skip to Main Content
Important Mortgage Terms To Help You Talk The Talk

Important mortgage terms to help you talk the talk

Talking a bit more about mortgage terms.

Dressing in a presentable way provides you with more opportunities. Imagine you are boarding a plane dressed in a suit with an economy class ticket. You sit down in your seat that has minimal legroom. Looking around you, many of the other passengers are dressed casually for their flight. The flight attendant walks by and offers you an open seat in the first class. Chances are you got the opportunity to sit in that first-class seat because you were dressed in a presentable manner. Whether you were a businessman or not, dressing in a nice way sets you up for success and better opportunities.

Being familiar with mortgage terms opens you up to more opportunities and allows you to feel more comfortable with homeownership. In this post, we talk about a few important mortgage terms that we receive a number of questions on.

Mortgage Pre-Approval

The first of our mortgage terms is the mortgage pre-approval. A mortgage pre-approval is an important step a homebuyer can make before house hunting. It is when the lender indicates, formally, how much a house hunter qualifies for. A lender assesses a borrower’s finances, like credit score and debt-to-income, to determine how much they can qualify for. This gives you an idea of your budget so that you can shop within your means. Moreover, it shows sellers that a person with a pre-approval is a serious buyer. A seller is more likely to accept an offer from someone who has been pre-approved for a mortgage since they have already qualified to obtain a loan of that amount.

Interest Rates

The interest rate is the percentage being paid to borrow the funds. This is the cost a borrower must pay in order to borrow the money from the lender. Your interest payment is wrapped into your monthly mortgage payment. This payment includes the interest outstanding for the month as well as a payment towards the principal balance. The interest rate is determined by a number of factors. Your financial situation, like your credit score, can play a part in the interest rate you receive. There are also economic factors that help determine the interest rate.

Rate Holds

Since interest rates vary depending on the lender, the borrower can choose to lock in a rate with a pre-approval. This rate hold will last for up to 120 days and helps to protect you from rate changes. Locking in an interest rate can be advantageous to a borrower if interest rates are fluctuating. It is important to note that if rates go down further, you can receive a lower rate than the amount quoted on your rate hold. Locking in a rate protects you in the event rates rise.

Equity

We talk a lot about the value of equity in your home. Put simply, this is the total value of the property, less the amount you owe on your mortgage. By regularly making mortgage payments, you will increase the equity you have in your home. Similarly, if the market value of your property increases, your equity will also increase. When we talk about refinancing your mortgage, the amount of equity you have in your home will be an important factor in the process.

Mortgage Principal

The principal balance of your loan is the actual amount you are borrowing. This is the amount that you have to pay back, along with the interest on the principal amount. So, each month you are paying down some of the principal balance as well as interest on the amount outstanding. As you pay down the principal balance, your equity in the property will grow. Your equity in the property grows as you pay down the principal balance. An extra payment each year, or bi-weekly payments, can help pay down the mortgage faster. This allows borrowers to make bigger payments on the principal of the mortgage and pay less in interest.

Mortgage Insurance

Mortgage insurance is mandatory insurance that some borrowers are required to purchase. Borrowers with a down payment of less than 20% must purchase mortgage default insurance to be approved for the loan. The insurance protects the lender in the event that a borrower defaults on their mortgage payments. Without mortgage default insurance, many Canadians would not be able to afford to buy a home. It allows Canadians with less than a 20% down payment to access the housing market and purchase their first home. Mortgage insurance also helps keep interest rates low for all Canadians. Mortgage insurance lowers the risk of lending funds. Therefore, protecting lenders if you default on your mortgage and providing you with options if you cannot afford a 20% downpayment.

Knowing some of the important mortgage terms will help you feel more confident about homeownership. This can open up more opportunities to you, as a borrower, by being more confident and knowing a little more about homeownership. Knowing more stuff about stuff makes you a more attractive person and fosters deeper conversations. When looking to learn more about the mortgage market, give us a call at Clinton Wilkins Mortgage Team! You can reach us at 902-482-2770 or get in touch with us here!

1. The TeamClinton.ca “Fall Into Homeownership Giveaway” (the “Contest”) runs from 08:00:00 a.m. AST on September 6th, 2020 (the “Contest Starting Date”) to 5:00:00 p.m. AST on September 18th, 2020 (the “Contest Completion Date”). The Contest will have a series of prizes including:

  • One (1) daily prize draw for two (2) ticket vouchers for a future Halifax Wanders game (the “Daily Prize”) starting on September 8, 2020. The Daily Prize is valued at $65.00 CAD. There are no cash alternatives or substitutions.
  • Two (2) weekly prizes (the “Weekly Prize”) for a pair of season tickets with draws occurring on September 11, 2020, and September 18, 2020. Each Weekly Prize is valued at $450.
  • One (1) grand prize (the “Grand Prize'') that includes hotel accommodations, a restaurant gift card, and a Halifax Wanderers swag bag including two (2) game vouchers for a future Halifax Wanderers. The Grand Prize is valued at over $500.00 CAD. There are no cash alternatives or substitutions.

    2. Submitting this form implies consent to subscribe to our emails and mobile phone alerts. Subscribers may opt-out at any time. 

    3. SMS message and data rates may apply. Text HELP to 68411 for help, text STOP to 68411 to end. By opting in, I authorize the seller to deliver messages using an automatic telephone dialling system and I understand that I am not required to opt-in as a condition of entering the Contest.

    4. Participants will receive one (1) contest entry for signing up to email and/or mobile phone updates. This is limited to one entry per person through the online sign up form.

    5. Participants may have the opportunity to earn additional entries and any details will be announced from time to time if available.

    6. The Grand Prize is valued at $500.00 CAD. There are no cash alternatives or substitutions.

    7. Participants must be 18 years of age at the time of contest entry and reside in Nova Scotia, Canada.

    8. By entering this Contest, all entrants consent and agree to the use of their name, address, likeness and photo for any advertising, publicity and marketing purposes by the Sponsor, without compensation.

    9. By entering, all eligible participants agree to abide by the rules and conditions outlined above.

Subscribe to our newsletter

Sign up here to get the latest news and updates from Clinton Wilkins Mortgage Team.



You can unsubscribe at any time.

Normally you can find this at retail stores across Halifax and Dartmouth, but we wanted to make it even easier for you to get a copy.

The entire guide is available online to view or download, and to make sure you’re staying safe at home, you can now request a print copy by mail, free of charge, anywhere in Nova Scotia!