March 2, 2022, marks the beginning of the interest rate hike, and Canadians can barely see how high it would go. So, knowing that the rate is going up, does it mean it is bad to get a mortgage now? Well, this is dependent on the type of rate that is chosen. There are two types of mortgage rates: fixed and variable.
Fixed-Rate Mortgage
Fixed-rate mortgages have an interest rate that remains the same throughout the term of the mortgage. This allows for you to be able to easily plan, budget, and have a better level of expectations on your monthly expenses. A fixed-rate option is a worry-free option, especially during times of uncertainty such as rate hikes or rate fluctuations.
Variable-Rate Mortgage
Variable interest rates on the other hand move throughout the term of the mortgage. While this does make it more difficult to plan monthly expenses, variable rates tend to be lower than fixed-rate mortgages. In fact, variable rates were above the fixed rate only at two points in the past decade. Therefore, variable rates tend to make mortgages more affordable with lower rates.
Another concern that comes with the rate hike is the rising difficulty of Canadians getting their mortgage approved from big banks, given the inflated qualifying payment. What a lot of people miss during this challenging time could be the one opportunity that helps them to get a home. That is, a private mortgage.
Private mortgages often offer the same structure, terms, and requirements as big banks. There is a common misconception that private mortgages are associated with high risks or unreliability. As a matter of fact, private mortgages take on more risks themselves than conventional big banks. They offer customizable loans to Canadians with lower incomes, recovering credits score, and high debts. Private mortgages act as a bridge to fill the gaps of those in need.
So, what is so good about private mortgages?
- Private mortgages offer an easier approval process, and lower requirements on income and debt-to-income ratio.
- Private mortgages offer a helping hand for those who are declined by big banks due to their strict policies.
- Private mortgages offer a chance for the homeowner to build or rebuild their credit score.
If you are facing challenges obtaining a mortgage from a traditional lender, do not let that deter you from your goals and plans. Leap Financial is able to offer you a helping hand to keep you on track with the same level of reliability.