|
Glossary of Terms
Acceleration
This is an
expression that is usually used when a person chooses to pay a mortgage
on a weekly or a bi-weekly basis although it can apply to any repayment
program. All mortgages are drawn with a requirement that you make
payments monthly, however, the bank will usually agree to administer the
mortgage with some other payment frequency. If you choose to pay
bi-weekly and pay one half of the required monthly payment each
bi-weekly period, you are paying the equivalent to one extra monthly
payment per year and therefore paying off your mortgage more quickly. If
you choose to pay weekly and pay one quarter of a monthly payment each
weekly period you get the same benefit. Be sure to arrange that your
mortgage payment dates match your pay days!
top
Amortization
The period
of time it takes to pay off your mortgage in full. Typically you would
choose the longest amortization available which is 25
years.
top
Appraisal
A process
which determines the market value of property. This will usually be
performed by a professional appraiser who will prepare a comprehensive
report complete with photographs of the home. When you deal with
Mortgage DepotŪ, one copy will be given to you for your
records.
top
Assumable
When a
mortgage is assumable, a buyer may take over the responsibilities and
benefits of the sellers' existing mortgage. This may be advantageous to
a buyer if the interest rate on the mortgage is below current market
rates. Before assuming a mortgage, approval must be obtained from the
lender.
top
Blended
Payment
A mortgage
payment that includes both interest and principal repayment. The amount
of interest taken from each payment reduces while the amount applied to
principal reduction increases over time, but the payment remains
constant.
top
Closed
Mortgage
A mortgage
may be an open or closed mortgage. An open mortgage usually charges a
higher interest rate but may be paid off at any time without penalty
while a closed mortgage may not be paid off during the term without
penalty. Be careful as some mortgages may not be paid off even with a
penalty before the maturity date. See also Prepayment
Penalty and Maturity
Date.
top
Closing
Costs
Expenses,
in addition to the purchase price of the home, that are payable on the
completion date. These costs will include appraisal, legal and survey
costs. Be sure to talk to your Mortgage Depot specialist for a thorough
review of expenses.
top
Commitment
letter
Written
notification from the lender to the borrower that approves the mortgage
request and which should include the amount of the mortgage, interest
rate, payment and all terms and conditions.
top
Completion
Date
The date on
which your purchase will complete and money will change hands between
you and the sellers.
top
Conventional
Mortgage
A mortgage
loan up to a maximum of 75% of the purchase price is referred to as a
conventional mortgage. Any mortgage in excess of 75% must be insured
against default. See also High
Ratio Mortgage.
top
Gross Debt Service
Ratio (GDS)
The
percentage of your gross income which you will be using to pay for the
mortgage payment including property taxes. See also Total
debt service ratio (TDS).
top
High Ratio
Mortgage
A mortgage
where you have a downpayment of less than 25% of the purchase price.
This type of mortgage must be insured against default. See also Conventional
Mortgages.
top
Interest Adjustment
Date
The date
from when the lender will start collecting interest. Your regular
payments will commence one payment period after this date. For example,
if you have chosen to make bi-weekly payments, your first payment will
come due two weeks after the Interest Adjustment Date. When you sign
your mortgage papers the bank will collect from you an "Interest
Adjustment" which is a calculation of interest from the Completion Date
to the Interest Adjustment Date.
top
Loan to Value
Ratio
The amount
of the mortgage expressed as a percentage of the value of the home. For
example, if you wish to borrow $190,000 on a home you are buying for
$200,000, the Loan to Value Ratio is 95%.
top
Maturity
Date
The last
day of the term of your mortgage agreement. On the Maturity Date the
mortgage must be paid in full, renewed with the same lender or
transferred to a new lender. At Mortgage DepotŪ we are constantly
searching the market for the best terms available for a free mortgage
transfer to compare with what your present lender is
offering.
top
Mortgage
A mortgage
is actually a document which is registered in Land Titles Office and
provides evidence that you have given your home as collateral to a
lender to secure a loan. In practice, the loan itself is usually
referred to as a mortgage.
top
Mortgagee
The lender
who provides a loan secured by a mortgage.
top
Mortgagor
A person
who takes out a loan which is secured by a
mortgage.
top
Net Worth
The
difference between what you own (assets) and what you owe (liabilities)
is called your net worth.
top
Portable
A portable
mortgage is a mortgage that can be transferred from one property to
another. This is particularly useful if you sell one home and buy
another.
top
Prepayment
Penalty
Unless it
is open, the mortgage may not be paid off before the Maturity Date
without paying a Prepayment Penalty. Sometimes the calculation of the
penalty can be complex and it would be better to talk to your Mortgage
DepotŪ specialist than to attempt to explain it in great detail here. Be
very careful when negotiating a mortgage as some mortgages cannot be
paid off atall before the Maturity Date. See also Closed
Mortgage and Maturity
Date.
top
Prepayment
Privilege
When you
negotiate a closed mortgage, you are entering into an agreement with the
lender that you will not pay off the mortgage during the term. In return
the lender agrees to maintain the same interest rate throughout the
term. However, most mortgages allow certain prepayment privileges such
as an annual prepayment of a certain percentage of the mortgage amount.
or an annual increase in the mortgage payment. An open mortgage will
usually cost more but allows you to repay the mortgage in full or in
part at any time without penalty. See also Closed
Mortgage and Prepayment
Penalty.
top
Principal
The amount
of money actually borrowed.
top
Survey
A
certificate showing the home and other buildings relative to the
property boundary.
top
Term
The length
of time that the lender guarantees the interest rate. At the end of the
term, the mortgage comes up for re-negotiation. See also Maturity
Date.
top
Total Debt Service
Ratio
The
percentage of your gross income which you will be using to pay for the
mortgage payment including property taxes and all other debt payment
such as credit cards and bank loans. See also Gross
debt service ratio (GDS)
top
|
