Mortgage Terminology

APR stands for Annual Percentage Rate and is often used to compare the costs of a mortgage quote with various lenders. Since lenders use different ways to calculate the costs of credit, there is no set way you can determine the cost of a loan.

Capital and Interest Mortgage is when your monthly loan payments are not only applied against interest but also against the outstanding principal of the mortgage. At the end of the term there is no balance.

Cash back is a cash amount, either fixed to a percentage of a mortgage, which you can choose to accept when you are closing your mortgage. The lender often has another way to recoup this cash either through a higher interest rate or additional fees. This is a common situation if the house needs work the fund will be used for renovation.

Discounted Rate occurs when the lender reduces the standard variable rate for a pre-determined length of time. When this time period ends, the borrower will pay the standard variable rate.

Early Redemption Charges this is important to understand prior to signing with a lender. If you were to pay off the loan before the end of the term, what types of penalties, if any, would you be responsible? Often, the penalty is a percent of the principal.

Equity you will likely here this phrase a great deal as you secure the purchase of a home. In banking terms, equity is the difference between owning a property and the money owned on a property.

Lock-in Period during this time your rate of interest is fixed so it cannot rise above this rate until you have settled your mortgage and taken possession of the property. This is more helpful with fixed mortgages than variable rate mortgages, which tend to quickly descend.

Mortgage Indemnity Guarantee (MIG) is a type of insurance which protects the lender in the case of a high-ratio mortgage if you were to default on the mortgage at a time when the value of your home is less than the amount you would have borrowed.

Negative Equity occurs when the value home is less than the amount owed on your mortgage. This usually takes place when you have taken out a large loan on a house and the prices fall substantially.

Settlement is the date on which the title to the real estate legally transfers from the seller to the buyer. The loan usually begins on this date at well. It is important to note that numerous additional expenses and fees are charged at the time of settlement.

Structural Survey this is a comprehensive report on the condition of the property you are looking into buying. The inspector will look at the inside and outside of the property and tell you if it is structurally sound.