Interest Only Mortgages

Specialty Mortgages

Interest Only Mortgages and Home Equity Lines of Credit

Interest Only

Interest only mortgages are common in Canada. They have become more mainstream in the last 5-7 years since the Prime lending rate in Canada has been undeniably low. An interest only mortgage is a basic loan secured against a residential property that does not have a fixed payment (a blend of interest and principal like 98% of all mortgage products in Canada). It is a loan that has an outstanding balance owing which is calculated on an interest only payment against the prime lending rate. This type of mortgage financing can be compounded monthly but still results in a much lower payment. Another positive aspect of the interest only mortgage is that it usually can be converted to a fixed portion at any time, thus turning it into a blended payment of interest and principal which usually includes an amortization period, giving it an end date.

An interest only mortgage is usually used when someone wants to realize more of a cash flow on the property (like on a rental property) or if they know they will have the loan for a short period of time and will want to pay it off, so as not to make larger payments in the interim.

Apply for an Interest Only Mortgage

A HELOC (Home Equity Line of Credit) is another similar interest only product. It has some different aspects to it but is essentially an interest only secured loan as well. The HELOC though can be re-advanced many, many times if the balance is paid down. Meaning, if the HELOC has been set at 100,000 dollars for example and the loan amount of 100,000 dollars has been paid down, it can be reused up to 100,000 dollars again without having to re-qualify. It is like a regular Line of Credit that stays active as long as you own the home or do not purposely discharge it. This is typically an open mortgage loan which means it can also be paid off at any time without any penalty or discharge fees. These are very attractive loans when it comes to borrowing money quickly against your home for other purposes such as investment top up, second home purchase, debt consolidation, etc.

A qualified, knowledgeable Mortgage Professional can advise on the differences between the 2 products and can assist when it comes to putting this loan request together for you.

HELOC And Interest Only Mortgages At A Glance

  • In these types of loans, the principle amount is not being reduced, and payments cover only the interest accrued. This results in smaller overall payments.
  • The compounding period is monthly instead of semi-annually, but despite this, the payments are significantly lower than normal mortgages.
  • You do not build equity in your home as quickly as with other mortgages, but the money saved can be put to use in other places.

Alberta Equity has helped over 50,000 people find and qualify for the best mortgages in Canada for over ten years. We do all of the heavy lifting and ensure that you get the best mortgage rates and product features available. Apply online for a free, no obligation consultation.