Types of Mortgages
Conventional, High Ratio and Second Mortgages
In order to qualify for a conventional mortgage, banks will require you to have at least 25% down payments of the desired properties price. Above all the mortgage loan cannot be greater than 75% of the entire property value.
Aside from conventional, there is another option being, High Ratio Mortgages, which is when the down payment is lower than 25%. In a High Ratio Mortgage, you will be most likely required to obtain Loan Insurance which can increase the rate from anywhere between 0.5% – 3.75%. Lastly, in a High Ratio Mortgage you may not be given the chance to exceed a certain purchase price.
Additional Bank Loan Mortgage
A Second mortgage is an additional bank loan on top of the existing mortgage. In this scenario your first mortgage takes priority, and in case of mortgage default the first mortgage lender gets paid out first. In order for banks to compensate for a high risk in their loan they tend to have increased rates in comparison to a typical mortgage.
The type of mortgage and rate an individual will receive is solely based on their finances and assets. Depending on certain banks and types of banks, rates and requirements will vary in every circumstance.