Use this calculator to generate an amortization schedule for a interest only mortgage. Quickly see how much interest you will pay, and your principal balances. You can even determine the impact of any principal prepayments! Press the report button for a full amortization schedule, either by year or by month.
Many people across Canada are looking to purchase a new home. Buying a new home is such an exciting experience; however, it is a costly investment. Therefore, borrowers need to consider all options, so they can save as much money as possible. One option that people have is an interest only mortgage.
An interest-only (IO) mortgage involves the borrower paying only the interest on the loan for a specific amount of time. Individuals will usually pay interest from 5-7 years. After the term is complete, consumers can choose to refinance the loan or begin paying off the principal balance. People need to keep in mind that if rates rise they can expect to have a higher monthly payment even if they refinance into another IO loan.
Some of the benefits of this type of loan include:
Interest only mortgage do have some drawbacks. Some of the disadvantages include:
Potential home borrowers in Canada should research their options to see what type of mortgage is best for them. Individuals should weigh their choices and consider the possibilities. After a borrower has decided on the best mortgage, they can find the home of their dreams.
People purchasing a home in Canada need to be familiar with the different types of loans available. Here are some types of mortgages in Canada:
Conventional Mortgage
This type of loan usually requires a 20% down payment. Some companies require a person to have home insurance.
Fixed-Rate Loans
This type of mortgage has an interest rate that does not change for a certain amount of time. The rates for this type of mortgage could be a little higher than those of other types of loans. The most popular type of mortgage in Canada is a five-year fixed-rate loan.
Adjustable-Rate Loan
After certain periods of time, the rate is adjusted according to the current prime rate. Both the monthly payment and the interest rate could change. If interest rates rise, then the borrower will face monthly payment increases.
Variable-Rate Mortgage
The interest rate could change with this loan; however, the monthly payment amount will not increase. If the rate increases, the additional payment will be applied to the principal balance of the loan. Interest rates are normally lower with this type of mortgage.
Closed Mortgages
In many cases, these loans cannot be paid off before the life of the loan expires unless the borrower wants to pay a large penalty.
Open Mortgages
These loans are more flexible. The interest rate might be higher, but individuals will have flexibility on payments.
Convertible Mortgage
With this loan, borrowers can switch from an adjustable rate to a fixed rate, or they can switch to a shorter term.
Hybrid Mortgage
This loan combines a fixed rate with an adjustable rate. Some of the loan is paid at a fixed rate, and the other part is paid with an adjustable rate.
People who are looking to purchase real estate in Canada might wish to know some of the leading markets.
Guelph in Ontario is the Canadian city with the most attractive real estate options in the country. Homes in the city are priced at about 4 times the average household income. The unemployment rate in Guelph is low, and there are numerous booming companies.
Toronto is the largest urban area in the country, with one of the most diverse economies in the country and some of the highest real estate prices nationwide.
On the west coast the Vancouver metro area can be pricey. The city enjoys a relatively warm climate.
French speakers will enjoy Montreal, Quebec. For whatever reason real estate prices in Montreal have not increased anywhere near as fast as they have in Toronto & Vancouver.
Other recommended cities to purchase real estate include:
The Canadian government offers numerous incentives to help homebuyers be able to afford a new home. To save for a down payment, individuals can set up a tax-free savings account. In addition, people can make tax free withdrawals from their investment accounts to make a down payment on a home. For first-time homebuyers, the government allows people to borrow up to $25,000 for an RRSP account. First-time homebuyers are permitted to claim a tax credit on their income tax returns.
If a borrower fails to pay his payments on time, the lender will first call or send letters to remind him that a payment was due. Numerous letters will probably be sent. If a person continues to refuse to make payments, the home can be seized by the lender. They will eventually sell the property and use the funds to pay off the debt. Taking control of the property is undesirable for all parties involved, including the lender. Most lenders will work with borrowers to come up with a suitable payment arrangement plan. Therefore, people who are at risk of falling behind on their payments should immediately contact their lender. It is wise for borrowers to communicate with their lender.
