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Mortgage Information, News & Glossary
Mortgage News & Financial Updates
Amortization The gradual reduction of a debt by means of a regular payment. Repayments of principal and interest in "blended" amounts. The normal amortization period for a mortgage in Canada is 25 years, but can be as short as 5 years or as long as 40 years. return to glossary Appraisal Lenders require an independent assessment of the value of the home you are buying before agreeing to finance the purchase. return to glossary Assessed Value The value placed on land and buildings by a government agency for tax purposes. return to glossary Assessment A tax or charge levied on property by a taxing authority to pay for improvements such as sidewalks, streets, and sewers. return to glossary Assets What the borrower owns. This could include real estate, savings, vehicles, RRSPs, GICs, stocks, bonds, household goods, etc. return to glossary Assumption (of mortgage) Buyer assuming responsibility of seller's existing mortgage at the interest rate and terms as laid out in the original mortgage documents. return to glossary Blended Mortgage A mortgage that combines the amount owing on an existing mortgage with additional funds being advanced. The interest rate would be a combination of the rate on the old loan and the rate in effect at the time of the new financing. return to glossary Bridge Financing Interim financing to bridge the time gap between the closing date on the purchase of a new home and the closing date on the sale of the current home. return to glossary Building Codes Provincial or locally adopted regulations that control the design, construction, repair, quality of building materials, use, and occupancy of any structure under its jurisdiction. return to glossary Chattel Articles of personal property such as household goods, furnishings, and fixtures that are not permanently affixed to the house. return to glossary Closed Mortgage The restriction or denial of repayment rights until the end of the mortgage term. return to glossary Closing The meeting (usually in a lawyer's office) at which the transfer of title of property passes from the seller to the buyer. return to glossary Closing Costs All the charges that are attached to the closing ceremony. These one-time fees include charges for title search and insurance, attorney's fee, lender and/or broker fee(s). return to glossary C.H.M.C. Canada Mortgage and Housing Corporation, a Crown Corporation which administers the National Housing Act. return to glossary C.H.M.C. Insurance If your down payment is less than 20%, you must have mortgage insurance. It insures the lender against the possibility of you defaulting on your mortgage. Canada Mortgage and Housing Corporation is the principal source of mortgage insurance. Genworth Financial Canada also provides mortgage insurance to many of Canada's financial institutions. return to glossary Commission The payment given by the seller of a property to a Real Estate agent for his/her services. The amount is usually a percentage of the sale price and is usually paid at closing. return to glossary Commitment Letter A letter outlining the amount, terms and conditions under which a lender is willing to offer a mortgage. return to glossary Common Areas Lands or improvements on land that are designated for common use and enjoyment by all occupants, tenants or owners. The lobby, a pool, tennis court or common hallways would all be Common Areas in a condominium or townhouse complex. return to glossary Common Tenancy The ownership of property by two or more persons, where on the death of one, his share does not automatically go to the other(s) but is credited to his estate. return to glossary Compound Interest Interest charged on both the principal amount of a loan as well as on the interest charged in a preceding period. return to glossary Contract of Purchase and Sale A written statement by which a buyer agrees to purchase, and a seller agrees to sell a particular piece of property according to the terms set forth in that agreement. return to glossary Conventional Mortgage A first mortgage granted by an institutional lender such as a bank or trust company, where the amount of the loan does not exceed 80% of the lending value of the property. return to glossary Convertible Mortgage A short term mortgage, usually 6 months or 1 year, that allows a borrower to lock in to a longer term at any time without penalty. return to glossary Conveyance Transfer of ownership of real estate property from one individual to another. return to glossary Credit Bureau Report A report by a credit reporting agency that maintains a history of timely, or untimely, repayment of debt. The lender's primary source of information regarding the credit history of a borrower. return to glossary Default Failure to meet certain contractual obligations, such as mortgage payments. Default can lead to foreclosure. return to glossary Deposit A sum of money that is required to be paid with an offer to purchase as a symbol of the purchaser's commitment. return to glossary Double-Up The option to make twice the normal regular payment at a regular payment due date. return to glossary Downpayment The