Mortgage Solutions For You: documentation

Monday, December 4, 2006

"TIP-ICALLY SPEAKING"

Quick Tips for home buying...

Get a list of all closing costs (IE: legal fees, land transfer taxes, administrative fees, etc.)
Make a list of all documentation you'll need to provide (IE: recent pay stubs, income tax notice of assessment, old mortgage statements, confirmation of down payment, etc.)
Get Pre-Approved! (Getting a pre-approval for your mortgage is the easiest way to determine what price range you can shop for - most lenders will hold an approval for 3 or even 4 months!)
Anticipate possible further expenses (IE: buying a home that needs repairs or extra maintenance, landscaping, upgrades to the property, etc.)

~ Common Terms ~

Amortization: The amortization is the length of time it takes to pay off a mortgage, assuming that the interest rate and payment amount do not change, that all payments are made on time and that no additional payments are made. Credit (Bureau/History/Score): If you have ever taken out a loan, used a credit card or taken advantage of a "buy now, pay later" offer, you will have a credit history. Whenever a financial institution, such as a bank, a credit card company, or any other business gives you credit, it may send information about whether or not you make your payments on time to a credit-reporting agency. Credit-reporting agencies, also known as credit bureaus, are businesses that collect information about you and how long it takes you to pay back money you have borrowed. This information is called your "credit history". A credit-reporting agency provides information about credit history in two ways, as a credit report and as a credit score. Along with the credit histories of millions of other people, your credit history is recorded in files maintained by at least one of Canada's three major credit-reporting agencies: Equifax, TransUnion and Northern Credit Bureaus. These files are called credit reports. Your credit score is a judgment about your 'financial health', at a specific point in time. It indicates the risk you represent for lenders, compared with other consumers. There are many different ways to work out credit scores. The credit-reporting agencies Equifax and TransUnion use a scale from 300 to 900. High scores on this scale are good. The higher your score, the lower the risk for the lender. Lenders may also have their own ways of arriving at credit scores. In addition, lenders must decide on the lowest score you can have and still borrow money from them. They can also use your score to set the interest rate you will pay. Debtor/Borrower: The debtor[s] must meet the requirements of the mortgage conditions imposed by the creditor in order to avoid the creditor enacting provisions of the mortgage to recover the debt. Typically the debtors will be the individual home-owners, landlords or businesses who are purchasing their property by way of a mortgage. The debtor is usually referred to as the borrower, buyer or mortgagor. Equity: Equity can be simply stated as the monetary value of a property or business beyond any amounts owed on it in mortgages, claims, liens, etc. For example, if you owe less on your mortgage than the property is worth, the difference is the equity. (IE: I owe $120,000 but the home is assesed for $220,000 - I would have $100,000 equity in the property) Interest Rate: The monthly/daily/annual effective rate paid (or received if you are a creditor) on borrowed money. Expressed as a percentage of the sum borrowed. The original amount lent is called the 'principal', and the percentage of the principal which is paid/payable over a period of time is the "interest rate". (Shown as a percentage %, for example 4.85%) Lender/Creditor: The creditor has legal rights to the debt secured by the mortgage and often makes a loan to the debtor of the purchase money for the property. Typically, creditors are banks or other financial institutions who make loans available for the purpose of real estate purchases. A creditor is usually referred to as the lender or mortgagee. Fixed: Usually used to describe an interest rate, meaning that it will not change and is locked in for a certain period of time (or term) that has been agreed upon by the borrower and lender. (opposite of a variable interest rate) Refinance: Refinancing may be undertaken to reduce interest costs (by refinancing at a lower rate), to pay off other debts, to reduce one's periodic payment obligations (sometimes by taking a longer-term loan), to reduce risk (such as by refinancing from a variable-rate to a fixed-rate mortgage), and/or to liquidate some or all of the equity that has accumulated in real property during the tenure of ownership. In essence, refinancing a mortgage can lower the monthly payments owed on the mortgage either by changing the mortgage to a lower interest rate, or by extending the period of a mortgage, so as to spread the re-payment out over a long period of time. The money saved can be used to pay down the principal of the mortgage or to pay off other debt, thus further reducing payments. Alternately, refinancing can be used to transform available equity in one's house into ready cash, available for other purposes or expenses. Term: The amortization of a mortgage is divided up into smaller time periods called "terms". The term is the period of time during which, with fixed-rate mortgages, the interest rate and payment amount are fixed. With variable-rate mortgages, the payment amount may, or may not, change. At the end of the term, you can renew your mortgage for a new term, at current interest rates. Mortgage: An arrangement whereby a lender (or the mortgagee) lends money to a borrower (or the mortgagor) with the loan being secured on the mortgagor's assests (or the property. The mortgage lapses when the loan is fully repaid along with all the interest due. Mortgage Loan Insurance: High-ratio mortgages (mortgages with less than 25 per cent down payment) must, by law, be insured against default. This type of insurance is offered by the federal government through the Canada Mortgage and Housing Corporation (CMHC) or through an approved private insurer (such as Genworth Financial Canada). With mortgage loan insurance, if you default on your mortgage, the lender is paid back by the insurer. Variable: Usually used to describe an interest rate, meaning that it can fluctuate or change depending on current interest rates. (opposite of a fixed interest rate)

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Happy New Year!

Monday, December 4, 2006

"TIP-ICALLY SPEAKING"

PUT A MORTGAGE BROKER TO WORK FOR YOU!

~ Common Terms ~