What’s the difference between a fixed-rate mortgage and a variable-rate mortgage?
If you have a fixed-rate mortgage, your interest rate stays the same for the entire mortgage term versus having a variable-rate mortgage where your interest rate changes when a specified financial index such as Bank Prime Rate changes. Your mortgage agreement explains how and when your interest rate will change. Variable-rate mortgages typically offer a lower rate than a fixed-rate mortgage.
What is mortgage insurance?
If your down payment is less than 20% of the purchase price of your home, you will require a mortgage that’s insured against default. This insurance protects the lender in case you default on your mortgage payments and is required by law. The cost will vary depending on the total amount borrowed. The amount is usually added to your mortgage, and the cost is added to your regular payment.
What is an amortization period?
The amortization period is the length of time it takes to pay off a mortgage in full. The amortization period is not the same as the mortgage term, which is the length of time your mortgage agreement will be in effect (for example, five years). If your down-payment is less than 20% of the purchase price of your home, the longest amortization period allowed is 25 years. With a 20% down-payment or more, you can extend the amortization period to 30 years.