A Short Glossary of Commonly Used Mortgage Terms

A Short Glossary of Commonly Used Mortgage Terms

When you interact with a mortgage company, they will use mortgage related terms. It is important that you comprehend these terms clearly when your mortgage company uses them. Your ability to select the right mortgage plan and discuss at par with the mortgage company will be largely determined by your knowledge of these terms. While some mortgage related terms are self explanatory, others can be tricky to understand. Here is list that will give you an overview of key mortgage terms used by Toronto mortgages companies:

Annual Percentage Rate

Annual Percentage Rate, also known as APR, is a value that denotes the cost of a loan. An APR is conveyed as a yearly percentage rate. You should use annual percentage rates when comparing different mortgages. Most borrowers are likely to opt for an annual percentage rate that appears lower. However, in addition to looking at which APR is lower you should also look into what each rate comprises. A plan with a high annual percentage rate may include private mortgage insurance while one with a low rate may not. So choose a plan with an annual percentage rate that offers what you require.

Bi-weekly mortgage

With a bi weekly mortgage, you will have to pay half your monthly payment amount every two weeks. This way, instead of making 12 monthly payments a year you will be making 26 bi weekly payments- since a year has 52 weeks. A benefit of taking a bi weekly mortgage is that you will finish paying your entire mortgage earlier than you would if you were making monthly payments. Another advantage of a bi weekly mortgage is that you will save money because you finish paying your mortgage earlier this way than you would with monthly payments. However, converting an existing mortgage to a bi weekly mortgage may not be a good idea since mortgage companies charge a fee for this.

Co- signed account

A co- signed account is one, which is secured by another person other than the primary mortgage borrower. Such an account makes both borrowers who sign for the account, responsible for repayment of mortgage. Having a co-signed account can be advantageous for those who are not eligible for a loan without a co signee. Generally, mortgage companies give co signed mortgages to students who want to avail a loan but are not eligible for it. This is because co signees for loans taken by students are mostly their parents who increase the likelihood of the mortgage being paid on time to the mortgage company. It is best to talk to a mortgage company about co-signed Toronto mortgages to understand more about these loan accounts.

Down payment

Down payment is the initial amount of money paid by the home buyer and this amount is not a part of the mortgage that he takes to pay for the house. Most sellers and mortgage companies require that the buyer pay 20% of the total price of the house as down payment. Most Toronto mortgages have this requirement. If a buyer is unable to do this and avails a loan amount over 80% of the total price of the house, he will have to take mortgage insurance. So incase the borrower defaults, the mortgage insurance acts as security for the mortgage company.

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