Many factors to consider when choosing your mortgage type for the first time ...
The amortization period of a mortgage is the total length of time it will take to pay off the overall cost of borrowing. A common amortization period is 25 years. Shortening your amortization period can help to reduce your overall cost of borrowing. Consider the fact that mortgage lenders charge interest on mortgage loans, therefore, the longer it takes to pay off the mortgage, the more interest one pays.
Your mortgage term is the length of your mortgage agreement; usually this length ranges from 6 months up to 10 years. Once your mortgage term has expired the balance of your mortgage can be repaid, refinanced or renewed by your lender at current market interest rates.
Mortgage default Insurance is mandatory for all borrowers with a down payment of less than 20%. A High Ratio or Collateral Mortgage is one where the down payment is less than 20% of the purchase price or property valuation. In this case, the mortgage must be insured by a mortgage insurer.
On the other hand, a Conventional Mortgage is one where the down payment is equal to, or greater than, 20% of the purchase price or property valuation. This means you are not required to seek additional mortgage default insurance.
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