EMD: Earnest Money Deposit - EMD is Earnest Money Deposit. Your Earnest Money Deposit the down payment that is placed on a real estate property to make the offer to purchase legitimate.
NDI: Net Debt to Income Ratio - This is the ratio of your net disposable income to total debt commitments
DSR: Debt Services Ratio - This is the ratio of your loan repayments to your gross income. For most lenders this figure should not exceed 30% for singles and 40% for couples.
LMI : Lenders Mortgage Insurance/ PMI: Private Mortgage Insurance - If you are borrowing over 80% of the value of a property then your lender will probably require that your loan is insured due to the increased risk. It will usually be added to your monthly mortgage repayment. LMI protects the lender. Sometimes also called PMI.
LVR or LTV: Loan To Value Ratio - Loan To Value ratios are depicted as percentages and measure the ratio of the amount borrowed to the value of the property. For example, your home is valued at $200,000 with a mortgage/loan of $150,000. The LVR is 75% (debt/loan of 75%, equity of 25%).
TIL: Truth in Lending - Mortgage Brokers are required by law to provide any prospective mortgagor a Truth In Lending disclosure (TIL). The TIL includes pertinent loan information such as the amount financed, annual percentage rate (APR), finance charges, as well as an outline of the period required to pay off the loan.
APR: Annual Percentage Rate - Simplified, the APR is the rate that will be charged on a certain loan amount based on the amount of the loan, the life of the loan, plus any additional costs associated with the loan.
GFE: Good Faith Estimate - A GFE is a document your mortgage broker will provide to indicate the approximate costs associated with the closing of the loan - including title closing costs, mortgage and deed recording costs, lender fees and any prepaid figures.
GLOSSARY OF TERMS
Appraisal: A written analysis of the estimated value of a property. The lender uses this in determining your qualification for a loan.
Closing: Meeting where the lender, homebuyer and seller complete the sale and mortgage process, after which the home officially belongs to the buyer.
Closing costs: The money paid at closing to the lender – including a loan establishment fee, appraisal fee, title search and insurance, survey, taxes, deed recording fee, credit report charge and other costs assessed at settlement. The closing costs are typically around 2% - 6 % of the mortgage amount.
Credit report: A report showing your history of borrowing and repaying money that a lender uses to determine your suitability for a loan.
Down payment: A deposit paid by a home buyer to make up the difference between the purchase price (plus closing costs and fees) and the mortgage amount. Usually, 20 percent of the purchase price is required to avoid having to pay lenders mortgage insurance.
Equity/ Owner's Interest: The difference between the value of your home and the current amount left on your mortgage.
Interest Rate: The annual interest on a loan, based on a percentage.
Lock-in: A lender's guarantee that you will be granted a certain interest rate for a specific time period, e.g. 30 days prior to closing.
Mortgage refinancing: This is when you pay off one mortgage using another – usually in order to get a better interest rate, change the terms of your mortgage or to pay off debt.
Origination or Establishment fee: The fee charged by a lender for processing a loan.
Pre-approval: This is when you complete a mortgage application and supply a lender with all the necessary documentation to check your financial background and credit rating and receive approval for a specified mortgage amount before you have actually put an offer in on a property.
Pre-qualification: This is when a lender estimates what size mortgage you can afford. It is non-binding.
Principal: The amount of debt, excluding interest, left on a loan.
Term: The time period for your loan.
Title: The document that shows property ownership.