Mortgage Features
Here are some mortgage options you should know about:
Every lending institution is different, and each will have their own
customizable mortgage options. When you're hunting for a lender and a
home, see how the following features could be beneficial to you.
Prepayment
This is a wonderful option if you receive regular bonuses or if your
income fluctuates throughout the year. With a pre-payment privilege,
you have the right to make payments toward the principal portion of
your mortgage over and above the monthly payments. A mortgage with a
pre-payment option is closed. An open mortgage means you can pay the
entire principal sum without notice of bonus.
Portability
If you still have time remaining on that fantastic loan you negotiated,
portability is one option you'll want to discuss with your lender. Quite
simply, it means transferring the balance of your current mortgage at the
existing rates and with the existing terms and conditions, to your new home.
Assumability
Let's say that the vendor has negotiated a dynamite mortgage. With an
assumable mortgage you, the purchaser, simply assume the obligations of
the mortgage. This is a wonderful feature especially if the terms are
more favourable than the existing market conditions would allow. Remember,
when it is time for you to sell, you may still be liable for any
mortgage you allow the buyer to assume. This means if the buyer stops
making payments, you could be accountable for the payments. Be sure to
have the subsequent buyer approved for the assumption of the payments,
thereby avoiding this potential land mine.
Expandability
If you need additional funds down the road, will your mortgage terms
allow you to increase the principal amount? Usually, your new rate will
be a blended amount of the initial mortgage rate and the prevailing
rates. It's a great option to discuss with your lender if you foresee
large expenses in your future like renovation or education costs.
