The world of finance has its own dictionary, which can be pretty daunting for someone who isn’t aware of it. When you are planning to take a mortgage you might find the whole process to be quite intimidating. Though you can always ask your Mortgage Broker Oakville to explain the terms to you, it is always best to educate yourself with the basics. They can clear the rest of the doubts for you. We have created a mini dictionary for you to help you navigate the language of the mortgage.
Amortization: It means the number of years that it will take for the borrower to repay the full amount of the mortgage loan.
Appraised Value: it is understood as the property’s approximate value, which is presented in the form of security for the loan.
Assumption of Mortgage: It is the process of transferring the remaining mortgage amount from the present owner of the home to the new buyer.
Blended Payments: A type of repayment scheme in which the principal amount and the interest rate remains stable.
Closed Mortgage: This is a type of mortgage plan. In this, you can’t repay, refinance or renegotiate the terms of payment without having to pay a penalty.
Completion Date: The date when all the needed documentation were completed. It is on this day that payments for the sale of the property are made. The purchase becomes final.
Compound Interest: interest amount which is charged on the principal and the accrued interest.
Conventional Mortgage: This is a type of loan which cant go beyond 80% of the purchased price or the appraised value of the property.
Conveyance: means transferring of the property in the name of the buyer from the seller
Default: refers to the inability to make the payments according to the terms and conditions prescribed by the contract.
Leasehold Mortgage: it is the mortgage that is secured on the property lease and not on the property owner.
Mortgagee: The person or the institution who is lending the money.
Mortgagor: the person or the institution who is borrowing the money or taking out the mortgage.
Offer to Purchase: It is the legal document that formalizes the offer. The document contains the price of the property which is being bought.
Open Mortgage: It is a type of payment plan. An open mortgage gives the mortgagor an option to prepay the amount in part or full without paying any penalties. This amount needs to be paid within a specific time frame.
Prepayment Option: As the name suggests it allows the mortgagor to prepay specific sums of the principal balance. Whether the penalty interest is charged or not, is dependent upon the kind of payment option the borrower has.
Principal: The amount of the mortgage balance which is yet to be paid off.
Term: It is time that is mentioned in the mortgage agreement. When this period is over, you might need to renew your contract or renegotiate the terms.
Underwriting fees: The payments made to the lender to compensate for the expenses which arose during the lending process.