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Convertible mortgages
If you don’t want to stick with a closed or open mortgage for your entire term, you have the option to switch types
through a convertible mortgage.
Convertible mortgages allow the holder to transition between a closed or open type during their term. With some
lenders, it may also be possible to opt into a fixed rate mortgage if a variable rate was originally selected.

In cases where the market is in a falling interest rate environment like at the start of the pandemic, Hinojosa said
clients may opt into a convertible mortgage so they can capture a lower interest rate in the near future. Clients who
also anticipate selling their home and using the funds to make a substantial payment on their next property may also
opt for a convertible mortgage type.
“It gives the client the ability to take that large chunk of money from the proceeds, pay down the open portion of that
new house and then convert whatever is remaining over into a more faithful term,” explained Hinojosa.

Hybrid mortgages
If you’re debating between fixed and variable interest rates, a hybrid mortgage can offer a bit of both.
With a hybrid mortgage, you have the ability to have multiple styles of mortgages under one umbrella, which
can include a combination of fixed and variable rates, a line of credit, and other financial products. If a client isn’t
comfortable with the risks of a fully variable rate mortgage in the event interest rates rise, but wants some of the
stability offered with a fixed rate, a hybrid mortgage fuses the two together.

“It allows you to soften that risk by splitting your mortgage off between fixed and variable, whatever percentage that
you want,” said Hinojosa. “A little bit of fixed, a little bit of variable. You’re getting the best of both worlds there.”
Reverse mortgages

Exclusive to home owners aged 55 and older, a reverse mortgage is a loan connected to the value of the property and
allows older Canadians to convert their home’s equity into a lump sum of cash or regular payments.

Mortgage holders with a fixed income like a pension who want to use cash for renovations, living expenses, or to give
as living inheritances to family are often interested in reverse mortgages, Hinojosa explained. These mortgages are
also becoming increasingly popular as the Baby Boomer generation lives longer and enjoys an active lifestyle in their
homes.

Penalties for breaking a reverse mortgage vary by lender. If the home is sold or the occupant dies, the balance of the
loan is due, which can be settled through the sale.

What else should you know about mortgage types?

Whether you’re a first-time home buyer or your mortgage term is coming up to maturity, Hinojosa said it’s important
to work with a mortgage professional who you can have an in-depth conversation with about your finances, goals,
and options. Be sure to ask questions about all of your mortgage’s features, including pre-payment options and the
costs to break your mortgage, as well as clarification on interest rates.
Whenever your mortgage term comes up for renewal, Hinojosa said it’s a vital moment to reassess your life goals and
priorities and how this affects the mortgage type you may have. As your life evolves, the mortgage type you signed
up for during your last term may no longer be the best fit for you in the future, which might warrant a change.
“Like any of us, life changes. What your goals were five years ago will always be different five years moving forward
because your life is moving forward. Your goals are going to be different,” said Hinojosa.

If you’re looking for referrals on mortgage brokers, a REALTOR® is a great source for financial experts as well as the
most up-to-date advice on your local housing market. ■

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