Page 6 - REN Nov/Dec 2021_Loralee Burns

Real Estate Terms Cheat Sheet

Tori Mcneely courtesy REALTOR.ca
uying a house can be an exciting, but complex process. So
when you embark on your journey, one of your first stops
Bshould be familiarizing yourself with the lingo.

We’ve curated helpful information from our Homebuyers’ Road
Map and Tips for Buyers, to share with you some of the most
important terminology a new buyer needs to know—from pre-
purchase to post-purchase.

Before you buy
First things first, you need to find yourself a REALTOR®. A REALTOR®
can bring you peace of mind thanks to their experience and
professionalism. From helping you find a home that meets your
needs and price range, to negotiating your purchase price,
directing you through complex contracts, a REALTOR® is an
important part of your home buying journey.
While it’s exciting to start visiting open
houses, you must first determine how much
a mortgage lender is willing to let you borrow
to purchase your first home. Your mortgage
is a loan that can help you cover the cost of
buying a home. How much you’re able to
borrow will depend on factors including
your total current debt, monthly household
income, how long you’ve been at your current
job and how long it will take you to pay it
back: Introducing the amortization period.
A longer amortization period means lower
monthly payments but higher interest rates.

Mortgage lenders use Principle, Interest, Taxes and Heating (PITH) as a tool to ensure mortgage affordability by
determining the monthly payments that can be made by the home buyer. The REALTOR.ca mortgage affordability
calculators can help you perform your own PITH test to estimate affordable mortgage payments.

When taking out a mortgage, home buyers grant the bank a lien on the property. This gives the bank the right to seize
your property in the event you don’t repay your mortgage.

Types of mortgages:
• Fixed-rate mortgage: Your interest rate is locked in for a specified period called a term. Your payments stay the
same for the mortgage’s term so you will not pay more even if interest rates increase over time.
• Variable rate mortgage: The rate of interest you pay may change if rates go up or down.
• Conventional mortgage: Requires a down payment of 20% or more of the property’s value. You’re not required
to get mortgage default insurance with a conventional mortgage.
• Closed mortgage: The mortgage cannot be paid off early without paying a prepayment charge.
• Open mortgage: A mortgage that can be paid off at any time during the term, without having to pay a charge.
The interest rate for an open mortgage may be higher than for a closed mortgage with the same term.

6 | REAL ESTATE NOW | LB@LoraleeBurns.com