Get That Pre-Approval!!!
Mortgage rates are at a historical low! If there’s a right time to make that first purchase or upgrade it is now! here are some terms to help you better understand what a mortgage is and what its composed of.
Mortgage Term: Is the number of years and months over which you pay a specified interest rate
Principle: The amount of money borrowed from the lender.
Mortgagee: Is the lender lending the money
Mortgagor: Is the borrower
Amortization Period: The time over which all regular payments would pay off the mortgage. This is usually 25 years for a new mortgage, however can be greater, up to a maximum of 35 years.
Payment frequency: The option of making regular mortgage payments every week, every other week, twice a month or monthly.
Maturity Date – Last day of the term of the mortgage agreement
Fire Insurance: Before a mortgage can be advanced, the purchaser must have arranged fire insurance. A certificate or form of documentation from the insurance company may be required on closing.
Types of Mortages:
Open Mortgage: A mortgage which can be prepaid at any time, without penalty
Closed Mortgage: A mortgage agreement that cannot be prepaid, renegotiated or refinanced before maturity, except according to its terms.
Fixed Rate:A mortgage for which the rate of interest is fixed for a specific period of time (the term).
Variable Rate: A mortgage for which the rate of interest may change if other market conditions change. This is sometimes referred to as a floating rate mortgage.
High Ratio Mortgage:If you don’t have 20% of the lesser of the purchase price or appraised value of the property, your mortgage must be insured against payment default by a Mortgage Insurer, such as CMHC
Some things to consider when signing a Mortgage Agreement:
Prepayment option:The ability to prepay all or a portion of the principal balance. Prepayment charges may be incurred on the exercise of prepayment options
Prepayment charge:A fee charged by the lender when the borrower prepays all or part of a closed mortgage more quickly than is set out in the mortgage agreement.
Porting: This will allow you to move to another property without having to lose your existing interest rate. You can keep your existing mortgage balance, term and interest rate plus save money by avoiding early discharge penalties
Bridge Financing: Short-term financing to help a buyer bridge the gap between the closing date on the purchase of a new home and the closing date on the sale of the current home.
Ask your Real Estate Professional to refer you to a Mortgage Broker in you local area,he or she will help you find a mortgage that will suit your needs!
And always ask questions!
