A Brief Glossary of Mortgage Terms
Whether it’s your first or fifth time, buying a home can be a stressful process. Banks, lenders, and mortgage advisors will be using terms you may not know or understand, potentially leaving you confused.
To help you understand the terms, acronyms, and phrases regularly used during the mortgage application process, the team at Mountainview Mortgage have created this handy reference guide. Here you’ll find valuable information allowing you to comprehend and communicate your mortgage needs effectively.
Mortgage.
A loan and related documentation that aids in purchasing a home.
Mortgage Insurance.
This provides protection for the lender in the case that the borrower defaults on repayment of the mortgage loan.
High Ratio Mortgage.
A mortgage loan that surpasses 80 percent of the purchase price of the home. In other words, the downpayment made is less than 20 percent of the purchase price of the home.
Mortgage Renewal.
To continue your mortgage commitment with the same lender for another term.
Down Payment.
A percentage of the total purchase price of a home that the buyer is required to pay upfront.
Interest Rate.
A percentage of the principal amount charged to a borrower by a lender as a cost of borrowing. Interest rates can be noted annually, semi-annual, quarterly, etc.
Variable Rate.
An interest rate which changes over time, based on a standard (or benchmark) interest rate.
Fixed Rate.
An interest rate that does not change over a set period of time (or term).
TDS Ratio.
TDS stands for Total Debt Service. Your TDS Ratio is the total percentage of gross monthly income needed to cover monthly housing expenses and other financial obligations. TDS ratios should not exceed 40 percent of gross monthly income.
Equity.
The difference between the market value of a home and the debts registered against it.
Amortization.
The amount of time it will take to pay your mortgage loan back in full. Amortization periods are typically 25 years in length.
Maturity Date.
The final day in the term of the mortgage agreement. After which you must renew your mortgage agreement, or pay the remainder in full.
Mortgage Term.
A fixed length of time in which the interest rate, payments, and conditions of the mortgage are set. Mortgage terms are typically 5 years in length.
Appraisal.
The process of determining the value of a property for lending purposes.
Mortgagor and Mortgagee.
The Mortgagor is the borrower, while the mortgagee is the lender.
If you’re considering buying a new home, reach out to a qualified mortgage advisor to help you understand what you can afford and what your best options are while guiding you through the process.
The team at Mountainview Mortgage has over 75 years of combined experience so you can rest assured knowing you’re getting the best advice and service for your mortgage application. We help first-time buyers in Burlington, ON and the surrounding areas navigate the pre-approval process with ease, ensuring a smooth transaction.
Not sure if you’ll qualify for a mortgage? We’re experts at advising those who are self-employed, work under contract, have bruised credit or are new to Canada. Contact us today to discuss your unique situation.
To learn more, please visit our website or get in touch with us here.