Mortgage Glossary
This mortgage glossary provides definitions for mortgage and other home financing terms
A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | X | Y | Z
A
Accelerated Mortgage Payment
A mortgage payment that is larger than regular mortgage payment. By making accelerated mortgage
payment homeowner will repay mortgage sooner and save thousands of dollars in interest.
Amortization Period - a total number of years that it will take to repay the total mortgage amount borrowed. Commonly people think of mortgage term being the same as amortization period. In most cases this is not correct.
Appraisal
The process of revealing a market value of the property that helps lenders to determine what
mortgage amount available to a borrower. This value may or may not be the same as the purchase
price of the home.
Assumability
This option allows a purchaser of the home to take over the current homeowner's mortgage. New home
owner must qualify for this mortgage first. This can be great selling tool in case when interest rate
is significantly lower than current mortgage rates.
B
" B" Lending
Mortgage financing provided to borrowers with derogatory credit or some other issues that prevents
them from qualifying under traditional mortgage financing.
Balloon Payment
A total repayment of remaining mortgage amount at the end of the mortgage term.
Blended Payment
The interest and principle amount combined within a mortgage payment.
C
Closed Mortgage
This mortgage cannot be repaid unless the property is sold.
Constant Payment - simply means that the payment amount will remain the same throughout the term of the mortgage. Even though mortgage payment remains the same the portion of interest and principle within this payment will change.
D
E
Equity
The difference between the value of the house and the amount of mortgage or other financing currently
secured against the property.
F
Fixed Rate - the interest rate is fixed and does not change for the length of the term.
Fully Open Mortgage
This mortgage can be repaid at any time without penalty or notice.
G
H
High ratio mortgage
A mortgage amount exceeds 80% of house value. In other words, Downpayment or equity is less than 20%
of total house value.
I
Interest rate - is a price that you pay for your mortgage. Your mortgage contract will outline the interest rate that you're required to pay for your mortgage. Any changes in the rate will lead to changes in payment amount as well as the amount paid in interest. Even though getting lowest interest rate seems to be a priority # 1 while obtaining a mortgage, lowest rate does not mean Best mortgage. Go here to learn some more about it.
Interest rate differential
The difference between original mortgage interest rate and the lender's current mortgage interest
rate for a similar term.
J
K
L
M
N
O
P
Private Lender
Typically an individual investor who lends own money to a mortgage borrower. Prudent lending and
understanding of mortgage market required to avoid loses. Contact us if you want to learn more.
Portability Option
This option allows mortgage holder to transfer the existing mortgage amount and the interest rate
to a new property.
Power of Sale
A remedy the lender can use in case of default on a mortgage payment by a mortgage holder.
99% used in Ontario.
Prepayment Options
This option allows the mortgage holder to prepay a part of the mortgage amount without penalties.
Prepayment Penalty
This penalty is charged in case of early prepayment of the mortgage.
Property Insurance
Insurance that protects a mortgage holder against the losses to the property due to a fire and other
specified accidents.
Q
R
S
T
Term - a length if time after which a mortgage must be fully repaid or renegotiated.
The term is typically anywhere between 6 month and five years, but longer terms are available.
The mortgage contract indicates the time before term will expire and has to be repaid. In fact,
every time you renew your mortgage banks technically repays the old mortgage and issue a new one.
When term expires homeowner can negotiate a new interest rate, term, amortization period and
mortgage type. That's why it is important not to accept a renewal letter from your bank until
you look into other options that will support your long and short term goals. You can consider
refinancing, debt consolidation, equity takeout or simply switch your mortgage to a new lender.
You must also understand that after your term contract expires lender can refuse to renew your
mortgage and will ask you to repay a total amount.
Title Insurance.
This insurance policy provides coverage against errors in title. Also it can protect mortgage
holder against fraud. Some policy cover you from errors in the past, some may cover you from
errors in the future. Always ask your Lawyer about offered type of title insurance coverage.
U
V
Variable rate - the interest rate fluctuates according to prime lending rate and could change several times for the length of the term.
W
X
Y
Z
We continue updating our mortgage glossary with new terms. Stop by again to learn something new.
Mortgage Glossary - quick reference for mortgage terms and definitions
