Types of Mortgages

Fortunately for buyers, there are a variety of mortgages to choose from.

It is in your best interest to investigate each of them to determine which is the best for your situation. You probably won’t qualify for all of them. In fact, you may only qualify for one. But if you do qualify for more than one, you may save yourself money (and worry) in the long run if you do your homework before signing on the dotted line.


Fixed Rate Mortgages

Consider a fixed rate mortgage if either of the following describes you:

  • You plan on living in your new home for many years, and/or
  • 15-Year Fixed-Rate:
  • Pay off the loan in half the time of a 30-year loan.
  • Equity builds up more quickly than in a 30-year loan.
  • Payments are higher (which may be a problem if you lose your job or become unable to work).
  • 20-Year Fixed-Rate:
  • Pay off the loan in 2/3 the time of a 30-year loan.
  • The overall interest paid is considerably less than for a 30-year loan.
  • 30-Year Fixed-Rate:
  • The most common choice, especially for first-time homebuyers, as it’s the easiest of the fixed-rate loans to qualify for.
  • Monthly payments are lower than for 15-year and 20-year loans. This can prove especially helpful if you do not have a lot of “padding” between the amount you can afford to spend and the monthly payment for your desired property.
  • More desirable if you plan on staying in the same home for years, since equity builds more slowly than for shorter-term loans.
  • For income tax purposes, this term provides the maximum interest deduction.   You are not a risk-taker and prefer the stability of knowing how much your payment will be each month. Since most home loans are for a period of 30 years, if you want a payment you can count on for that long of a period of time, a fixed rate mortgage may be what works best for you. Once your loan amount and interest rate are calculated and locked in, a fixed rate mortgage will guarantee that you will have the same payment over the life of the loan. Making extra payments to principal will allow you to pay your loan off sooner. This may not always be the best choice, however. If interest rates are very high at the time you take out your loan, with a fixed rate mortgage you’ll be stuck with that high interest for the life of the loan (unless you choose to refinance). Conversely, if interest rates are very low, you’ll come out the winner with interest rates that will stay low no matter how high interest rates go in the future. The following are the advantages and disadvantages of the varying lengths and terms of fixed-rate mortgages:

Adjustable-Rate Mortgages (ARMs):

If you are more comfortable in taking a risk with your money or if interest rates are very high at the time you take out your loan, an adjustable-rate mortgage (ARM) may be the solution for you. You might also choose this type of loan if your planned ownership of the property is short-term or if you expect your income to increase to cover any potential rise in the interest rate.

  • Generally, the interest rate when you take out your loan will be lower than a fixed-rate mortgage. Please note that this is true initially, not necessarily long-term.
  • Since an ARM rate rises and falls depending on the prevailing interest rate, your mortgage payment will rise and fall accordingly. If your income is not sufficient to cover the highest possible payments, then this option is not for you. On the positive side, the lower initial payments will allow you to qualify for a larger loan than if you choose a fixed-rate. The downside is that your payments will increase if/when the rates go up.
  • Typically, ARM interest rates are tied to a specific financial index (such as Certificate of Deposit index, Treasury or T-Bill rate, Cost of Funds-Indexed Arms or COFi, or LIBOR [London Interbank Offered Rate]) and your payment will be based on the index your lender uses plus a margin, generally of two to three points. Get the formula used by your lender in writing and make sure you understand what it means.
  • Fortunately, the amount an ARM can increase is limited. There are “caps” on how much your lender can increase your rate, both for a period of one year and for the life of the loan. Plan ahead, and have your lender calculate what the maximum payment would be if your rate went to the highest amount allowed by the cap for your particular mortgage. If you are not confident you’ll be able to pay that amount on a monthly basis, perhaps you should reconsider this type of loan.


Convertible ARMs:

If neither the fixed-rate or the adjustable-rate mortgage seems like the best option, perhaps the convertible ARM will be right for you. This alternative combines the initial advantage of an ARM with a fixed rate after a predetermined number of years. Obviously, this type of mortgage has more advantages when the initial interest rate is low and the future rate is not guaranteed.

  • Government Loans: Another mortgage option available to some people is a government loan, providing that you meet the qualifications for these loans.
  • VA Loans: Veterans may qualify for a loan from the Veterans Administration. There is a limit on the amount you can borrow, so this option works best for those buying a lower priced home.
  • FHA Loans: The Federal Housing Association offers loans to lower-income Americans. Look for the phrase “FHA approved” when looking at ads for homes.


