Date Posted: September 12, 2018
Mortgage financing and purchasing a home comes with an entirely new set of terms for buyers to understand.
Some of the common terms are as follows:
Collateral: The home in this instance is the security for the loan.
Down payment: How much money you need to have to buy a home- minimum is 5% of the purchase price.
Amortization period: The length of time required to pay off the mortgage.
Fixed rate mortgages: Rate is set for the entirety of the term and the payments do not change.
Variable rate mortgage: Rate is based on the Prime Rate decided by the lender in conjunction with the Bank of Canada rate. Payments fluctuate as the prime rate changes.
Open or Closed mortgage: Open mortgages are more expensive for borrowers and should be considered if you plan to move and sell. A Closed mortgage is a contract and you will be subject to penalties if you break the contract early.
Pre-approved Mortgage Certificate: If you are looking to purchase a property your Real Estate Agent will want to know that you have been pre-approved. It will also give you the peace of mind knowing what the payments will be on your new purchase for budget purposes.