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What type of mortgage should you get?

Mortgage rates are quite low right now and, in many parts of Canada, it’s a buyers’ market for residential real estate. That may have you thinking about purchasing your first home or upgrading from your current abode. Either way, the first item on your real estate shopping list should be a solid understanding of the mortgage options available to you.

Here is some basic mortgage information to get you going:

  • Fixed-rate mortgages: Offer the security of a locked-in interest rate for the term you choose, typically one to five years.
  • Variable-rate mortgages: May have a lower interest rate than fixed-rate mortgages, but the interest rate is linked to the prime rate and fluctuates with it. That could mean decreases or increases in the rate you pay over the term you select.
  • Blended-rate mortgages: Offer a combination of both fixed- and variable-rate financing – a split-rate structure that combines the benefits and risks of each type of mortgage.
  • Mortgage pre-approval:  Having your mortgage financing firmly in place indicates to prospective sellers that you are a serious buyer and it can give you the security of negotiating for a house that falls comfortably within your means.

The best mortgage choice for you should be firmly based on your personal financial objectives and your overall financial plan. Talk to your professional planner to ensure you don’t over-mortgage your financial future.

Date reviewed: February 25, 2015

This column, written and published by Investors Group Financial Services Inc. (in Québec – a Financial Services Firm), presents general information only and is not a solicitation to buy or sell any investments. Contact a financial advisor for specific advice about your circumstances. For more information on this topic please contact your Investors Group Consultant.