Common Mortgage Terms & Definitions
Searching for a new home can be an overwhelming & emotional process, and adding financing into the mix can make the home buying process difficult to manage. Along with the open houses, viewings & multiple offer situations, realtors and mortgage brokers are throwing around enough home and financing terminology to make your head spin. Lucky for you, your local Langley Mortgage Broker is on your side. If you are in the market for a mortgage, or are struggling to understand the terms of your mortgage call Karen Canning today. Our mission is to educate our clients on all details and aspects of their mortgage to ensure they are knowledgeable about the product they are investing in.
Accelerated payments
Mortgage payments that are made at an increased frequency which serves to reduce your principal mortgage faster. In most cases an accelerated mortgage payment occurs every two weeks, making 26 payments in a year adding nearly 1 full extra payment when compared to a monthly amortization schedule.
Amortization Period
Amortization period refers to the number of years that it will take to pay down the principal balance of your mortgage in full. The most common amortization period in Canada is 25 years but can be up to 35 years if certain conditions are met.
Adjustment Date
Also known as interest adjustment date; this is the date in which mortgage interest begins to accrue on your mortgage, before the first mortgage payment is made.
Bridge Loan
A bridge loan is a second mortgage that is paid in full immediately following closing of the client's current home. Bridge Loans are typically put in place when the closing date of the buyer's current home is after that of the new home.
Conventional Mortgage
A mortgage loan that does not exceed the lesser of 80% of the homes appraised value or purchase price.
High Ratio Mortgage
A mortgage loan that is more than 80% of the homes appraised value or purchase price, whichever is less.
Mortgage Refinancing
The process of replacing your current mortgage with a new mortgage. This can take place either at the end of your current mortgage term, or before.
Prepayment Penalties
Penalties or fees charged to the mortgagee if he/she decides to break their mortgage prior to the end of the term. This is generally the great of 3 months payments or the interest rate differential.
Prepayment Privileges
Allowances within your mortgage contract which allow you to apply extra payments directly to principal in an effort to pay down your mortgage sooner.
Title Insurance
Insurance that protects the homeowner or mortgage holder against any lawsuits or claims that may arise as a result of defects on the home's title. This may include costs incurred as a result of unpermitted renovations, property line violations etc.
Term
The length of time that the interest rates or terms of the mortgage are applicable for. At the end of the term, the mortgagee must pay the mortgage in full, or replace the current mortgage with a new mortgage (either through renewal or another lender).
TDS
Total Debt Service refers to the mortgagee’s ratio of income to debt to ensure that the proposed mortgage payments can be managed. TDS factors in annual mortgage payments, property taxes and other debt payments in relation to the mortgagee’s income.
These are just a few of the commonly used terms in the mortgage industry, but are definitely some of the most important. If you have questions about your mortgage, renewal, or are beginning your new home journey, Call Karen Canning, your Langley & Abbotsford area Mortgage Broker today.