Length of time in years (or, number of payments) to
repay the entire mortgage loan.
Equal monthly payments consisting of both principal and
interest, paid by the borrower each month until the mortgage
is fully paid off (amortized). Each month, the principal
portion increases and the interest portion decreases, but
the overall monthly payment does not change. Most mortgages
are structured this way.
Biweekly Mortgage Payments
Instead of paying once a month, with biweekly mortgage
payments you pay half every two weeks. Instead of
making twelve monthly payments during the year, you end up
making the equivalent of thirteen. This extra payment reduces the
principal faster, and therefore reducing your overall
interest costs.
A closed mortgage is one that does not allow for prepayment
of principal, renegotiation or refinancing. Sometimes
penalty fees may be charged for these transactions if they
are allowed. People commonly choose closed mortgages, but it
may not always be to their advantage.
A mortgage loan up to 75% of the appraised value or purchase
price of the property, whichever is less. Mortgages beyond
this limit must be insured by CMHC (Canadian Mortgage and
Housing Corporation) or GE Capital.
The percentage of the borrower's gross income that will be
used for monthly mortgage payments of principal and interest,
as well as taxes,
heating costs and/or condominium fees. Lenders look at two
ratios: Total Debt Service (TDS) and Gross Debt Service
(GDS).
If you do not make your monthly mortgage payment, you are in
default of your agreement and the lender may take action
against you.
Paying off your mortgage. When a mortgage is paid in full,
the discharge is the official removal of the mortgage and
other financial encumbrances from a
property.
Sometimes there is more than one mortgage on a property. In
the event of a default by the borrower, the holder of the
first mortgage will be repaid first by the proceeds of a
sale. The second mortgage holder (if there is one) will be
paid with any remaining proceeds.
Should you default on your payments, foreclosure or
power-of-sale is a legal procedure in which the lender obtains ownership of
the property.
Percentage of your gross annual income required to cover
payments of mortgage principal and
interest, taxes and other financing. Most lenders
prefer the GDS be no more than 32% of your gross income.
Mortgage insurance
insures the lender against loss in case of default by the
borrower. The premium is paid by the borrower over the life
of the mortgage and added to the mortgage payments.
If the owner of a property should die, this
insurance will pay out the balance of the mortgage. The intent
is to protect survivors from losing their home. This is a form of
"reducing term insurance" which is recommended for the
borrower.
The lender of the mortgage.
The borrower.
A mortgage that can be prepaid at any time without penalty.
Some mortgages are "partially open", meaning some
prepayments can be made on certain dates. Paying down the
principal of the mortgage early (prepaying) can save you
thousands of dollars of interest costs over the life of the
mortgage.
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