There are quite a lot of parts to your mortgage document. We wanted to help you understand them! Here is a breakdown of the most common terms you may come across!
Understanding your mortgage
What is a mortgage term?
The length of the contract or the time till which the details of the contract are legally valid is called the mortgage term. It depicts the time till which you have to keep paying your lender. It does not signify the end of mortgage payments. It gives you the opportunity to refinance or renew your mortgage.
What is a premium?
The amount paid on a monthly basis towards your mortgage apart from the interest is premium.
What is amortization period?
The time it would take to pay off your entire mortgage amount with the interest, is called the amortization period. This is usually long term and is different for the mortgage term.
What is a down payment?
The amount you pay up front as an advance of the entire amount to be paid is called a down payment. There could be fixed rates in certain areas for this. It is important to have this amount ready before applying for a mortgage.
What is a pre-approval?
A pre-approval is the process which allows you to get a concrete estimate of how much mortgage you will be eligible for. It is not exact, but it is usually within the range of mortgage. It gives you a competitive edge and enables you to maintain a fixed budget! It has become an important part of the mortgage process!
Fixed rates or variable rates?
Fixed rates refer to interest rates which do not change with the market trends. Variable rates on the other hand are subject to changes in market trends. It is best to review your financial situation before deciding which one is best for you! We can help you get the right advice!
Open or closed mortgage?
Open mortgages allow you to make advance payments on your mortgage thereby closing it faster. Closed mortgages do not allow you to make advance payments. This should be considered and chosen only according to the requirements of the clients and their financial position.
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