HomeMortgageMortgages 101: What to know about fixed vs. variable rates in Canada

Mortgages 101: What to know about fixed vs. variable rates in Canada

Illustration by Melanie Lambrick

Selecting a mortgage is one of the biggest – and most stressful – financial decision made by many Canadians. But a clear understanding of a few basic terms and concepts can help allay some the anxiety. Here’s a primer on the basics of mortgages, along with insights into the current market.

THE BASICS

What is a mortgage?

In plain terms, a mortgage is a loan most often used to buy a house, condo or some other type of property. It’s a set amount of money provided by a lender (often a bank, credit union or mortgage company), and is repaid over a set period of time (referred to as the amortization, often 25 years). The mortgage usually includes the purchase price minus the down payment, plus mortgage insurance if your down payment is less than 20 per cent or if required by a lender.

Payments include interest plus a portion of the principal and might…

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