Important Mortgage Terms Explained

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When getting a mortgage it can be difficult to try and make sense out of the many things that you have probably never encountered before. Not only is there a lot of money involved, and of course the home that you are hoping to move into, but there are a lot of terms thrown around that can seem more like Ancient Greek than modern day English. That is why we hope to make the situation easier for you by explaining some of the more difficult but important words. Here are some important mortgage terms explained.

Amortization period

This might be one of the most important ones that people are not aware of. The amortization period is simply the number of years it will take you to repay the entire amount of the mortgage based on the terms of the agreement. Not only is it important to know the definition, but it is also important to know that the law has changed in Canada regarding it. The current maximum period has been reduced to 25 years as opposed to 40.

Collateral

You might be familiar with the term collateral, but perhaps not in the way that we mean in the industry. In the mortgage business, collateral is an asset such as a deposit, automobile, or other valuable piece of property that can be used as a security for a loan. The more collateral you have to offer, the more favourable your terms may be.

Credit score

We are all familiar with credit these days. In terms of getting a mortgage, though, we assess things a little differently. This is a system that assesses you based on a number of set criteria such as length of repayment terms, payment history, amounts owed, and others. This score will greatly affect the terms of your loan.

Equity

This is often a complex term that is shrouded in mystery to many consumers, but is actually fairly simple to understand. Equity is only the value that you have within your home. If the market value of your house exceeds the total amount you have left to pay, then you have equity. For example, if you still owe $150,000, but could sell your home today for $200,000, then you have $50,000 in equity. This is a valuable tool.

The key to negotiating a successful mortgage is to first understand all of the major terms associated with it. We don’t want you to feel like you are being given the run around, or that we are hiding anything from you. Our mortgage experts are always up front, and even though they may use some difficult to understand terms, now that we have explained some important mortgage terms, you are ready to face it head on.

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About Sky Financial

We incorporated The Mortgage Centre-Sky Financial Corp. in August 1992 in Edmonton Alberta. Furthermore we opened offices in Fort McMurray, Cold Lake, Grande Prairie, Red Deer, Stettler, Saskatoon, Moose Jaw and Prince George BC.

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