If you’re about to embark on the exciting journey of homeownership for the first time, familiarizing yourself with the words and people a part of the process will make things a little easier on you. The more you understand about the homebuying process, the better choices you can make about the professionals you align yourself with.
Here’s a quick glossary of words and definitions you’ll come across in the homebuying process:
Amortization: the length of time over which your mortgage debt will be repaid.
Closing costs: these are costs in addition to the purchase price of the home, such as legal fees, transfer fees and disbursements, that are payable on closing day. They range (on average) from 1.5% to 4% of a home’s selling price.
Deed: this is a legal document that transfers ownership in the real property to the purchaser.
Down payment: this is the portion of the home price that is not financed by the mortgage loan. The buyer must pay the down payment from his/her own funds or other eligible sources before securing a mortgage.
Equity: this is the difference between the price for which a home could be sold and the total debts registered against it. This is ultimately the value you build in your home during homeownership.
Interest: this is the cost of borrowing money for a mortgage. Interest is usually paid to the lender in regular payments along with repayment of the mortgage loan amount.
Real Estate Lawyer: this is a licensed legal professional who will assist you in the legal process of buying a home.
Mortgage: this is a loan for the purchase of a home. A mortgage is a security interest given in the property you are purchasing which secures repayment of the loan related to the property.
Mortgage Broker/Representative: this is a professional who works with a financial institution(s) to help you in getting a mortgage (loan) for the purchase of your home.
lender is an institution (bank, trust company, credit union, etc.) that lends money for a mortgage.
Mortgage loan insurance: “mortgage loan insurance is required for residential mortgage loans with a loan-to-value ratio of more than 80%, and is available from CMHC or a private company.” (CMHC website)
New Home Warranty Program: this is coverage in the event that an item under the warranty needs to be repaired within the specific warranty period. The repair will be made by the organization that provided the warranty.
Property taxes: these are taxes charged by the city or municipality in which you live, usually based on the value of your home.
Title: “a freehold title is an interest in land that gives the holder full and exclusive ownership of the land and building for an indefinite period.” (CMHC website)