Home Purchase


What is a Mortgage?

When you buy a home, you need financing. Home financing is a mortgage or a deed on your home. The bank lends you money in exchange for the deed, which gives them the right to your home if you don’t pay your loan as agreed.

Mortgages are Secured Loans

You’ve probably come across other loan types in your lifetime. Not all loans are secured – they don’t use collateral. Mortgage loans always use collateral. You promise the collateral (your home) in exchange for the funds. If you don’t make your payments, the lender can start foreclosure proceedings, giving them possession of your home.

Mortgage Terms you Should Know

When you apply for a mortgage, lenders use various terms including:

  • Loan term (amortization) – This is how long you borrow the money for and how the lender determines your principal payments.
  • Principal payments – This is the portion of the amount you borrowed that you pay monthly based on the chosen term.
  • Interest – Each loan has an interest rate. Lenders calculate the interest owed based on the outstanding balance. You pay interest payments each month.
  • Down payment – Lenders require you to invest money into the home. The down payment percentage is a percentage of the loan amount.

For My Grey Bruce Mortgage and related queries, Let’s connect by calling us at 226-702-0702.

How a Mortgage Works

When you apply for a mortgage, you apply for a specific loan amount. The loan amount isn’t the home’s purchase price. The home purchase price minus your down payment is your loan amount.

Lenders look at down payments in percentages. For example, if you buy a home for $100,000 and the lender requires a 5% down payment, you’d need $5,000 of your own funds, plus the closing costs and land transfer taxes.

Along with choosing your mortgage term, rate type, and down payment, you’ll choose a payment option from the following:

  • Monthly – Make 12 payments per year
  • Bi-weekly – Make 26 payments per year
  • Weekly – Make 52 payments per year
  • Semi Monthly – Make payments twice a month

With each payment option, lenders start with the traditional monthly payment. If you choose bi-weekly or weekly payments, lenders take the monthly payment, multiply it by 12, and divided it by the number of payments (26 or 52). The accelerated bi-weekly payment takes your monthly mortgage payment divided by two; you pay that amount twice a month.

A mortgage is an agreement between you and the lender. Understanding the factors affecting your mortgage helps you choose the right option. You want an affordable mortgage, but one that includes the most attractive terms, making the most out of your investment in your home.

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