Did you know there are multiple options for mortgage products outside of the traditional mortgage if you need something different?
No-Frills mortgage products offer a lower interest rate compared to other products, but the low interest rate is the ONLY benefit. While this will be ideal for individuals that are tight on cash, it does not benefit those who may want to pay off their mortgage faster.
Pre-payment privileges and lump-sum payment options are not available with a no-frills mortgage. However, this type of mortgage can be ideal for first-time homebuyers who have limited opportunities to make lump-sum payments, during the first five years, of their mortgage, and property investors who need a low fixed rate and are not concerned with making lump-sum payments.
Hybrid mortgages include an equal mix of fixed-rate and variable-rate components within a single mortgage. As it is difficult to predict rates over the long term, a hybrid mortgage offers interest rate diversification, which can help reduce your level of risk.
If you opt for a hybrid product, half of your mortgage is locked into a five-year fixed rate and half is at a five-year variable rate. You can lock in your variable-rate portion at any time, without paying a penalty. As well, each portion of the hybrid mortgage operates independently – like two separate mortgages – yet the product is registered as only one collateral charge.
Hybrid mortgages are a great mortgage option for anyone who would normally go fully variable but are afraid prime rate is at its bottom, isn’t comfortable being fully locked-in or can’t decide between a fixed or variable mortgage. The hybrid mortgage option also allows for 20% annual lump-sum pre-payment privileges, 20% annual payment increase ability and portability.