Mortgage Broker options you should know about.

If my mortgage is coming due soon, when should I call my mortgage broker? 

You should not wait to the last minute to contact your respective mortgage agent about renewing the mortgage on your home. You want options. Four months or 120 days ahead of the actual renewal date is a pretty good time to lock in your discount loan rate. Once the rate is locked in, you can rest easy knowing you will get a great rate for the next term period of your mortgage. Should those discount mortgage rates get even lower in that four month period, some lenders will lower your locked in rate to that new, lower rate. Discuss this with your mortgage broker and tell him this rate drop match is important to you. If you wait until the renewal date comes, you will no longer have options and will have to take what your current bank or lender offers you. This is a significant disadvantage and a total waste of money.

You will most likely receive a mortgage renewal notice from your bank in the mail, but do not sign it as the interest rate they offer on these mailed-in offers is usually much higher than a capable mortgage broker can get for you. Read this article on mortgage renewals and learn the truth about how much money banks make on mailed-in mortgage renewal documents. Mortgage agents deal with lenders on a volume basis and you will be assured the lowest mortgage rates in the financial market place.

The reality of variable rate and fixed term loans. 

Let’s keep this simple. 

Fixed-Rate Mortgages

With this option, your mortgage payment and rate is locked in. It is nice because you know your monthly obligation and can budget accordingly. There are no surprises that may put you in a financially compromising position.  

Variable-Rate Mortgages

With a variable rate home loan, you payment “floats” with prime. When rates go up, your mortgage payment goes up. When rates go down, your payments go down. These loans are usually qualified at the 3 year fixed rate and can be locked into a fixed-rate after a period of time, usually 3 years. I have reservations about these types of loans as people can get in big trouble with variable rate mortgages. If a person qualified for a loan at a certain interest rate and the rates go up, the monthly payments can get too expensive for that person to afford. I hate seeing people loose their home because of raising interest rates. I would suggest to use prudence and only get a variable rate mortgage if you can afford to pay twice the payment you are quoted. Should rates rise on you, you won’t feel the squeeze as much. Again, be careful, talk to your mortgage broker and use caution.

What's the difference between a Closed Term and an Open Term?

Closed Term Mortgages

The house loan is locked in for a set term. For example, a ten year mortgage cannot be pay off in full without some kind of penalty. The penalties vary widely from lender to lender, again, speak to your preferred mortgage broker for information on options available.
 
Open Term Mortgages

These loans are the opposite, you can repay the mortgage any time without penalty. This type of loan is usually short, like six months or a year. They can be handy for certain occasions like if you know you have money coming in soon to pay off the loan, or maybe you know you are going to sell your home. It is nice not to have to pay a penalty.

Long term or short term mortgage, which is better?