You have numerous choices when it comes to financing your real estate purchase, you can choose the traditional banks, credit unions, or go through a mortgage broker. Most of these institutions or individuals make it easy for you by providing evening and weekend appointments. Many will come right to your residence.
You will be faced with many mortgage options and they sometimes can be very confusing. Here is a list of some of the terms you may encounter:
Amortization:This is the length of time it would take to pay off the mortgage – assuming that the interest rate never changed, all payments were made on time and no additional payments were made. A typical is amortization is usually 25 to 30 years.
Down payment:The lump sum amount you will be putting towards your purchase. Most institutions require at least 5% down however some lenders are willing to loan 100% of the purchase price.
Term:The term is the period of time that you will pay a set interest rate. At the end of the term, you will renew your mortgage for a new term at the prevailing rates of interest.
Typical term is 5 years.
Payment:This is the amount you will pay on the mortgage and when you will pay it. You can arrange to pay weekly, bi-weekly, monthly etc. The amount typically includes principle, interest and property taxes.
Conventional Mortgage:This is when you have a down payment of equal to or greater than 20 % of the loan. You would not need to buy mortgage insurance for the loan if you have this downpayment.
High Ratio Mortgage:If you have less than 20% down payment than your mortgage will be a high ratio Mortgage. You will be required to insure the mortgage. The amount of the insurance cost will depend on the size of down payment you have.
Deposit:This is a dollar amount that you give once your offer to purchase as been accepted. It is a show of good faith. Amounts vary greatly by region but typical to Chatham-Kent and Windsor-Essex is $500 to $1000, this amount will become part of your downpayment.
Fixed Rate Mortgage:The amount of the payment will remain the same over the term of the mortgage.
Variable Rate Mortgage:The amount of the payment can change over the term of the mortgage as the interest paid is set in relation to the currently posted Bank of Canada Rate.
GDS – Gross Debit Service Ratio:Your monthly housing costs are generally not allowed to exceed 32% of your gross monthly income
TDS – Total Debit Service Ratio:Your entire monthly debt payments cannot exceed 40% of your gross monthly income. This includes your housing costs PLUS all other monthly payments.
Interest:The cost of borrowing money.
Deb Moysiuk, ABR, ASA, Broker
RE/MAX Chatham-Kent Realty Inc., Brokerage
Cell: (519) 809-1555
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