Decoding Mortgage Broker Jargon

So, you’re in the market for a mortgage? Whether you’re a first-time home buyer or a seasoned investor, understanding mortgage broker terminology is crucial. This knowledge will help you make informed decisions and communicate effectively with your mortgage broker. In this blog post, we’ll break down some of the most common mortgage broker terms and explain them in plain English. Let’s dive in!

Mortgage Broker: A mortgage broker is a professional who connects borrowers with mortgage lenders. They help you compare loan products and rates, guide you through the mortgage process, and handle the paperwork on your behalf.

Pre-Qualification vs. Pre-Approval:

• Pre-Qualification: This is an initial estimate of how much mortgage you may be eligible for, based on your credit score and other financial information.
• Pre-Approval: This is a more formal process where a mortgage lender reviews your mortgage application and supporting documents to approve you for a specific loan amount.

Interest Rate: The interest rate is the cost of borrowing money from a lender, expressed as a percentage. A lower interest rate means lower monthly mortgage payments.

Mortgage Rate Lock: A mortgage rate lock is an agreement from your lender to provide you with a specific interest rate for a set period, typically 30-60 days. This protects you from potential rate increases during that time.

Loan-to-Value Ratio (LVR): The LVR is the ratio of the mortgage amount to the appraised value of your home. A lower LVR means you need to borrow less and may qualify for better mortgage terms.

Closing Costs: These are fees associated with finalising your mortgage loan. They typically include origination fees, appraisal fees, title insurance, and other miscellaneous charges.

Lenders Mortgage Insurance (LMI): LMI is insurance that protects the lender in case you default on your loan. It is usually required if your down payment is less than 20% of the purchase price.

Understanding these key terms can help you navigate the mortgage process more confidently. If you have any further questions, don’t hesitate to reach out to a mortgage professional for more information.