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7 Common Terms to Know About the Home Buying Process

June 25, 2020

While it’s very exciting to purchase a first home, it can also seem terrifying, especially when you are faced with a whole new language filled with unfamiliar financial lingo.

 

MonsterMortgage.ca understands that this purchase might be the biggest financial decision of your life. Monster mortgage agents are here to walk you through every step of the process and make sure you have peace of mind.

 

To help get you started, here are seven common real estate and mortgage terms that are important to understand and can help you understand the home buying process a little better:

 

Pre-approved – A pre-approved mortgage is one of the first steps a home buyer should take before beginning the buying process. A pre-approved mortgage provides an interest rate guarantee from a lender for a specified period of time (usually 60 to 90 days) and for a set amount of money.

 

Amortization Period – The number of years it takes to repay the entire amount of the financing based on a set of fixed payment.

 

Term – The period of time the financing agreement covers. Terms are available in: 6 months, 1,2,3,4,5,6,7, and 10 year terms.

 

Fixed Rate Mortgage – A mortgage where your interest rate remains unchanged and your payments stay constant throughout the entire term of your mortgage. A fixed rate mortgage is considered a low-risk product for borrowers and people who choose fixed rate mortgages do so because it provides them with “peace of mind.”

 

Variable Rate Mortgage – The mortgage rate fluctuates with the prime lending rate set by the Bank of Canada. The Bank of Canada sets eight meetings per year to set the lending rates. Your mortgage interest rate could move up or down over the term of your mortgage if there is a change. The uncertainty of a variable rate mortgage may keep people away from it, but it has the flexibility and benefits that have been proven in the past to save your money.

 

Appraisal – The process of determining the market value of a property. This is a necessary step in validating the property’s worth for you and your lender.

 

Closing Costs – These are the costs associated with completing the real estate transaction. They are paid at closing and are additional costs beyond the price agreed with the seller. Closing costs can be up to 2.5% of the basic purchase price. There are closing and adjustment costs, interest adjustment costs between buyer and seller and (depending on where you live) land transfer tax.

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