6 Types of Mortgage and How Lawyers Can Help

Buying a home is a dream for arguably everyone. A person strives all his life to buy a dream house for themselves and their family. But not everyone can pay upfront for a house. This is where the mortgage comes in.

A house

 

 

A mortgage is basically an agreement between a person and a lender they borrow money from. The person agrees that if they fail to pay back the money with interest in due time, the lender can take away their property legally. This is why we advise always involving lawyers in any mortgage matters.

 

There are different types of mortgages, let's look at some of them in this article.

 

1. Open Mortgage

A type of mortgage where the person who has borrowed the money can pay it off completely or a portion of it before the mortgage matures. They won't be charged a prepayment penalty for doing so.

 

A prepayment charge is a penalty that the lender charges from the borrower, usually equal to 3 months of interest payments or higher.

 


2. Closed Mortgage

Unlike an open mortgage, in a closed mortgage, a person is charged a penalty for prepayment if they decide to pay off the mortgage before it matures. Some exceptions in closed mortgages have prepayment privileges, though.

 

Prepayment privilege is a certain clause that allows the borrower to pay an additional amount of their mortgage before maturity without getting a penalty for it. A common type of prepayment privilege clause people usually want to get inserted in their mortgage contracts is the lump sum payment.

 

3. Fixed Rate Mortgage

In fixed rate mortgage contracts, the rate of interest is locked throughout the whole duration of the contract and remains fixed without any changes, no matter what the conditions are.

 

4. Variable Rate Mortgage

As the term suggests, the interest rates differ and keep changing in variable interest rate mortgage contracts. The change of interest rates depends upon the prime rate.

 

 

 

5. Conventional Mortgage

Conventional mortgage contracts allow a loan of a maximum of 80 percent of the current value of the property the borrower is taking the loan for.

 

6. High-Ratio Mortgage

If the borrower seeks a loan higher than 80 percent of the value of the property they want to purchase, then the mortgage is referred to as a high-ratio mortgage. High-ratio mortgages must be insured through mortgage default insurance in order to prevent frauds and default scenarios.

 

Hire a Mortgage Lawyer in Canada

Mortgage contracts shouldn't be taken lightly, and the consequences of any mistake can be severe. Hire mortgage lawyers in Canada from Nanda & Associate Lawyers now to help you with any type of mortgage. They also offer immigration lawyers, divorce lawyers, personal injury lawyers, and more. Contact them now for further information.

 

 

 

Disclaimer: This article is only intended for educational purposes and shouldn't be used as a substitute for legal advice.

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