In Alberta, there are several types of mortgages available to borrowers. Each one differs in terms, interest rates and repayment structures offered.
Wondering why you should get your mortgage from an Alberta credit union? Check out our blog here outlining a few of the reasons, or review the blog here for the steps to get a mortgage from a credit union.
And remember, if you want to buy a home, your best bet is to speak with a mortgage expert at your local credit union – find one here!
Here are some common types of mortgages available in Alberta:
- Conventional Mortgage: This is a standard mortgage where the borrower puts down a minimum down payment of 20% of the home’s purchase price. With a conventional mortgage, you avoid paying mortgage insurance premiums.
- High-Ratio Mortgage: If you have a down payment of less than 20% of the home’s purchase price, you’ll need a high-ratio mortgage and you’ll be required to obtain mortgage loan insurance from the Canada Mortgage and Housing Corporation (CMHC) or other mortgage insurance providers.
- Fixed-Rate Mortgage: With a fixed-rate mortgage, the interest rate remains constant for the duration of the mortgage term, typically ranging from one to ten years. This allows borrowers to budget and plan their finances around a consistent monthly payment amount.
- Variable-Rate Mortgage: A variable-rate mortgage has an interest rate that can fluctuate based on changes in the lender’s prime rate (for more on interest rates, click here). The monthly payment may vary depending on changes to interest rates, so this type of mortgage carries some risk. However, it can lead to saving money if interest rates decrease.
- Adjustable-Rate Mortgage (ARM): An ARM is a mortgage where the interest rate adjusts periodically based on a specific index, such as the Bank of Canada’s prime rate. The adjustment frequency and terms vary depending on the lender. The interest rate and monthly payment can increase or decrease during the loan term.
- Open Mortgage: An open mortgage allows borrowers to make extra payments or pay off the mortgage balance without incurring penalties. This flexibility can be beneficial for those who anticipate changes in their financial situation or plan to sell their property in the near future.
- Closed Mortgage: A closed mortgage has specific terms and conditions, including a fixed interest rate and limited prepayment options. If you choose to make additional payments beyond the agreed-upon terms, you may face prepayment penalties.
Worth noting: Sometimes you can bundle or pair a Home Equity Line of Credit (HELOC) with your mortgage or home purchase. A HELOC allows homeowners to access funds based on the equity they’ve built in their property and functions like a revolving line of credit, with variable interest rates.
Mortgage options vary among all Alberta credit unions with each one offering a unique mix products and different terms – talk with a mortgage professional at your local credit union today to see what specific mortgage options are available to you.