That’s why we’ve come up with this list of common mortgage terms to help you out.
Principal: The original amount of a loan, before interest.
Prepayment penalty: A fee charged by the lender when the borrower prepays all or part of a mortgage over and above the amount agreed upon.
Closed mortgage: A mortgage that cannot be prepaid or renegotiated for a set period of time without penalties.
Open mortgage: A mortgage that can be repaid at any time during the term without any penalty. For this convenience, the interest rate is between 0.75-1.00% higher than a closed mortgage. This is a good option if you are planning to sell your property or pay-off the mortgage entirely.
Fixed rate mortgage: A mortgage where the interest is set for the term of the mortgage.
Variable rate mortgage: A mortgage for which the interest rate fluctuates based on changes in the prime interest rate.
High ratio mortgage: A mortgage that exceeds 80% of the purchase price or appraised value of the property. This type of mortgage must be insured.
Conventional mortgage: A mortgage up to 80% of the purchase price or the value of the property.
Mortgage insurance: If your down payment is less than 20% of the purchase price of the property, the lender is going to require mortgage insurance.
