage?
Is your credit rating ready for a mortgage? Your credit rating is crucial because it is the determining factor on if you will get pre-approved for the mortgage and how much you will get pre-approved for. Lenders want to assume that you are going to repay your debt so they consider the following factors: payment history, outstanding debt, age of credit history, too often applying for new credit, and the type of loan you are looking for (long-term debt vs. short-term debt).
Want to see more rates? Check out BMO Fixed and Variable Mortgage Rates Here.