February 19, 2025
Guelph is a fantastic place to enjoy outdoor winter activities, and tobogganing is one of the best ways to embrace the snowy season. Whether you’re looking for a gentle slope for the kids or a thrilling ride down a steep hill, Guelph has plenty of great options. Here are some of the top spots for tobogganing in the area:  1. Exhibition Park One of the most popular tobogganing spots in Guelph, Exhibition Park offers a great hill with a moderate incline, making it ideal for families and younger children. The park is centrally located and has plenty of space for winter fun. 2. Mollison Park Located in the city’s west end, Mollison Park features a well-known sledding hill that offers a good mix of fun and safety. The hill isn’t too steep, making it a great choice for all ages. 3. Kortright Hills Park For those looking for a longer ride, Kortright Hills Park has a fantastic slope that provides a smooth and enjoyable run. The park’s natural setting makes it a beautiful spot for winter recreation. 4. MacAlister Park Another family-friendly location, MacAlister Park has a gentle slope perfect for younger children who are just learning to enjoy the thrill of tobogganing. It’s a quieter location, making it a great place for a relaxed outing. 5. Riverside Park This popular Guelph park has a designated tobogganing area that attracts sledders from all over the city. The varied terrain provides options for both beginner and more experienced riders, making it a great all-around choice. Safety Tips for Tobogganing Always wear a helmet, especially for young children. Ensure the hill is free of obstacles, such as trees and rocks. Sled during daylight hours or in well-lit areas. Dress warmly and wear appropriate winter gear. Supervise children at all times for a safe and fun experience. These top tobogganing spots in Guelph offer a range of experiences for sledders of all ages. So grab your sled, bundle up, and enjoy the winter season in one of Guelph’s best tobogganing locations!
February 19, 2025
With discussions surrounding potential tariffs on Canadian imports, stakeholders in Guelph’s real estate market are evaluating the possible consequences. If implemented, these tariffs could significantly affect housing costs, development projects, and market dynamics in Guelph and the surrounding areas. Possible Increase in Construction Costs One of the most immediate impacts of tariffs would be rising costs for construction materials such as lumber, steel, and aluminum. Since a large portion of these materials is imported from the U.S., tariffs could lead to price hikes, ultimately increasing the cost of building new homes. If material prices rise, builders may pass those costs onto buyers, potentially adding thousands of dollars to home prices. Industry experts predict that if tariffs are introduced, the additional cost per single-family home could range from $10,000 to $25,000. Potential for Higher Mortgage Rates Economic uncertainty caused by tariffs could influence the Bank of Canada’s interest rate policies. If inflation rises due to increased costs on imported goods, the central bank may opt to raise interest rates to curb inflation. Higher interest rates would directly affect mortgage rates, making borrowing more expensive for homebuyers in Guelph. With rising mortgage costs, buyer affordability could take a hit, leading to reduced demand and a slower real estate market. Those looking to purchase a home may need to reconsider their budgets or lock in rates before any potential hikes occur. Possible Slowdown in New Developments Developers in Guelph may hesitate to launch new housing projects if tariffs increase construction costs. A more expensive development process could lead to project delays or cancellations, tightening housing supply in an already competitive market. If fewer homes are built, demand for existing properties could rise, potentially driving up home prices. This would further strain affordability for first-time homebuyers and those looking to enter the market. Housing Market Uncertainty Even before any tariffs are imposed, the uncertainty surrounding trade policies can impact market confidence. Buyers and investors may adopt a wait-and-see approach, slowing down transactions and cooling off market activity. Conversely, if there is speculation that tariffs will push prices higher in the future, some buyers may rush to secure homes before the impact takes effect. This could create short-term market volatility, with a potential surge in demand followed by a slowdown. How Buyers, Sellers, and Developers Can Prepare Homebuyers : Consider securing mortgage pre-approvals early to lock in favorable interest rates before any potential hikes. If tariffs are implemented, it could make homeownership more expensive in the long run. Sellers : Monitor market trends closely. If tariffs lead to increased costs and reduced affordability, selling sooner rather than later might be advantageous. Developers : Explore cost-efficient alternatives for sourcing materials and streamline construction processes to mitigate potential price increases.  Conclusion While tariffs have not yet been imposed, their potential implementation could bring significant changes to Guelph’s real estate landscape. Rising construction costs, potential mortgage rate hikes, and a slowdown in new developments could all impact affordability and market stability. Buyers, sellers, and industry professionals should stay informed and prepared to adapt to possible changes in the housing market.
By Hudson Smith December 18, 2024
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