Mortgage Terminology – Part 1
These are some of the common terms you will see used when you are purchasing a home and getting a mortgage. Learning what they mean will help you avoid misunderstandings and make better decisions.
Purchase price – The purchase price is the actual price of the home not including the closing costs on the loan.
Total monthly payment – The total monthly payment is the total of principal, interest, taxes and heat that you will required to pay monthly. When the calculations are made to determine the loan amount you qualify for, the total monthly payment is the figure that will be used to be sure you can actually afford a particular home.
Monthly heat – Total monthly payment for your home’s heating bill. CMHC and Genworth currently only require heat costs to be incorporated into the monthly costs, however, there are other monthly costs associated with properly running a house such as hydro, water, telephone, cable, etc. You may wish to add these costs into the “Heat” category in order to properly calculate your monthly payment.
Cash on hand – Cash on hand refers to the total amount of money you will need to have available to cover the down payment and all closing costs (including fees) that are not financed as part of the loan.
Interest rate – The interest rate is the current interest rate you will pay on your mortgage loan.
Mortgage Loan Insurance Premium (non-refundable) Mortgage Loan Insurance allows homeowners to purchase a home with less than a 20% down payment. The Canadian Bank Act prohibits most federally-regulated lenders to offer a mortgage that is more than 80% of the home value without this insurance.
As always before purchasing a home, consult with a reputable and lisenced mortgage broker before making your buying decisions. Call us at Averbach Mortgages for unbiased advice.
