2. MORTGAGE INTEREST RATES

Two types of mortgages have different interest rate schedules: MLR (Minimum Loan Rate) and MRR (Minimum Retail Rate).

• MLR financing has an interest rate that a bank charges the highest quality customers and is used for long-term scheduled mortgages.
• MRR financing has an interest rate that a bank charges lower quality customers. The interest rate is not fixed for a definite term and there is no fixed repayment schedule until the principal has been paid .

In the long-term, MRR will allow some flexibility to repay the principle. The borrower can pay the interest according to their ability but this mortgage may not clearly fix the term according to which the principle must be paid. For a bank, an MLR will has lower risk because it fixes clearly when the mortgage is to be paid completely which is a guarantee that the bank will receive the principle with interest thus ensuring profit on the loan. This security is why banks charge lower rates on MLR than MRR, to persuade borrowers to opt for this repayment program.

Each bank charges different interest rates because they have different capital requirements and use different criteria for mortgage eligibility evaluation. Buyers should keep in mind interest rate history and if possible, should choose the bank that has a history with less fluctuation.