Remember way back to when you were studying for your real estate exam? All those terms and laws that you had to memorize, only to be forgotten as soon as you started your career and met the in-house mortgage broker? He or she immediately became the smiling face you inevitably dropped your clients off with, and then subsequently prayed that he or she would find some hidden wealth that might actually qualify them to purchase a home.
Many of those mortgage terms are actually quite practical to retain throughout your career, even if they might only ever be utilized while explaining to Mr. & Mrs. Jones that a) they will indeed require pre-qualification prior to a purchase, b) you are not a miracle worker, and c) third bankruptcy filings are generally frowned upon in the lending community.
However, there are the “actual” mortgage terms lenders will use, and then there are the unsaid, possible meanings of those mortgage terms. Allow me to present a few examples to expand on that theory:
Debtor – Actual: The individual owing money to a person or institution. Possible: When Paula Abdul had a hit with Forever Your Girl, that might be a more polite wording than the euphemism the lender might use privately.
Debt-to-income ratio – Actual: A calculation of monthly housing costs and overall debt payments, divided by the purchasers’ gross monthly income, which ultimately determines the size of their available mortgage. Or something like that. Possible: The grosser the purchasers’ income, the higher the likelihood of the purchasers receiving a booklet from the lender titled Renting – Stick With It, Folks!
Debt consolidation – Actual: An option where the debtor takes out one larger loan to consolidate several smaller ones. Possible: Way too many additional loans can lead to a debt “consolation” advisement from a lender, like, “Have you considered fleeing the jurisdiction?”
Balloon mortgage: Actual: Wow! There was a whole lot of reading to go with this mortgage term, but essentially it is a deferral of standard mortgage payments until the specified mortgage term “matures”. Possible: Considering that most modern mortgages mature slower than Grandma, and that you will repay roughly 111 times the value of the mortgage before it is paid off, “balloon” and “mortgage payment” are essentially synonymous.
Default – Actual: When the borrower fails to meet the terms set out by the lender at the start of the mortgage. Possible: The borrower can pleadingly suggest that it was default of de bank, or they can try to suggest that it was default of de forces outside of his control. De lender won’t care, and will likely start de foreclosure.
Foreclosure – Actual: The legal process whereby the lender regains control of the property, and the debtor will begin test-driving various empty appliance boxes. Possible: NOT an exclamation prior to a wayward golf ball finally landing on the green, this process signals what is likely the end of receiving annual birthday cards and invitations to client appreciation dinners from your lender. It may also dampen a planned romantic evening when you arrive “home” to find the locks changed, and your collection of Anne Murray memorabilia strewn across the front lawn.
These are just a handful of the many common mortgage terms currently in use. I hope that you will find that these mortgage term explanations are either informative, or nostalgic. I also sincerely hope your own experience has primarily been with the “actual” definitions.
Humour columnist and author Dan St. Yves was licensed with Royal LePage Kelowna for 11 years. Check out his website at www.nonsenseandstuff.com, or contact him at ThatDanGuy@shaw.ca.
