Choosing the Right Financing Option

You have many options to choose from… but we say, relax! Don’t be intimidated! Our role at Domus Financial is to help you identify which option suits you.

MORTGAGE TYPE FEATURES WHOM IT SUITS
Variable Rate
  • The mortgage interest rate (“Rate”) is based on the prime commercial lending rate (“Prime”) of Canadian chartered banks
  • If and when Prime changes, the Rate changes on the first day of the month after Prime changes
  • The instalment payment does not change if the Rate changes
  • The instalment payment is comprised of both interest and principal repayment
  • May be converted to a fixed-rate mortgage loan at any time
  • May be prepaid in full at any time upon paying a bonus equal to 3 months’ interest
  • The Rate is usually lower than fixed Rates
  • The term of the mortgage is usually 3 years or 5 years
  • Homeowners who wish to take advantage of Rates falling, or staying below fixed Rates
  • Homeowners who may wish to sell and buy again in a short period of time (i.e. 2 to 4 years)
  • Homeowners who may wish to pay the loan off as quickly as possible (HINT: Take advantage of monthly prepayment privileges by setting the monthly payment the same as if the loan carried a fixed Rate)

DISADVANTAGE

  • If the Rate rises, and a negative amortization occurs, then the lender will adjust the mortgage payment
Adjustable Rate
  • The mortgage interest rate (“Rate”) is based on the prime commercial lending rate (“Prime”) of Canadian chartered banks
  • If and when Prime changes, the Rate changes on the first day of the month after Prime changes
  • The instalment payment changes if the Rate changes
  • May be converted to a fixed-rate mortgage loan at any time
  • The instalment payment is comprised of both interest and principal repayment
  • May be prepaid in full at any time upon paying a bonus equal to 3 months’ interest
  • The Rate is usually lower than fixed Rates
  • The term of the mortgage is usually 3 years or 5 years
  • Homeowners who wish to take advantage of Rates falling, or staying below fixed Rates
  • Homeowners who may wish to sell and buy again in a short period of time (i.e. 2 to 4 years)
  • Homeowners who may wish to pay the loan off as quickly as possible (HINT: Take advantage of monthly prepayment privileges by setting the monthly payment the same as if the loan carried a fixed Rate)

ADVANTAGE

  • The amortization will not be affected if the Rate rises or falls

DISADVANTAGE

  • The instalment payment will change as the Rate changes
Fixed Rate
  • The Rate and instalment payment stay the same throught the term of the mortgage.
  • The term may be in a range between 6 months to 25 years
  • Homeowners who would not comfortable with the potential for the Rate or instalment payment to change
  • Homeowners whose income will not change in the foreseeable future
Line of Credit
  • The mortgage interest rate (“Rate”) is based on the prime commercial lending rate (“Prime”) of Canadian chartered banks
  • If and when Prime changes, the Rate changes on the first day of the month after Prime changes
  • The instalment payment changes if the Rate changes
  • May not necessarily be convertible to a fixed-rate mortgage loan
  • The minimum required instalment payment is interest only
  • Payments on account of the principal balance owing may be paid at any time without notice or bonus of interest
  • The Rate is usually lower than fixed Rates
  • Homeowners who wish to take advantage of Rates falling, or staying below fixed Rates
  • Homeowners who may wish to sell and buy again in a short period of time (i.e. 2 to 4 years)
  • Homeowners who may wish to pay the loan off as quickly as possible

ADVANTAGE

  • The loan is not amortized

DISADVANTAGE

  • The instalment payment will change as the Rate changes
  • The loan is a ‘demand loan’, which means that the lender may demand payment at any time (HINT: Although this is possible, as long as the loan is repaid without default, it is rare that a lender demands repayment)
Combo Fixed Rate / Line Of Credit
  • The mortgage contains 2 credit facilities: a portion of it bears a fixed Rate and the other portion bears a fluctuating Rate
  • The fixed-Rate portion requires a constant instalment payment to be paid
  • The fluctuating-Rate portion requires minimum instalment payment of only interest
  • As the principal of the fixed-Rate portion is reduced, it may be re-advanced against the fluctuating-Rate portion
  • If and when Prime changes, the fluctuating Rate changes, as does the minimum instalment payment that is required to service the fluctuating-Rate portion
  • Homeowners who want to benefit from the features of both types of mortgages
  • Homeowners who may wish to sell and buy again in a short period of time (i.e. 2 to 4 years)
  • Homeowners who may wish to use the equity in their home to finance major purchases (HINT: The Line of Credit portion may be used in lieu of high-interest credit cards, or, to pay off the cards)

DISADVANTAGE

  • BE CAREFUL: Some lenders register mortgage documents that specify loan amounts that are greater than the amount borrowed, or the loan limits that are available. This can be problematic if a homeowner wishes to borrow a second mortgage loan for whatever reasons.