Thank you for visiting www.GreatMortgageAdvice.com By Cecilia Ramos
Mortgage glossary Mortgage Terms and Definitions
Rate: The interest rate you'll pay over the term of your mortgage.
Amortization: The life of the mortgage, usually 25 or 30 years. The time it will take to pay off the mortgage at the initial term's interest rate if only the stipulated minimum payments are made. You must still renew that rate according to the term of the mortgage.
Fixed: An interest rate, which is fixed for the term of the mortgage.
Variable rate: An interest rate, which fluctuates with the market.
Interest calculation: How the interest payments are calculated, usually every six months not in advance.
Frequency: How often you make a mortgage payment, once a month, once a week, every two weeks or twice a week.
Open term: You can lock in your mortgage at any time into a closed rate and pay more than the minimum with no penalties.
Closed term: You're locked in for the term and cannot change either the rate or make extra payments (although sometimes there's a clause allowing a payment on the anniversary of the mortgage or at the end of the term).
Debt-service ratio: The relationship between what your debt and operating liabilities are and your gross income.
Blended payments: Combine, principal and interest paid regularly. Over time more principal will be paid off and less interest will accrue. After the first year of a $200,000 mortgage, for example, you'll have paid off the front doorknob.
Conventional mortgage: A mortgage that does not exceed 80 per cent of the purchase price of the home.
High-risk mortgage: If you have less than a 20 per cent down payment, you'll have to get your mortgage insured by an agency like Canada Mortgage and Housing Corp. (CMHC).
P.I.T.: Principal, interest and taxes. What you'll be paying for every month if you opt to have your taxes included in your monthly payments.
Principal: What's left of the original amount you borrowed
Equity: What the value of the home is minus what's left on the mortgage.
Mortgagee and Mortgagor: The lender is the mortgagee and the borrower is the mortgagor.
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