7 terms to know before getting your first mortgage

Ready to buy your first home? Here are 7 basic mortgage terms you should know.

A mortgage is a loan that is secured to real estate. It’s comprised of two parts: principal (the amount initially borrowed) and interest (what you pay the lender in exchange for the loan).

Amortization refers to the total number of years it’ll take to pay off your mortgage.

The term is the length of time of your specific agreement with a lender. The most common term length is 5 years, but many options are available.

When your down payment is 20% or more of the purchase price, you have a conventional mortgage. Any down payment less than 20% of the purchase results in a high ratio-mortgage.

Mortgage default insurance protects the lender if you can’t make your mortgage payments. It’s required on high-ratio mortgages, but optional for conventional mortgages. Sometimes known as “CMHC Insurance”, it’s actually available from 3 insurers: Canada Guaranty, Genworth Canada, and, of course, CMHC. The insurance premium is added to the total mortgage amount and is determined by how much down payment you have to put towards the purchase.

There are plenty of other mortgage terms, but these 7 are probably the ones brokers and lenders use the most.

If you have any questions about these terms or any other mortgage terms, give us a call.

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