Q: I just left my appointment with the Bank. I don't have a clue as to what my loan officer just told me! What do all of these terms mean?
A: When shopping for a mortgage (and a house!), you will come across some lingo that is not commonly used in everyday language - particularly for first-time homebuyers. Here is a list of some of the terms and their definitions that you may hear being used in your meeting with your loan officer:-
ARM (adjustable rate mortgage) - a mortgage with an interest rate that changes periodically
Appraisal - written report done by a professional who assesses and determines their opinion of the value of property based on other similar properties
Closing Costs - expenses that are paid (just once) when you purchase a property and/or get a mortgage. Examples may include stamp duty, legal fees, bank fees, etc.
Collateral - assets used to secure the repayment of a loan/mortgage; you risk losing these assets if you do not repay your loan/mortgage according to the terms of the Bank/lender
Credit Report/Check - a report of a person's history to repay bills/loans.
Deed - a legal document that transfers ownership/responsibility from one person to another person
Mortgage deed - a legal document that confirms the transfer of funds from the Bank to the borrower to purchase property. It also outlines the terms to repay these funds back to the Bank.
Title/Conveyance deed - a legal document that transfers ownership from one owner to another owner
Down Payment - the part of the purchase price of a property that the buyer pays in cash. Example, if you get 95% financing for a $1,000,000 house, the Bank is willing to loan to you $950,000 - you will have to pay a down payment of $50,000 in cash.
Interest Rate - the rate used to calculate the cost for you to borrow funds from the Bank.
Term - the length of time you have to pay back what you borrowed from the Bank plus pay back the interest you are charged for these funds.
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