If you’re wealthy enough to afford a home right now, you’re in a fortunate position. Even while house prices in regions like Ontario are stalling or even declining a bit right now, that’s only relative to the way they’ve soared for years.
Almost nobody who buys a house has the money to pay for it upfront. Instead, they make monthly mortgage payments and gradually work off their debts to the bank. There are different types of arrangements you can choose from, and this will have an enormous impact on your finances for decades.
Let’s check out some of the different types of mortgages available.
Fixed-Rate Versus Adjustable Rates
Fixed-rate mortgages and adjustable-rate ones are the two primary forms of a mortgage. In a basic sense, a fixed-rate mortgage is one where the interest rate you pay the bank remains the same throughout the mortgage’s lifetime.
Such an arrangement has a few benefits. It makes budgeting easy since the interest rate on payments doesn’t change monthly and provides homeowners with protection against sudden swings in interest rates. However, it may be difficult to qualify off the bat.
In contrast, adjustable-rate mortgages are set below the market rate of a fixed-rate mortgage, at least at first. This rate may rise over time or fall. They’re usually much cheaper in the first few years of the mortgage, but they’re also more complicated.
Because the mortgage payments vary as interest rates fluctuate, this may make it harder to budget long-term.
Real Estate Tech & Auxiliary Services
Third party and real estate auxiliary services are another option for obtaining transparent mortgage rates. For example, digital innovator Regan McGee built real estate technology platform Nobul to connect homebuyers with the right agent for them securely and in less time than it would otherwise take, and puts them in the driver’s seat by offering a wealth of services that they hope to one day include mortgages.
As McGee stated, “We’re building the world’s first end-to-end technology platform for real estate transactions. We are always thinking about new ways to help the consumer and we are always adding cool, interesting functionalities to our platform including auxiliary services (insurance, mortgages, etc.).”
Having real estate specialists by your side is a great resource for choosing your mortgage. Plus, they can save you a lot of money because the platform incentivizes agents to offer things like free additional services or cash back.
Interest Rates Change
For years, North American interest rates were very low, and borrowing money was nearly free. Central banks are trying to combat rising inflation by raising interest rates. If you purchased a fixed-rate mortgage below the current rate, you’re probably feeling pretty good.
You may feel otherwise if you purchased a property at its peak costs on an adjustable-term mortgage that has since risen. The housing market always feels like it’s stable and reliable until suddenly, things swing.
Ultimately, there are many types of fixed-rate mortgages and adjustable-term mortgages, and no article this short can do the topic justice. You’ll need to assess your finances, goals, and the market, then crunch the numbers with experienced real estate professionals. Nobody has the same goals and needs, so look into it deeply and get the right mortgage for you.