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Mortgage Glossary

Adjustable-Rate Mortgage

An adjustable-rate mortgage has an adjusting interest rate, which fluctuates based on changes in the market and to the prime lending rate. Your interest rate can go up, or it can go down, and the amount you pay each month will adjust accordingly.

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Bad Credit Mortgage

A bad credit mortgage is a specialized mortgage agreement designed for people with low credit scores. Usually, they come with a more significant down payment amount and a higher interest rate.

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First-Time Home Buyers

First-time home buyer (FTHB) is both a legal and industry-specific term, referring to someone buying a home for the first time in their life. First-time homebuyers can take advantage of several government initiatives—including the GST/HST Housing Rebate, Home Buyers’ Plan, FTHB Tax Credit, and the FTHB Incentive—to help them secure a mortgage.

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Fixed-Rate Mortgage

Unlike an adjustable-rate mortgage, a fixed-rate mortgage does not have a floating interest rate. Instead, the rate is agreed upon at the outset of the mortgage terms, and it stays the same throughout the period of the agreement.

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Investment Property Mortgage

An investment property mortgage (also known as an income property mortgage) is a mortgage taken out on a property that’s intended to provide some form of cash flow, often by renting it out. Vacation homes, tenements, and bed and breakfasts are all examples of such types of property.

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Mortgage Broker

A mortgage broker is a third party that connects mortgage lenders with mortgage borrowers. A broker does not sell mortgage products but rather acts as a mediator so that borrowers can find a suitable lender for their financial circumstances.

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Mortgage Rates

A mortgage rate is the rate of interest charged on a mortgage’s principal balance. There are three different types of mortgage rates: adjustable-rate, fixed-rate, and variable rate.

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Mortgage Refinancing

Refinancing allows consumers to replace their original mortgage with a new one. The money taken out on the second one is used to pay off the first, and the remainder is freed up for whatever purpose the borrower may have in mind: home renovations, big purchases, education, or other investments.

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Mortgage Renewals

A mortgage renewal occurs when a mortgage agreement reaches its end of term but still has an outstanding balance. The lender will usually ask the borrower to agree to the same terms as the original agreement, but this is not always in the borrower’s best interests. When renewing a mortgage, it often pays to try to renegotiate and seek better mortgage terms.

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Pre-Approved Mortgage

Despite the name, a pre-approved mortgage isn’t a mortgage per se. Rather, it is a statement by the lender that you qualify for a certain loan amount. Getting pre-approval is a great way to know how large of a loan you can take out and start weighing your options.

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Purchase-Plus-Improvements Mortgage

A purchase-plus-improvements mortgage is for someone who wants to buy a home and make improvements to it. The purchase-plus-improvement mortgage factors the price of home improvements into the amount of money borrowed, allowing the borrower to start renovating immediately.

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Variable-Rate Mortgage

Like an adjustable-rate mortgage, a variable-rate mortgage has a floating interest rate, which varies according to fluctuations in the market.

But unlike an adjustable-rate mortgage, a variable-rate mortgage will always require the same payment amount each month. Your payments will stay the same, no matter what happens to the prime lending rate. What will change, however, is the length of time you will need to pay off the loan. If the prime rate increases, you’ll need more time to pay off the loan. If it decreases, you’ll pay it off sooner.

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