Mortgage Basics

There is no such thing as "just a mortgage". There are numerous types of mortgages and payment options designed to meet the unique requirements of every homeowner. If you’re considering purchasing a new home, you should be aware of the basic mortgage components, which include:

Principal - The amount of money you need to borrow; usually the difference between the selling price of the property and the down payment.

Interest - A percentage of the principal that is charged by the mortgage lender for borrowing the money.

Mortgage Payment - A regular instalment usually composed of principal and interest that is paid towards the mortgage over its term to maturity.

Amortization Period - The actual number of years it will take to repay the entire mortgage, generally a period anywhere between 15 and 25 years.

Term - The length of time a specific mortgage agreement covers. When the term matures or expires, the balance of the mortgage is often renegotiated for another term at rates and conditions in effect at that time.

Equity - The value of the property over and above all claims. This is generally calculated as the difference between market value and the outstanding principal of all mortgages relating to the property.

By understanding these definitions, you will gain a better understanding of the many options available and how to tailor your mortgage to your specific needs.