The basics of any mortgage loan remain the same, but there are still slight variations in each type. A review of some common mortgage loans is given below.

Pre Approved Mortgage

A pre-approved mortgage is not a final deal. It is just a certificate that can help you in analyzing the maximum amount you can afford to borrow.  This even guarantees you a rate hold which means that you will be able to avail the mortgage rate stated in the certificate for the next four months, even if the rates increase. A pre-approved mortgage does not cost anything, so it should be availed.

Conventional Mortgage

In this type of mortgage, the loaned amount is not more than 80% of the selling price or the appraisal value of the home. CMHC insurance is not mandatory for conventional mortgages.

High-Ratio Mortgage

A high ratio mortgage is also termed as the CMHC insured mortgage. The loaned amount is more than 80% of the selling price or the appraisal value of the home. This mortgage must be insured so that the lender can be protected if you default on the payments in the future. The premiums vary as a percentage of the mortgage amount; the more the amount, the greater the premium.

First and Second Mortgages

A first mortgage is an initial debt on the house. If you cannot repay it back in a fixed time period, the first lender will have a legal right to the house and can recover his losses with it. After this, a second mortgage can also be registered at a higher rate. Naturally, his right on the property will be second if you default on the payment.

Open Mortgages

An open mortgage can be repaid back anytime without any penalties. The total term is usually of six months or 12 months, and the interest rates are also higher.

Closed Mortgages

A closed mortgage is characterized by fixed months, and can last for a couple of years. The interest rates are also less than what they are in open mortgages. You will have to pay a penalty if you pay off the mortgage before it matures.

Fixed-Term Mortgages

Fixed mortgages offer the same interest rate and monthly payments throughout the whole term.

The Adjustable Rate Mortgage

An Adjustable Rate Mortgage or ARM offers a mortgage rate which is dependent on the prime. Thus the interest amount will vary during the whole period, but the principal amount will be the same.