For most of us, trying to make sense of the terminology surrounding mortgages can be mind boggling to say the least. But, with this short guide to the most commonly used words and terms, you can begin to turn nonsense, into sense:
This is the period in which you will be required to pay off your mortgage in its entirety, with all conditions met and all payments made on time. How much your monthly payments are, is determined by the length of the amortization period.
These describe all of the fees associated with buying a home, such as legal fees, transfer fees, and disbursements, and are due on the day the buyer officially takes ownership of the home.
Not typically requiring mortgage insurance, these loans are equal to or less than 80% of the value of a property.
This is the amount of money that buyers use to show they are serious about purchasing a property, and is held by the real estate agent or a lawyer until the point of sale.
Increasing over time, equity is the cash value of a home once the owner has subtracted the mortgage or other debts owed on the property.
Fixed rate mortgage
With an interest rate that is locked in, fixed rate mortgages never change for the duration of the term.
This term describes an individual with an established credit rating and earnings that are enough to repay the loan on the borrowers behalf, should the borrower not be able to.
High ratio mortgage
These mortgages come from regulated lenders and must be insured against default with mortgage loan insurance; they are for more than 80% of the value of the property.
Interest adjustment date
Interest adjustment is the amount of interest accrued between the closing date and first day of the initial mortgage payment; the date is naturally, the day on which it will begin.
Your mortgage loan must be paid in full, renegotiated or renewed by this date.
If your down payment is less than 20% of the purchase price, the premium describes the amount you would have to pay to an insurer to insure the mortgage against default. Generally, the smaller the down payment, the higher your insurance premiums will be.
This describes the amount you will borrow for a loan.
Once the term of your mortgage has ended, this will mean that it’s up for renewal, and you can do so with the same lender or transfer it to another at no extra cost.
A term is the period of time covered by a mortgage agreement, and common terms are 6 month, 1,2 to 4, 5, 7 and 10 years.
This registered document shows all legal encumbrances filed, and who legally owns the property.
Variable rate mortgage
With a variable mortgage, the interest rate can go up or down depending on market conditions, and while the payments will usually stay the same, the amount of each payment towards the principal or the interest on the loan, changes as the rates go up or down.
Working with someone professional like a mortgage broker, is a fantastic way to help understand the entire mortgage process, and that, coupled with your knowledge of the terms listed above, should help you get the right mortgage for your circumstances and needs.