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Mortgage Information

Conventional Mortgage - loan allows borrowing up to 75% of the purchase price or the appraised value of the home, whichever is less.

High-Ratio Mortgage - loan allows borrowing more than 75% of the purchase price or the appraised value of the home, whichever is less.  With this type of loan, the borrower must pay a mortgage default insurance premium to protect the lender if payments are not made.  

Amortization Period - the size of the mortgage loan is calculated as if the loan payments were going to paid over 20, 25, or 30 years.  The longer the amortization  period, the lower the regular payment will be.  However, the faster you repay any borrowed money by choosing a shorter amortization period, the more you reduce the total cost of borrowing.

Term - the length of time the borrower commits to the mortgage rate, lender, and associated mortgage terms and conditions.  Regular payments continue for a specified term which is shorter than the amortization period.  The term can be as short as six months or it can be five years or more.  The lender is not obligated to renew your mortgage loan at the end of the term.

Fixed-Rate Mortgage
- a mortgage that has a fixed interest rate for the entire term of the loan.

Variable-Rate Mortgage - a mortgage that has fixed payments, but the interest rate fluctuates with any changes in interest rates.  If interest rates go down, more of the payment goes to the principal, and if interest rates go up, more of the payment goes towards the interest.

Vendor Take-Back Mortgage - a type of mortgage in which the seller offers to lend funds to the buyer to help facilitate the purchase of the property.

Open Mortgage - a mortgage that can be prepaid and renegotiated at any time, without penalty.

Mortgage Insurance - government backed or private backed insurance protecting the lender against the borrower’s default on mortgages.

Gross Debt Service Ratio
- the amount that a lender will permit a borrower to use from their gross income in order to qualify for a loan for housing costs, including mortgage payment and taxes.

Total Debt Service Ratio - maximum percentage of a borrower’s income that a lender will consider for all debt repayment including mortgage, other loans, and credit cards.