Key in door of home

Sometimes mortgage terms can be confusing. That’s why we’ve come up with this list of common mortgage terms to help you out.

Principal

The original amount of a loan, before interest.

Prepayment penalty

A fee charged by the lender when the borrower prepays all or part of a mortgage over and above the amount agreed upon.

Closed mortgage

A mortgage that cannot be prepaid or renegotiated for a set period of time without penalties.

Open mortgage

A mortgage that can be repaid at any time during the term without any penalty. For this convenience, the interest rate is between 0.75-1.00% higher than a closed mortgage. This is a good option if you are planning to sell your property or pay-off the mortgage entirely.

Questions marks in orange

Fixed rate mortgage

A mortgage where the interest is set for the term of the mortgage.

Variable rate mortgage

A mortgage for which the interest rate fluctuates based on changes in the prime interest rate.

High ratio mortgage

A mortgage that exceeds 80% of the purchase price or appraised value of the property. This type of mortgage must be insured. 

Conventional mortgage

A mortgage up to 80% of the purchase price or the value of the property. 

Mortgage insurance

If your down payment is less than 20% of the purchase price of the property, the lender is going to require mortgage insurance.

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