Mortgage vocabulary explained

Getting a mortgage is an essential part of buying a property. Here’s a short glossary to familiarize you with the most important terms.

• Mortgage loan. A type of loan typically obtained from a financial institution to purchase a home or other real estate property. The property itself serves as collateral to secure the loan. Moreover, the lender reserves the right to seize the property if the payments aren’t made.

• Down payment. An upfront payment you make to purchase a property. The amount paid is usually a percentage of the purchase price and can range from as little as three percent to as much as 20 percent.

• Mortgage loan insurance. You must buy mortgage loan insurance if your down payment is less than 20 percent of the property’s price. The insurance can be paid upfront or added to your monthly payments.

• Interest rate. A fixed or variable percentage is added to the amount of your mortgage loan. In short, it’s the price you pay to the financial institution for taking on your loan.

• Amortization period. This refers to the length of time it takes to pay off your mortgage.

• Mortgage term. The length of your current mortgage contract is referred to as the term. After the mortgage term expires, the remaining balance must be renewed, refinanced, or paid in full.

• Pre-approval. When you get pre-approved for a mortgage, the lender estimates how much you might be able to borrow based on your income, credit history, assets, debt, and down payment.

Contact a mortgage broker in your region for more information about mortgages or support for buying a home.