When buying a new home for the first time, there are many new terms that you will come across. The situation becomes more profound when looking to take a mortgage. If you are not familiar with the terms, you will get very confused with the process. A mortgage broker will take you through these terms. Therefore, we have put together the most common terms that you are going to hear from mortgage brokers. The terms are as follows:
PITIMI payment is the total amount of money that you have to pay to complete mortgage payment. PITIMI stands for the payment of Principal, Interest, Taxes, Insurance and lastly the Mortgage Insurance.
Mortgage insurance covers the mortgage payment and is not your homeowner insurance as many people believe. You pay the insurance for your lender. This is what encourages banks to give loans to people with lesser amounts of down payments and on the other hand, the insurance is paid to cover the risks of the loan that you are receiving from your lender. This is very important as it ensures that the bank gets back its money should something happen and you are not able to repay your mortgage loan back. However, the lender will have to sell the property first and the insurance will cover any short falls that comes out of the sale.
Home owners insurance
This is normally the insurance taken to cover you home. This insurance has policies covering a home against theft, fire, disasters and ensures that you can get your money back should something happen to your house. It is a good cover given that people struggle to pay back their mortgages. If something happen to their house and the properties inside, the people would suffer huge financial losses since they have already spent large portions of their money on the project.
Loan to value
Loan to value is a term used by many mortgage brokers and it refers to the amount of loan in respect to the value of a home. Therefore, this is calculated as the loan amount over the actual value of the house times 100.
Annual percentage rate
Contrary to how people think that this is the rate that is used to calculate the loan, the annual percentage rate is what banks use to determine the overall cost of your loan. Normally, the APR is usually higher than the interest rate charged on your loan. However, if you do not have very many fees to pay, your APR amount will be closer to that of your loan. The best way to compare what different mortgage brokers have to offer is to look at the APR rates.