Real estate financing glossary
The following are some useful vocabulary terms for home buyers.
Interest rates
The interest rate is, in a way, the price you pay for a mortgage loan. The rate is a percentage amount that is added to the amount of your monthly mortgage payments.
Fixed and variable interest rates
A fixed interest rate does not change during the life of the mortgage loan.
A variable interest rate (or floating interest rate) changes according to market fluctuations.
Your financial advisor will advise you on which kind of interest rate is best for you.
Amortization
The amortization period is the length of time it takes to repay your mortgage loan in full. Currently, the maximum amortization period in Canada is 25 years.
Mortgage term
This is the duration of the agreement with your financial institution.
The mortgage term is shorter than the amortization period; it can last from a few months to several years. At the end of the mortgage term, the terms of the contract (such as the interest rate) are renegotiated.
Closed mortgage
A closed mortgage engages you to a particular term and generally implies lower interest rates. However, closed mortgages offer less flexibility because a penalty is levied if you renegotiate your rate, refinance or even pay off the loan early.
Open Mortgage
With an open mortgage, the loan recipient pays higher interest rates but benefits from more flexibility, meaning he/she can renegotiate the terms, refinance or pay off the loan in advance without penalties.
Did you know?
77% of Quebec homeowners surveyed have purchased an existing home in the past. 32% have purchased a new property*.
*Source: Results from an online Extract Marketing Research survey, conducted among 1170 Canadian homeowners (Quebec, Ontario and Alberta) aged 25 to 64, from April 23rd to May 12th, 2014.