Amortization
The amortization period is the time it will take to pay off your mortgage based on the sum plus the interest rate. Amortization periods are typically between 25-30 years.
Capitalize payment
If you are struggling with financial hardship, in some cases, you can capitalize your payment. This allows your lender to add your year’s worth of payments to your principal loan amount, eliminating the need to make payments throughout the year.
Collateral Charge
It allows you to secure a mortgage or loan against your current property without needing to refinance. This means the lender can provide funds beyond the initial loan, giving you the flexibility to access additional credit while using the same property as collateral.
Interest only
You only make payments on the interest of your loan at either a fixed or variable rate during your term period. During the interest-only period, your loan amount does not decrease with each payment.
Loan-to-Value (LTV)
It is a formula used to calculate the amount a lender is willing to provide based on the value of the home you plan to purchase or refinance.
LTV= The loan amount divided by the appraised value of the property, multiplied by 100
Open/Closed/Convertible Mortgage
You can choose between an open, closed, or convertible mortgage based on your financial goals.
An open-term mortgage is ideal if you plan to pay off your mortgage quickly. It allows you to repay it in large payments or in full at any time. Due to the flexibility of paying off the mortgage at any time, these usually tend to have a higher interest rate.
A closed mortgage outlines the length of the mortgage and an agreed-upon interest rate. This tends to offer a low interest rate and the flexibility to choose a fixed interest rate or variable. You can choose to break the term of your closed mortgage at any time, but you will incur a penalty fee. These tend to be the most common type of mortgages.
A convertible mortgage offers the same advantages as a closed mortgage but allows you to switch to a longer closed term at any time without incurring prepayment penalties. This means you can start with an open mortgage and switch to a closed one later.
Purchase Price
The purchase price is the actual price you’ve agreed upon for the purchase of your new home. This price doesn’t include any closing fees, transfer taxes or interest costs.
Principal
The principal is the amount of money you’ve borrowed for your property. This doesn’t include any interest costs that might be required.
Qualification
To qualify for a mortgage, you’ll have to prove to your lender that you can afford the amount you’re asking for. Mortgage lenders or brokers will use your financial information to calculate your total monthly housing costs and total debt load to determine what you can afford.
Reverse Mortgage
Reverse mortgages offer Canadians over the age of fifty-five the opportunity to tap into their existing home equity without having to sell and move. You may be able to borrow up to 55% of the current value of your home tax-free and the loan does not require any scheduled repayment.
Standard charge
A standard charge mortgage secures only the specific mortgage you have acquired with the lavender and does not extend to any other loans. This means if you require an additional loan, you will need to redo the process of applying, requalifying, etc.
Stress test
The Office of the Superintendent of Financial Institutions Canada (OSFI) announced a number of new mortgage rules, also known as “stress test,” which came into effect on January 1, 2018. The stress test is the government’s way of preventing the worst-case scenario for the housing market by ensuring you can afford interest rate increases.
Terms
Identifies the interest rate and time period you have locked in for your mortgage.
Title Insurance
Title Insurance is a product that protects you from any fraud, errors or survey matters associated with the title of your property.
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