Determining your mortgage variable rates is a difficult task, and the vast majority of indexes used on loan rate quotes, anyway denoted by a floating rate. Mortgage brokers usually talk about three programs they usually work with. All of those rates will be slightly higher than what other mortgage brokers in Surrey offer, but the loan and closing fees may be lower than with the fixed program.
Prime Vs. Fixed
Many times the advertised interest rate only shows you what the index is set to. Taking the smoothening out of this, you see what the mortgage rate would be if it were locked for a fixed period of time. Those of you who like to enter the waiver are able to look at the index through pre-qualification, with the rate ascertained after looking at the index.
Larger reserves can be typical, but smaller and shorter periods of time are common. Just like with a variable rate, the agreement will lock on the loan for a pre-determined amount of time, but you are holding to the existing rate at the time of closing.
Fixed Rates
Looking at a fixed rate means you are locked into a rate at the beginning of the mortgage term. This can be done in one month, out until 3, 5, 10, or 20 years, depending on your contract. The vast majority of mortgages allow the rents to increase, up on a yearly basis. This can be limiting. Many of us don’t plan for and thus can deal with, large amounts of additional payments beyond what the 10-year contract allows. It is important that the mortgage is set up for the highest possible rate at the time you enter into an agreement. The worst rate you can get is on a stated income loan, where you can not control how much you make, or even if you make more than the payments you’re charged.
Fixed rates can also be attractive to buyers that know rates are imminent on a purchase. 3, 5, or 7 years are common after set periods. Weekend rates that make for an interesting rental yet expensive payment structure are many times on a stated income loan. Although your payments are affordable, the fact they are treated as ‘income’ guarantees more that the payments are below a minimum payment within the contract term.
Mortgage Variable Rates
Two offsetting disadvantages are the potential damage that can cause to your credit score by choosing a variable rate mortgage. In a pre-qualification process of conventional mortgage companies, you can’t directly manipulate what the rate is. With a stated income loan, you can’t predict which options you may opt for. Some lenders may even give you zero credit at this time on a stated income loan. The implications of that to the loan could potentially be disastrous as more stress to the credit score, especially if you are careful to make the payments on a stated income loan.
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As with everything, there are advantages and disadvantages to both sides of the coin. Our advice to you is to weigh and consider the pros and cons of each term of the mortgage you are looking for before you head out to look at homes. If you are in need of a mortgage broker in Vancouver, give us a call today!