UNDERSTANDING YOUR MORTGAGE: Common Terms and Jargon Explained

For many people, buying a home is one of the biggest financial decisions they will ever make. Unfortunately, the mortgage process can be confusing, with plenty of unfamiliar terms and jargon that can be difficult to decipher. To help demystify the process, we've put together this guide to common mortgage terms and what they mean.

Amortization: This is the process by which you pay off your mortgage over time, usually in monthly installments.

APR: The APR, or annual percentage rate, is the total cost of your mortgage over the life of the loan, expressed as an annual percentage. This includes not only the interest rate, but also any fees or charges associated with the loan.

Closing costs: These are the fees and charges associated with finalizing your mortgage, such as appraisal fees, title fees, and attorney fees.

Collateral: Collateral refers to the property you are buying with your mortgage. If you default on your loan, the lender may seize your collateral as a way to recoup their losses.

Escrow: An escrow account is a separate account where your mortgage lender holds funds to pay for things like property taxes and homeowners insurance.

Interest rate: The interest rate is the percentage of your loan balance that you will pay in interest each year. This rate can vary depending on a number of factors, including your credit score and the length of your loan.

Principal: The principal is the amount of money you borrowed to buy your home, not including interest or other charges.

By understanding these common mortgage terms, you'll be better equipped to navigate the homebuying process and make informed decisions about your mortgage. Of course, there are many other terms and jargon you may encounter along the way, but this guide should give you a solid foundation to start from. If you have any questions about your mortgage or the homebuying process, don't hesitate to reach out to your mortgage broker or lender for guidance.