A Glossary Of Essential Mortgage Terms
Every industry has its own language and terms. These words and phrases can be confusing to anyone who is not part of the daily operations of a specific industry, and the mortgage business is no exception.
To help you understand the terms, acronyms, and phrases regularly used when purchasing a home, Leslie Joy Cairns- Joy in Mortgages – Keystone Mortgage Corp. has created this handy reference guide. Here you’ll find valuable information allowing you to comprehend and communicate your property needs effectively.
Loan to value (LTV) ratio
It is the ratio of the mortgage loan compared to the value of the home or the purchase price.
Debt service ratio
It is the percentage of a borrower’s gross income that will get used for monthly payments of principal, interest, heat, taxes, and condo fees (if any).
Mortgage term
It is the length of time during which a borrower is bound by the conditions of a mortgage contract, including the interest rates.
Amortization
It is the amount of time it will take to pay off a mortgage. The payments will cover both the principal and interest.
Mortgage insurance
It is an insurance policy that allows you to purchase a home for as little as 5% down. It is required when there is less than 20% put down and is paid in lump sum and added to your mortgage.
Equity
It is a property’s market value minus any outstanding mortgage or claims attached to that property.
Principal
It is the amount you borrow from a lender.
Interest
It is the cost of borrowing money from a lender.
Variable-rate
It is a mortgage rate that has the ability to change. The variable interest rate and its mortgage payment is based on the prime rate.
Fixed-rate
It is a mortgage rate that stays the same for the duration of a mortgage term.
Prime rate
It’s the rate a lender uses as a reference for its variable interest rate loans.
Refinancing
It refers to renegotiating the terms and conditions of a mortgage before the term ends. A fee may be charged to refinance the mortgage.
Prepayment penalty
It is an additional fee charged to you if you pre-pay all or a portion of a mortgage before the term ends. Most all mortgages allow a borrower to put down a little extra amount without a fee.
Renewal
At the end of a mortgage term, it is your opportunity to renegotiate new terms upon renewal. This is done by setting up another mortgage term with new conditions and interest rate.
A mortgage can be renewed with the same lender or a new one.
Down payment
This is the amount of money that a homebuyer must have available to secure a mortgage, generally ranging from 5% to 25% of the purchase price.
I hope these terms made you feel more confident to apply for a mortgage. If you’re looking for an Accredited Mortgage Professional in Edmonton, Alberta, reach out to me Leslie Joy Cairns - Joy in Mortgages – Keystone Mortgage Corp. I work with numerous lenders across Canada, which gives me access to the right mortgage solutions to suit my clients’ changing needs.
My services include first-time homebuyer mortgages, mortgage renewals, mortgage refinancing, purchase mortgages, home equity line of credit (HELOC), and reverse mortgages. I also offer purchase plus improvement mortgages, spousal buyout mortgages, borrowed down payment mortgages, and new to Canada mortgages for my clients.
I serve clients across Edmonton, Sherwood Park, St. Albert, Beaumont, Ardrossan, Spruce Grove, Leduc, Fort Saskatchewan, and the surrounding areas.
View my full list of services here, read my customer reviews here, or get in touch with me here.