A Short Mortgage Glossary
Amortization: The length of time it will take to pay off your mortgage in full (generally 25 - 35 years but it can be any length of time that is determined by you and your mortgage professional when negotiating your terms).
Blended Payments: The combination of both principle and interest into one payment paid on a predetermined basis (i.e. monthly, biweekly, semi-monthly, weekly)
Closed Mortgage: A mortgage that cannot be prepaid or if it is pre-paid it will be subject to a penalty. These are common mortgages that have fixed interest rates and generally have pre-payment options (it is ideal to discuss what your penalty and pre-payment options are with your mortgage professional when deciding on the type of mortgage suites you).
Conventional Mortgage: A mortgage that does not exceed 80% of the lessor of the appraised value or the purchase price of the home.
Debt-Service Ratios: The percentage of gross income that is used to pay mortgage and debt. These ratios are used when being qualified for a mortgage. See Qualifying for more information.
Equity: The interest in a property after all encumbrances (mortgages, other interest registered on property).
Fire Insurance: Prior to a mortgage being advanced fire insurance must be in place for the property.
Fixed Rate Mortgage: A mortgage in which the interest rate is firm for a specified period (the term).
Interim Financing: Short term financing to cover the period between the purchase of a new home and the sale of the old home (sale of old home generally must be a firm deal).
Maturity Date: Also known as Renewal Date it is the final day in the term of your mortgage and your mortgage terms must be renegotiated.
Mortgage: Financing secured by real estate.
Open Mortgage: A mortgage with flexible terms that can be pre-paid at anytime without penalty.
Payment Frequency: The pre-determined intervals for your mortgage payments
Porting: Allows you to 'take' your current mortgage terms to another property
Pre-Payment option: The option to pay your mortgage down outside of your reqular payments. Pre-payment options are determined when negotiating the terms of your mortgage and if they are exceeded could cause penalties.
Term: The pre-determined time frame for which your mortgage terms (i.e. interest rate and payments) are held. At the end of your term your mortgage comes up for renewal at which point you must re-negotiate your terms.
Variable Rate Mortgage: A mortgage with a changing interest rate based on market rates.
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