A Glossary Of Essential Mortgage Terms
Every industry has its own language and terms. These words and phrases can be confusing to anyone who is not part of the daily operations of a specific industry, and the mortgage business is no exception.
To help you understand the terms, acronyms, and phrases regularly used in the mortgage industry, Alberta Mortgage Expert - Danelle Cole with The Place To Mortgage Inc. has created this handy reference guide. Here you’ll find valuable information allowing you to comprehend and communicate your mortgage needs effectively.
A fixed-rate is a mortgage rate that remains the same for the mortgage term or a portion of the term.
A variable rate will fluctuate according to the prime rate throughout your mortgage term.
The amortization of your mortgage is the length of time it will take you to pay off your entire mortgage.
A mortgage is a type of loan used for housing or other property. It is typically larger and paid off over many years. The property is the security on loan, allowing the lender to take possession of the property if the loan is not repaid over time.
Principal is the balance outstanding on the mortgage at any time.
The term is the time the interest rate is in effect. After this time period has ended, the rate can be renegotiated.
A mortgage broker is a company that matches buyers with lenders and products to fit their needs.
Total Debt Service Ratio
When calculating TDS, lenders will take the same GDS calculation but add in any other monthly payments you might have to make, including loans or the minimum payments on any credit card debt. So, the lender adds together your mortgage payments, property taxes, heating costs, 50% of your condo fees and debts, and divides the total by your gross annual income. The lender will know you have enough income to make all of the payments necessary if the answer is less than 40%.
Gross Debt Service Ratio
When calculating GDS, lenders try to figure out the proportion of your income you would be paying each month to own a property. It is done in two steps; first, the lender will estimate your annual mortgage payments, property taxes, heating costs, and 50% of your condo fees (if applicable). Second, this number will then be added up and divided by your gross annual income. The lender will know you can pay your monthly housing costs if the answer equals less than 32%.
Your home equity is the interest you have in a property. This can increase if the value of the property goes up, or the balance of your mortgage is paid down.
A down payment is a percentage of the sale price of the property that is paid upfront when getting a mortgage.
A closed mortgage is a mortgage that cannot be repaid in full until maturity without penalty.
An open mortgage can be repaid in part or in full at any time without penalty.
An estimated value for a property often used as security for a mortgage.
Canada Mortgage and Housing Corporation (CMHC) is Canada’s national housing agency.
If you’re looking for a digital mortgage broker in Red Deer, AB, reach out to Danelle Cole. With over fifteen years of experience in the mortgage industry, I can help clients obtain the best possible mortgage product for their individual situation. I offer first time home buyer programs, second mortgages, reverse mortgages, bareland financing, self-employed mortgages, and other online mortgage services to clients across Alberta.
For more information about the products offered at Alberta Mortgage Expert - Danelle Cole with The Place To Mortgage Inc., please click here. If you have any questions about the mortgage terms or obtaining a mortgage, please get in touch with me here.