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Mortgage Guide - Ahmad Asadi, Your Realtor

Mortgage Guide - Ahmad Asadi, Your Realtor

Welcome to the Mortgage Guide

Embarking on the journey of buying a home can be exciting, yet navigating the world of mortgages can often seem daunting. Our Mortgage Basics Guide is here to help. Whether you're a first-time homebuyer, looking to refinance, or simply seeking to deepen your understanding of how mortgages work, this guide is designed for you.

Here, you'll find essential information covering everything from what a mortgage is, to the different types of mortgages available, interest rates, down payments, and much more. Our aim is to equip you with the knowledge and confidence needed to make well-informed decisions on your path to homeownership.

Let's begin this journey together, one step at a time.

Ahmad Asadi, Your Realtor


Mortgage Basics Guide

Welcome to our Mortgage Basics Guide. This guide is designed to help you understand the fundamental aspects of a mortgage, providing you with the knowledge you need to navigate the home-buying process effectively. Whether you're a first-time homebuyer or looking to refinance, understanding these basics is crucial.

What is a Mortgage?

A mortgage is a type of loan specifically used to purchase real estate. In this arrangement, the buyer borrows money from a lender and agrees to pay it back, with interest, over a set period. The property acts as collateral for the loan.

Types of Mortgages

There are several types of mortgages available, each with its own advantages and disadvantages. The most common are fixed-rate mortgages, where the interest rate remains the same throughout the loan term, and variable-rate mortgages, where the rate may change based on market conditions.

Mortgage Terms and Repayment

The term of a mortgage refers to the length of time you have to repay the loan. Terms typically range from 5 to 30 years. The repayment schedule and the amount of each payment will depend on the term and type of mortgage you choose.

Interest Rates

Interest rates are a critical aspect of any mortgage. They represent the cost of borrowing money and are determined by several factors, including market conditions, your credit score, and the type of mortgage you choose.

Down Payments

A down payment is an initial payment made when purchasing a home, typically expressed as a percentage of the purchase price. The size of the down payment can affect your mortgage rate and the need for mortgage insurance.

Mortgage Insurance

If your down payment is less than 20% of the home's value, you may be required to purchase mortgage insurance. This insurance protects the lender in case you default on your loan.

Closing Costs

Closing costs are fees and expenses you pay to finalize a mortgage transaction. These can include appraisal fees, title insurance, and loan origination fees, among others.

Understanding Your Credit Score

Your credit score is a crucial factor in determining your mortgage eligibility and interest rate. A higher credit score can lead to more favorable loan terms.

Refinancing Your Mortgage

Refinancing involves replacing your existing mortgage with a new one, typically to take advantage of lower interest rates. It can also be used to consolidate debt or change mortgage terms.


Understanding these mortgage basics can help you make informed decisions when buying a home or refinancing a loan. Consult with a mortgage professional for personalized advice and information.


Mortgage Glossary

The process of spreading out a loan into a series of fixed payments over a period of time. For mortgages, this period often ranges from 15 to 30 years.
Adjustable-Rate Mortgage (ARM)
A type of mortgage where the interest rate adjusts periodically based on a benchmark interest rate or index that reflects the cost to the lender of borrowing on the credit markets.
Closing Costs
Fees and expenses, over and above the price of the property, incurred by the buyer and seller during the transfer of ownership of a property.
Debt-to-Income Ratio (DTI)
A measure that compares an individual's monthly debt payments to their monthly gross income. Lenders use DTI to assess a borrower's ability to manage monthly payments and repay debts.
The difference between the market value of a property and the amount still owed on the mortgage. It represents the portion of the property that the owner truly owns.
Fixed-Rate Mortgage
A mortgage with a fixed interest rate for the entire term of the loan, resulting in consistent monthly payments.
Loan-to-Value Ratio (LTV)
A ratio used by lenders to determine the risk of loaning money to a borrower. It's calculated as the amount of the mortgage divided by the appraised value of the property.
Mortgage Insurance
Insurance policies that protect the lender in case the borrower is unable to repay the loan. It is typically required for loans with an LTV ratio greater than 80%.
A lender's conditional agreement to lend a specific amount based on the borrower's financial status and creditworthiness before a specific property is chosen.
The process of paying off one loan with the proceeds from a new loan secured by the same property. This is often done to secure a lower interest rate.
A financial arrangement where a third party holds and regulates payment of the funds required for two parties involved in a given transaction.
Interest Rate
The amount charged by a lender to a borrower for the use of assets, expressed as a percentage of the principal.
The amount borrowed or still owed on a loan, separate from interest.
The length of time for which a mortgage agreement is valid. Common terms in Canada include 5, 10, and 15 years.
The process a lender uses to determine if the risk of offering a mortgage loan to a particular borrower under certain parameters is acceptable.
Special Mortgage Features

