What kind of mortgage should I get?

There are different types of mortgages available to suit individual needs, resources and preferences. You can choose fixed rate or variable rate, short-term or long-term, closed or open. Here are some general rules of thumb to help you decide on the mortgage option that’s right for you.

When considering a fixed rate versus a variable rate mortgage, the current interest rate and whether you believe it will rise or fall in the future is a key determining factor. If rates are low, it may be best to lock into a fixed rate mortgage. If rates are likely to decrease, however, a variable rate mortgage would be advantageous. In this case, your monthly payments would stay the same but the amount of principal you pay would increase. An adjustable rate mortgage will change the amount of your monthly payments based on market conditions.

Short-term mortgages are preferable if you think interest rates are likely to remain low or fall in a few years. Long-term mortgages are the better bet if you foresee interest rates rising over the long term. Long-term mortgages are typically for three or more years and often have higher interest rates than shorter term mortgages.

Your third option is an open or closed mortgage. Open mortgages allow you the freedom to make prepayments and lump sum payments without penalties. Closed mortgages offer lower interest rates but have the disadvantage of not allowing you to contribute extra money over and above your regular monthly payments.

We recommend that you contact a mortgage specialist for more details and to find out what mortgage option best suits your needs.