Comparing mortgage rates can be beneficial to you as not all rates will be equal. The conditions and the terms can vary as much as the interest rate. The mortgage you decide will depend upon what you need so you must compare the options to determine the best mortgage rate for you.
Open vs Closed Mortgages
The closed mortgage has a lower interstate compared to the open rate mortgage, so it’s quite popular with home buyers. The closed mortgage has both a variable and a fixed format, but the principle that you pay down each year has restrictions. If the entire principal is paid off before the set term of the mortgage is up, there is a penalty that you pay like higher interest charges over several months.
When you have an open mortgage, you can pay off the whole balance when you want throughout your term. The downside to this is that a premium is paid. If you plan to move soon, the open mortgage is a good option. If you expect to receive a large sum of money through inheritance or other means, then this would also be a reason why an open mortgage might be a better choice for you.
Read more: Open vs Closed Mortage Types
Two Important Terms
There are 2 important terms you’ll need to know when comparing mortgage rate types:
- Mortgage term – This is the time length for locking in the current mortgage rate
- Amortization period – This refers to the time it takes to pay off your mortgage
- 25 year Amortization period with a 5-year term
5-Year Fixed Mortgage Rates
In the fixed rate mortgage, the “five” represents the term your mortgage is for which is five years. The term refers to the time length for locking in the current rate of the mortgage. The amortization period is the time that it takes to pay the mortgage off. Once the term is up, you can refinance and reset the mortgage to what the mortgage rate is at the end of your term.
Specification: Meridian 5-year Fixed Mortgage Rate
For the 5-year term, the borrower must get approval even if they choose a lower interest rate and term. This approval process reduces the risk for the lender and helps the buyer. A fixed rate refers to the rate percentage that is set for the term duration. When you have a rate that is variable, the rate will fluctuate with the interest rate of the current market which is referred to as the prime rate.
3-Year Fixed Mortgage Rates
In the 3-year fixed mortgage, there is a constant interest rate over the three years. The 3-year term is not as popular in Canada but is useful in some circumstances.
To best learn more about 3-year fixed mortgage rates, you need to compare them with 5-year mortgage rates.
10-Year Fixed Mortgage Rates
Specification: HSBC 10-year Fixed Mortgage Rate
When you have a 10-year term, this is a constant interest rate over those ten years. The monthly mortgage payment is fixed and you have protections against any fluctuations in the interest rate.
Now that you know all the different types of mortgage rates and terms, you should be able to get the best one for you using our comparison tool.