Residential Mortgage Products & Features

Conventional vs. High Ratio

Residential mortgages can be initially divided into conventional mortgages and high ratio mortgages. Regulated lenders can underwrite conventional mortgages that do not exceed 80% of the property lending value. When loan-to-value ratio exceeds 80%, the mortgage is considered high ratio and must be insured against default. Unregulated lenders do not fall under conventional/high ratio guidelines.

Fixed & Variable Rate Mortgages

The standard residential blended mortgage is typically a fixed rate mortgage. For example, a blended principal and interest payment fixed throughout the term.

The variable rate mortgage typically fluctuates with the lender’s prime rate. Lenders may offer an introductory fixed low rate then moves to prime in a few months. It does vary with various lenders.  Most variable mortgages allow conversion to fixed.  

Open vs. Closed

A fully closed mortgage does not permit principal payments before maturity. But there are most lenders permit the stipulated payments on regularly-scheduled payments dates. For example, a 20/20 option provides that up to 20% of the original mortgage amount can be paid on anniversary dates and periodic payments can be increased 20% at the same time. The balance of the mortgage remains closed.

A fully open mortgage permits principal payments without notice or penalty.