Friday 18 March 2011

Mortgage Terminology

Glossary


Amortization: The period of time required to completely pay off a mortgage debt, if all payments are made on time and the terms of the mortgage stay the same.






Appraisal: An estimate of the current market value of a home.


Blended Payment: A mortgage payment that includes both the principal loan amount and the interest. The payment remains the same throughout the life of the mortgage, but the percentages of the payment that go towards the principal or interest change over time.


Closing Costs: The costs you will have to pay in addition to the purchase price of a home on the day you officially own the home. These costs include legal fees, transfer fees and disbursements.


Closing Date: The date at which the sale of a property becomes final and the new owner takes possession of the home.


CMHC: Canada Mortgage and Housing Corporation. A Crown corporation that administers the National Housing Act for the federal government and encourages the improvement of housing and living conditions for all Canadians. CMHC also develops and sells mortgage loan insurance.


Counteroffer: If your original offer to the vendor is not accepted, the vendor may counteroffer. A counteroffer usually changes something from your original offer, such as the price or closing date.


Credit Report: The report a lender uses to determine your creditworthiness for getting a mortgage.


Default: Failing to abide by the terms of a mortgage loan agreement. If you default on (fail to make) your mortgage payments, your lender can take legal action to take possession of your home.


Deposit: Money placed in trust by a home buyer when he or she makes an Offer to Purchase a home. The deposit is held by the real estate representative or lawyer/notary until the sale is complete.


Down Payment: The portion of the price of a home that is not financed by the mortgage loan, and which you must pay out of your own savings or other eligible sources before you can get a mortgage.


Lender or mortgage broker: Lenders will loan you money (a “mortgage”) to help you buy a home. Lenders include banks, trust companies, credit unions, caisses populaires, pension funds, insurance companies and finance companies. A mortgage broker can work with many different lenders to get you a mortgage that meets your needs.


Lump Sum Prepayment: An extra payment made to reduce the principal balance of your mortgage, with or without a penalty. Lump sum payments can help you pay off your mortgage sooner and save on interest costs.


Maturity Date: The last day of the term of the mortgage. On this day, the mortgage loan must either be paid in full or renewed.


Mortgage Life Insurance: Insurance which can protect your family by paying off your mortgage if you die.

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