Special Mortgage Features

  • Flexible Payment Options: Allows for increased payment flexibility, such as increasing monthly payments or making lump sum payments without penalty.
  • Portability: The ability to transfer your existing mortgage to a new property while maintaining current mortgage terms and interest rates.
  • Pre-Approval: Getting pre-approved for a mortgage to understand how much you can borrow before you start house hunting.
  • Rate Holds: Locking in an interest rate for a certain period to protect against rate increases while you shop for a home.
  • Cash Back: Receiving a cash rebate upfront, often used for home improvements or paying closing costs.
  • Home Equity Line of Credit (HELOC): A revolving line of credit secured by the equity in your home, allowing you to borrow and repay funds as needed.
  • Interest-Only Payments: Paying only the interest on the mortgage for a certain period, usually at the beginning of the mortgage term.
  • Accelerated Payments: Opting for bi-weekly or weekly payments to pay off the mortgage faster and reduce the amount of interest paid over time.
  • Fixed vs. Variable Rates: Choosing between a fixed interest rate (unchanged for the term) or a variable rate (can fluctuate with market conditions).
  • Mortgage Insurance: Insurance to cover the lender in case the borrower defaults, typically required for high-ratio mortgages.
Mortgage Tools and Resources

Some important information regarding mortgages

• I encourage you to speak to at least three mortgage specialists to learn more and obtain expert advice.
• A preapproval is not a guarantee of financing!
• Mortgages with down payments of less than 20% of the sale price require mortgage insurance.
• There are more expenses after submitting the offer and at the time of closing. Always work with a buffer.
• A common thumb of the rule is that mortgage debt cannot be more than four times your annual income. So, if you make $50,000 for example, you could borrow $200,000 from a bank. Four times 50,000 equals 200,000. You will need two years of tax returns, plus two recent pay stubs from your employer to demonstrate your income.
You also must have a good history of paying back the money you borrow. In other words, you need a good credit score. Credit scores help the bank judge how risky you are as a borrower and whether they should give you that loan. Your credit score is important because it is key to getting a loan for a house. Probably the most important role that banks play in most people's lives is providing home loans.

Mortgage Links:

Contact Ahmad Asadi, your Realtor.

The table below provides a detailed breakdown of monthly mortgage payments and associated expenses for homes priced between $550,000 and $900,000. It includes vital financial metrics such as the sales price, down payment, mortgage amount, interest rate, term in years, principal and interest payments, total monthly expenses, and the cash needed to close.
This comprehensive overview helps potential homeowners understand the financial commitments required for different home price points, allowing them to make informed decisions based on their budget and financial goals.
Approximate Monthly Mortgage and Expenses Breakdown
Sales Price Down Payment Mortgage Interest Rate Term (years) Principal & Interest Total Monthly Expenses Cash Needed to Close
$550,000 $100,000 $450,000 6.84 25 $3,195 $4,230 $110,200
$600,000 $100,000 $500,000 6.84 25 $3,549 $4,664 $112,295
$650,000 $100,000 $550,000 6.84 25 $3,904 $5,097 $114,407
$700,000 $100,000 $600,000 6.84 25 $4,272 $5,542 $116,663
$750,000 $100,000 $650,000 6.84 25 $4,628 $5,976 $118,787
$800,000 $100,000 $700,000 6.84 25 $4,984 $6,409 $120,911
$850,000 $100,000 $750,000 6.84 25 $5,339 $6,842 $123,035
$900,000 $100,000 $800,000 6.84 25 $5,696 $7,276 $125,159