Qualifying Rate
Definition
- The interest rate a borrower must qualify for if they are applying for a variable rate mortgage or a fixed rate mortgage with a term less than 5 years. Qualifying rates were introduced to ensure that borrowers can continue to make their payments in the event that mortgage rates increase over the course of their term, lowering the probability of a default. So while a borrower will most likely end up paying a low interest rate over the course of his or her term, one must qualify for a higher rate, just in case rates do rise.
Synonyms
qualifying mortgage rate, qualifying interest rate
Alternate Spellings
variable mortgage rate, variable rate mortgage, variable rate
Related Terms and Acronyms
- Adjustable-Rate Mortgage (ARM) — Acronym,
- A type of mortgage loan program in which the interest rate and payments may be adjusted as frequently as every month. The principal loan balance or term of the loan may also be adjusted to reflect the rate change. The purpose of the program is to allow mortgage interest rates to fluctuate with market conditions.
➥ A type of variable rate mortgage product. - Canada Mortgage and Housing Corporation (CMHC) — Company Est. 1946, Canada-wide, Very Important,
- The Canada Mortgage and Housing Corporation: this is a Federally run institution that provides banks and lenders with mortgage insurance. Not to be confused with life or property insurance. In the event of default or foreclosure CMHC assumes responsibility of the property and reimburses the bank/lender the entire mortgage amount. This insurance is required generally when you have less than 25% equity or down payment. This insurance is paid by the property owner in advance but usually added to the mortgage amount. See also "G.E. Capital."
➥ Insures Canadian mortgage lenders. - Fixed Rate Mortgage (FRM) — Acronym, Very Important,
- A loan in which the interest rate and payments remain the same for the entire life of the loan. The interest rate and payment amounts are set at the time of loan origination.
- Interest Rate (IR) — Acronym, Very Important,
- The rate a lender charges an individual to borrow money.
- Mortgage Rate — Definition, Very Important,
- The interest rate on a mortgage loan.
➥ You can compare mortgage rates using this website by clicking 'Rates' above. - Pre-qualification — Definition,
- An informal process in which a lender will offer an opinion on how much money you may be able to borrow. This opinion is based entirely on the financial information you provide and is neither binding nor necessarily accurate because lenders have not yet verified your financial information.
- Variable Rate Mortgage (VRM) — Acronym, Very Important,
- Home loan in which the interest rate is changed periodically based on a standard financial index. Also called an "Adjustable-rate Mortgage."
➥ A type of mortgage loan offered by brokers and lenders.
