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MORTGAGE

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MORTGAGE

Here are some key points

We know that when it comes to buying a home there is so much to know about. It is crucial that you take the time you need to educate yourself so you may be comfortably prepared during the process. We have put together, key pointers that are necessary for every home buyer to know.
Due to variable external circumstance, the mortgage rates varies from year to year. Currently most banks are sitting at an average rate of 5.7% . That being said other factors such as a person’s credit history will come into play when the lender decides on what will be the closing interest rate a client will be provided with.
It is important to shop around and compare mortgage rates before buying, as it not only fluctuates by bank but also by territory. It is ideal to get the lowest rate possible as that would in return help the home buyer save an extensive amount of money in the long run. That being said, keep your options open!
MORTGAGE EDUCATION GUIDE

The Basics

Let’s start with the basics, what exactly is a mortgage? A mortgage is a a type of loan often used to buy a home or other property. The loan is usually paid off during a period of many years.
Alberta mortgage rates fluctuate constantly and there are numerous factors that influence the rates the main one being national and global economy. The two main economic factors affecting mortgage rates are known to be the Bank of Canada’s overnight rate (benchmark rate) and the bond market.
Inflation is a prime example of what causes the BoC to either rise or go down. When the economy is in a fragile state the overnight rate goes up, in contrary situation when the Canadian economy is flourish the BoC instills the overnight rate to be low which in turn allows economical growth. When it comes to the bond market it is a marketplace for debt securities that are issued by the government or corporations. When interest rates rise, bond values decrease which puts banks at a critical position as they may loose money. In order to offset this, banks raise interest rates, but only on what is known as fixed-rate mortgages.

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THE DIFFERENT TYPES OF MORTGAGE RATES

Type 1 Type 2 Type 3
Fixed Rate Mortgage

Fixed mortgage rates are when the interest rate stays the same for the entirety of your term, even when the market fluctuates. These rates tend to be higher than variable interest rates but offer less risk and can provide a sense of security. A fixed rate can be a good choice for someone who is risk averse and prefers to have regular, predictable mortgage payments.

Variable-Rate Mortgage

Variable mortgage rates can increase or decrease throughout the length of your term, depending on your lender’s prime rate. It is often a popular choice amongst home buyers as it may seem like the better deal because they are lower than fixed rates which in return allows someone to save a lot of money. That being said, it can be tricky because if the economy fluctuates and in turn causes the mortgage rate to go up the buyer will have to be comfortable and ready to make those specified payments.

Hybrid -Rate Mortgage

Another option is a hybrid mortgage, which is sometimes called a combination mortgage. For these mortgages, one portion of your mortgage is subject to a variable rate and the other portion is at a fixed rate of interest. This kind of mortgage can help moderate the impacts of fluctuating interest rates in a particularly turbulent or uncertain economy.

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