All that mortgage terminology out there can become a bit confusing – it may seem like a foreign language when your mortgage broker starts throwing around words like amortization, closed term, ir conventional and high ratio mortgages. Here’s a quick guide to help you figure out what your mortgage brokering is saying to you!
The money that you pay up front for a house.
• Open mortgage – Lets you pay off your mortgage in full or in part at any
time without any penalties.
• Closed mortgage – Offers limited (or no) options to pay off your mortgage
early in full or in part, but it usually has a lower interest rate.
How often you make your mortgage payments. It can be weekly, every
two weeks or once a month.
• Conventional mortgage – A loan that is equal to or less than 80% of the
lending value of a home. This requires a down payment of at least 20%.
• High-ratio mortgage – A loan that is over 80% of the lending value of
a home. This means the down payment is less than 20% and will likely
require mortgage loan insurance.
An option that lets you transfer or switch your mortgage to another home
with little or no penalty when you sell your existing home. Mortgage loan
insurance can also be transferred to the new home.
The process of paying out the existing mortgage for purposes of
establishing a new mortgage on the same property under new terms and
conditions. This is usually done when a client requires additional funds.
The client may be subject to a pre-payment cost.
• Fixed rate – The rate doesn’t change for the term of the mortgage.
• Variable rate – The interest rate fluctuates with market rates.
• Protected (or capped) variable rate – The rate fluctuates but will not rise
over a preset maximum rate.
The length of time you agree to take to pay off your mortgage (usually
25 years).
A written agreement that you will get a mortgage for a set amount of
money at a set interest rate. Getting a pre-approved mortgage allows you
to shop for a home without worrying how you’ll pay for it.
Once the original term of your mortgage expires, you have the option
of renewing it with the original lender or paying off all of the balance
outstanding.
The ability to make extra payments, increase your payments or pay off
your mortgage early without incurring a penalty.
The length of time that the options and interest rate you choose are in
effect. When the term is up, you can renegotiate your mortgage and
choose the same or different options.
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