Mortgage Glossary
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Broker
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An intermediary between two or more parties. A real estate broker, for example, will negotiate between a buyer and seller. A mortgage broker will go between a borrower and a lender. (See “mortgage broker”).
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CMHC Fee
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This is a fee for insurance that borrowers pay if their down payment is less than 25% of the mortgage. (See “GE fee”)
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Credit rating
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A score – sometimes called a “Beacon Score” – given to consumers by a credit reporting agency (“CRA”) based on credit history, which includes the number of credit checks performed, the amount of credit available, missed or late payments, bankruptcies, and more. The score is out of 1000 and a good rule of thumb is as follows: Below 600, consumer is considered a credit risk. Above 600, consumer is considered a good candidate for more credit.Often, higher interest loans are given to those with lower credit scores and lower interest rate loans are given to those with higher credit scores.
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Down payment
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A portion of the mortgage that a borrower pays as a lump sum at the beginning of the loan.
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| CGE Fee |
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This is a fee for insurance that borrowers pay if their down payment is less than 25% of the mortgage. (See “CMHC fee”).
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Interest rate
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The cost of borrowing money from a lender. Expressed as a percentage and usually calculated based on the amount of the loan.
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Lender
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A bank or other financial institution that provides money for loans and mortgages.
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Mortgage broker
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An intermediary who looks for attractive mortgages on behalf of a potential borrower.
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Mortgage
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A loan for a home or piece of property.
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Pre-approval
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A preliminary process that allows borrowers to see how much money they can borrow from a lender to purchase property. An approval process follows once the actual property has been found. The pre-approval, in a sense, gives the borrower the “price range” of property they can shop in.
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Principal
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The portion of the mortgage that is the actual amount of money leant to purchase the property. (Other elements of the total mortgage amount include interest, taxes, and insurance; often, these four elements are referred to as “PITI”).
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Refinancing
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Renegotiating an existing mortgage that borrows against the equity and/or increases the amount of the loan, in order to provide additional money to the borrower for a variety of purposes. (Purposes may include consolidation of existing higher interest loans, to purchase additional properties, to start a business, to renovate, etc.).
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Term
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The duration of the mortgage.
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