Mortgage Jargon – Part 4
If you missed the previous article – Mortgage Jargon – Part 3
Special levees can be charged by municipalities to recover the cost of their services if their services, for any reason, cannot be funded from general revenues. For example, a water-meter installation, road improvement, or sewage improvement can be charged to the owner or new owner, if these are new improvements to the area.
If your down-payment is less than 20% with a regular lender, such as a bank, then you have potentially got into requiring an insured mortgage. This “kicks in” because of the small amount of down payment you are using. You have become more of a risk to the bank and they hedge their risk by getting you to take out insurance in case you default. You may be dealing with CMHC (Canada Mortgage and Housing Corporation), Genworth Financial, or AIG. Perhaps you are with a lender who has their own private insured mortgages. This is commonly known as ‘default insurance’, which means that if you default on your mortgage, your lender will be paid the balance of the mortgage. If there is any shortfall, they may sue you for the difference.
A conventional mortgage is commonly thought of as going to the bank. This is incorrect. A conventional mortgage is putting 20% or more down as a down-payment with a regular lender such as a bank.
This is a variable-rate mortgage that can be converted to a fixed-rate mortgage at any time, without any fees.
Cost of Borrowing
The total costs charged to a borrower, by a lender, to obtain a mortgage. This includes, not just their interest, but the other charges that have been calculated into the mortgage. These charges can be any up front fees, such as appraisal fees, lender fees and the like. What may look like a 5% rate could wind up being a 7, 8, or 10% rate because of the fees that are paid by the borrower at the outset of getting the mortgage.
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For the next article in the series – Mortgage Jargon – Part 5
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