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By Zhanna Krupnikov
Under Variable rate mortgages, the interest rate varies according to prevalent market conditions. Mortgage lenders in Richmond Hill also offer variable rate mortgages, which come with a fixed rate for several years, and then change to another rate, either variable or fixed, for the remaining period.
One benefit of variable rate mortgages in Richmond Hill is that they feature lower rates and payments during the initial loan term. Please note that, while it is true that a variable rate mortgage provides lower interest rate, it applies only in the short-term. This is a very dangerous position to be in, as you will be stuck with a high payment, further increasing every month, to perhaps a point where you can no longer afford even the monthly payments. Missed payments along with no home equity will strike a blow to your credit rating and you will not qualify for traditional refinancing mortgages and would be risking foreclosure.
Since variable rate mortgages are determined by market indices, they allow you to take advantage of falling rates without having to resort to refinancing in Richmond Hill.
Variable rate mortgage in Richmond Hill offers an inexpensive solution to borrowers who do not intend on staying in one place for a long time or intend to pay off their mortgage or sell their home before the expiry of the fixed rate period.
Borrowers are tempted with the low introductory payments under variable rate mortgages. However, if you are not careful and rely on the wrong mortgage lender in Richmond Hill, this kind of mortgage could turn into a nightmare.
The main reason why borrowers must exercise extra caution is that, after the expiry of the fixed rate period, the interest rate increases to an abysmal amount causing your monthly payments to rise by hundreds of dollars. This can throw you into a hazardous tailspin.
Also, in case of economic meltdown, your property value is likely to crash. In such a scenario, if you had refinanced your property value, using a variable rate mortgage, you will end up owing more than the adjusted value of your home. This is a very dangerous position to be in, as you will be stuck with a high payment, further increasing every month, to perhaps a point where you can no longer afford even the monthly payments. Missed payments along with no home equity will strike a blow to your credit rating and you will not qualify for traditional refinancing mortgages and would be risking foreclosure.
In summary, variable rate mortgages have their fair share of pros and cons. It is important for you to do your research, weigh your decision after a careful analysis and stay tuned in to the market. It is advisable to refinance before the expiry of the fixed rate period or you may be in for more than a rude shock!
For more information, you may contact:
Allegro Mortgages Corp. – Best Broker for All Your Financing Requirements (416) 987-0008
Check out amortgages.ca for information on different refinancing options.
About the Author: Please visit the website Amortgages.ca if you are interested to learn more about mortgage rate Richmond Hill or mortgages Toronto. The website also provides information on mortgage for self employed.
Source: isnare.com
Permanent Link: isnare.com/?aid=581715&ca=Finances
