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贷款知识 Mortgage & More – ENGLISH

What is a mortgage?

A mortgage is a loan that uses a property as security to ensure that the debt is repaid. The borrower is referred to as the mortgagor, the lender as the mortgagee. The actual loan amount is referred to as the principal, and the mortgagor is expected to repay that principal, along with interest, over the repayment period (amortization) of the mortgage.

Mortgage Glossary

Additional interest: The amount sometimes charged by the bank when you prepay principal or renegotiate the terms of your mortgage. The amount compensates the bank for loss of revenue.

Amortization: With a mortgage, the borrower agrees to pay back the amount borrowed over a period of time. This breaking of the loan into smaller parts to be paid back over uniform blocks of time is amortization.

Amortization period: The actual number of years it will take to repay a mortgage in full. This period can be longer than the loan’s term. For example, a mortgage may have a five-year term and a 25-year amortization period.

Appraised value: An estimate of the market value of the home and property that the borrower pledges as security for the mortgage. This value may be more or less than the purchase price of the property.

Assets: The things of value that you own, such as your home, car or summer home.

Types of Mortgages

While a mortgage is fundamentally a loan that is secured against your home, there are many variations to the type of mortgage that can be used for various needs. Based on your goals and risk characteristics there may be a number of different mortgage products that will meet your needs.

Below you will find a sampling of the many different types of mortgages that you may be exposed to. While there are hundreds of other combinations – these are the ones you will most commonly hear about or come across. Trying to figure out which is appropriate for your situation may seem daunting, but we take great care to not overwhelm you during the process. For this reason, one of the first steps in our mortgage process is to arrange a consultation where we can discuss and review your financial goals in detail – and then go over some options of the type of mortgage that may be right for you.

Choosing a Mortgage Term

Before you look at the issue of the term specifically, there are things you should consider:

When you’re looking at term and interest rates, look also at what you can live with in terms of payment amounts, because trying to predict where interest rates are going is a tough job. There are many forces that affect Canadian interest rates – economic, political, domestic, and international.

Even the best economists cannot pinpoint this, so how can we. You can twist yourself into knots worrying about what will happen. When the rates dropped in 1992 to their lowest in 35 years, no one thought that they will get that low again. They dropped even further. Since then we have enjoyed low rates and we don’t think of rates going in the double digits again. That’s wrong to assume as well. Who would have thought in 1978 that rates only 3 years later would go as high as 21.5%? Please check the graph below for a historical account.

Mortgage application steps

The loan and mortgage process is a stressful and sometimes frustrating process. The idea is to make the entire process go as smoothly as possible. What is most important? Be prepared before you sit down with your loan officer. Here are some things you can do to help ensure successful results, as well as give you some control over your own loan process.

Take time to Straighten out your finances. If you don’t have a grip on what’s coming in and what’s going out (and where, and why), you may be in for a rough time when you apply for a home loan.

Mortgage application tips
  • If the payments are about the same, you will be further ahead financially by making payments on a mortgaged home rather than paying rent on a house or apartment.
  • Paying down your mortgage is like earning the interest that you are paying on it, tax free.
  • Making no attempt to repay a mortgage is the worst thing that a borrower can do.
  • The size of the mortgage that you qualify for will be greatly affected by the level of your debt at the time of your mortgage application.
  • When renewing your loan or selling your house, look for…