Types of Mortgages

First Mortgage
A mortgage loan is given first priority at the registry office. It can be a conventional or high ratio. Provides lenders with the best interest rate.

Second Mortgage
A higher interest rate loan that provides lenders with additional funds if the first mortgage does not meet their total financing requirements. Financing is usually arranged at a higher rate of interest as it is a higher risk to the lender (being second priority on title), and is given for a shorter period of time than the first mortgage.

Fixed Rate Mortgage
A Mortgage loan for which the rate of interest is fixed for a specific period of time.( the term)

Variable Rate Mortgage
A mortgage loan where the interest rate fluctuates with the prime rate at the chartered banks. The rate is set on prime less a percentage. Please note this can be an open or closed or capped, and the way the interest is compounded can vary (it can be monthly rather than semi annually compounding).

Closed Mortgage
A mortgage whose terms state that it cannot be paid out, even with a penalty, unless the lender agrees. Most lenders do allow payout with a penalty. Make sure you check the penalty terms! Penalties typically are 3 months interest or the Interest Rate Differential (IRD), which ever is the greater

*Important note: Please be aware that a monthly compounding is costly to you!. Most mortgages are required to be compounded semi annually, a monthly compounding would make for expensive financing, and therefore the interest rate percentage cannot be compared.

Open Mortgage
A fully open mortgage is a mortgage that can be discharged without penalty.

Capped Mortgage
The highest rate that a borrower will pay within a defined time period.