When it comes to buying and owning a home, there's lots to know. Meridian is committed to helping you make the best decisions along the way.
Have a question? Click here to view our mortgage FAQs.
About Mortgages
Closed MortgageÂ
A mortgage that cannot be prepaid, renegotiated or refinanced before maturity, except according to its terms. A lender may permit payout under certain circumstances but will levy a penalty charge for doing so.
Open MortgageÂ
A mortgage, which you can pay off, renew or refinance at any time. The interest rate for an open mortgage is usually higher than a closed mortgage rate.
Convertible MortgageÂ
A mortgage that you can change from short-term to long-term, depending on your financial needs.
Conventional MortgageÂ
Is a mortgage that does not exceed 80% of the lesser of the appraised value or the purchase price of the property. A mortgage that does exceed that limit (referred to as High Ratio – see below) must be insured against default.
High-ratio mortgageÂ
Is the mortgage you obtain when you have less than 20% of the total purchase price to put down as your down payment. This type of mortgage must be insured through sources such as CMHC, GENWORTH, AIG. Borrowers pay the insurer an application fee and the insurance premium (which may be added to the mortgage).
Fixed-Rate MortgageÂ
A mortgage for which the rate of interest is fixed for a specific period of time (the term).
Variable rate mortgageÂ
A mortgage with an interest rate that changes with the market. The rate changes each month, meaning that the portion of your payment that goes towards interest may go up or down each month. But your total payment will stay the same.
About borrowing
Amortization PeriodÂ
The actual number of years it will take to repay a mortgage in full. This may go beyond the term of the loan. For example, mortgages often have five-year terms but 25-year amortization periods.
TermÂ
The length of time during which you pay a specific rate on the mortgage (i.e., the number of years in your mortgage contract). This is different than the amortization period. After the term expires, the balance of the principal then owing on the mortgage can be repaid or a new mortgage agreement (i.e. renewed) can be entered with a new renegotiated interest rate.
Blended PaymentsÂ
Payments consisting of both a principal and an interest component, paid on a regular basis (e.g. weekly, biweekly, and monthly) during the term of the mortgage. The principal portion of payment increases, while the interest portion decreases over the term of the mortgage, but the total regular payment usually does not change.
Maturity DateÂ
The last day of the term of the mortgage agreement. The mortgage agreement must then be renewed or the mortgage balance paid in full.
RateÂ
The percentage interest that you pay on top of the loan principal. For example, you may take out a mortgage of $100,000 at a rate of 12%. Your monthly payments will consist of a portion of the original $100,000, plus 12% interest.
PrincipalÂ
The amount of money borrowed for a new mortgage.
About home buying
Closing CostsÂ
Costs that are in addition to the purchase price of a property and which are payable on the closing date. Examples include legal fees, land transfer taxes, and disbursements.
Moving ExpensesÂ
The cost hiring of packers, movers or renting a van.
Down PaymentÂ
The amount of money put forward by the purchaser. It represents the difference between the purchase price and the amount of the mortgage. Down payments typically range from 5% – 25% of the total value of the home.
EquityÂ
Equity is the difference between the price for which a property could be sold and the total debts registered against it.
Gross Debt Service (GDS) RatioÂ
The percentage of gross income required to cover monthly payments associated with housing costs. Most lenders recommend that the GDS ratio be no more than 32% of your gross (before tax) monthly income.
Home InsuranceÂ
Insurance to cover both your home and its contents (also referred to as property insurance). This is different from mortgage life insurance, which pays the outstanding balance of your mortgage in full if you die.
Mortgage Life InsuranceÂ
This form of insurance pays the outstanding balance of your mortgage in full if you die. This is different from home or property insurance, which insures your home and its contents.
