Trying to differentiate between the countless home loan options as well as understand the common mortgage vernacular can be difficult if you are a first-time homeowner. So, to help make things easier for you as you begin your application for a home loan, your local Brampton Mortgage Broker with Lotus Loans & Mortgages has defined the most common mortgage terms.
- Adjustable Rate Mortgage (ARM): A mortgage option where your rate is dependent on the economy. The lender will supply you with a generally low initial interest rate which is linked to bank prime, then your rate could increase or decrease throughout your term This is a popular option amongst first-time home buyers due to the cheaper initial rates, however, it is more difficult to budget your spending since you can never truly predict where the market is going to head & therefore your can never accurately project your future mortgage payments.
- Amortization Period: The time in which you have to pay off your loan in full.
- Appraised Value: The market value given to a piece of property from a professional appraiser.
- Closing Costs: Additional fees that are due before you can close on your home. These costs include, but are not limited to, title insurance, origination fee (in special cases), lawyer fees, appraisal fees, land transfer tax, federal and provincial taxes, mortgage insurance, and down payment.
- Down Payment: The initial amount owed on a property that is usually in the form of a percentage. To qualify for a Brampton mortgage, you need to pay at least 5% towards your down payment. If you pay less than 20% towards your down payment, you will need to pay for mortgage default insurance.
- Equity: The difference between your homes appraised value and your mortgage Therefore, the more you pay towards your mortgage, the more equity you will have in your home.
- Fixed Rate Mortgage: The opposite of an ARM where you are provided a fixed rate on your loan that will not change throughout your mortgage’s amortization period. You are typically offered a higher interest rate than an ARM due to the security of knowing your rates will never change.
- Mortgage Default Insurance: An additional fee added on to your mortgage if you pay less than 20% towards your purchase price. This fee does not protect the borrower, it is only paid for by the borrower to protect the lender in case the mortgage is defaulted.
- Prime Rate: The lowest interest rate that banks and financial institutions can charge.
- Reverse Mortgage: For homeowners in their retirement years or older who wish to tap into their home equity without selling their homes.
Contact Us
For more information on the common mortgage terms or if you would like to begin your application for a Brampton home loan, please contact our Lotus Loans & Mortgages team at 905-791-1100.