amount of cash put forward by the buyer toward the purchase price of real estate. return to glossary Equity The difference between the value of a property and the amount of financing on that property. return to glossary Fixed Rate Mortgage The interest rate remains the same for the term of the mortgage. return to glossary Foreclosure Court action taken by a mortgagee when a borrower has defaulted. return to glossary Gross Debt Service Ratio (GDS) The percentage of annual gross income of the mortgagor that is required to maintain annual mortgage payments, property taxes and hydro. return to glossary High Ratio Mortgage A mortgage loan that exceeds the normal limit of 80% LTV (loan to value) of a conventional mortgage. Typically made possible by a mortgage insurance plan, e.g. CMHC or Genworth Financial Canada. return to glossary Inter Alia Mortgage "Inter Alia" is Latin for "Amongst other things". An Inter Alia Mortgage is a mortgage that is secured by more than one property. A single mortgage document is executed and registered against each property that is used as security. return to glossary Interest The price paid to rent money. The rate of interest over a period of time for a specific amount of money, usually expressed as a percentage. return to glossary Interest Adjustment Date The date on which the mortgage really begins, usually the first of the month. The interest owed for the number of days between the closing date and the last day of the month is paid on the closing date by cheque or by deduction from the mortgage advance. return to glossary Joint Tenancy Property held by two or more persons with an undivided interest. If one owner dies, the property passes automatically to the other(s). return to glossary Lease to Purchase Option Buying a piece of property by renting for a specified period, usually one year, with the provision that you will purchase the property at the end of that period for a predetermined sale price. return to glossary Liabilities Outstanding debts of an individual. Mortgages, loans, credit card balances. return to glossary Lien A charge registered against a property. return to glossary Loan to Value (LTV) The ratio between the mortgage loan amount and the value of the property usually expressed as a percentage, i.e. 75% LTV. The value of the property for lending purposes is the purchase price or appraised value, whichever is lower. return to glossary Market Value The value of a property based on what the market will bear. Determined by a comparison of the subject property to others in a similar area that have sold recently. return to glossary Mortgage A conveyance of property to a creditor, as security for payment of a debt, redeemable on the payment or discharge of the debt at a specified date. return to glossary Mortgage Broker Trained professionals with a wealth of knowledge and experience to find the mortgage that best suits your needs, at the best rate available, from a large selection of lenders that include most major banks, trust companies, credit unions. A mortgage broker works for you, not for the lender. Many financial institutions pay finders fees to mortgage brokers who refer business to them making it possible for you to get the best mortgage product at no cost to you. return to glossary Mortgagee The lender of mortgage funds. return to glossary Mortgagor The borrower of mortgage funds. return to glossary Net Worth The value of ones assets minus their liabilities. return to glossary Open Mortgage A mortgage which allows for extra payments, principal reductions or full payment at anytime without penalty. return to glossary Portability The ability to transfer your mortgage including rate and terms, from your existing property to a new property. return to glossary Prepayment Clause A clause in a mortgage agreement that allows you to pay off all or a percentage of the mortgage before the maturity date. return to glossary Prepayment Penalty A fee charged by a lender when the borrower prepays all or a part of a mortgage in excess of the regular payments allowed by the mortgage terms. return to glossary Principal The money borrowed, not including any accrued interest. return to glossary Rate Commitment A lenders commitment to offer to hold a specific rate for a certain length of time. Rate commitments can vary from 30 to 180 days. return to glossary Refinance To pay in full and discharge a mortgage with the proceeds of a new mortgage. return to glossary Second Mortgage A mortgage registered against real property which is already encumbered with one mortgage. Date and time of registration determines which is first and which is second. return to glossary Strata Fee A charge (usually monthly) by a Strata Corporation to cover the costs of maintenance, repair, cleaning etc. of common areas. This fee will usually include a reserve to cover major repairs such as re-roofing and heating system replacement. return to glossary Tax Hold Back When your property taxes are included with your mortgage payments, your lender will withhold funds from your disbursement to cover interim or final taxes payable to the municipality. The amount depends on the month that the mortgage was funded and the dates when interim and final taxes are due. Tax hold backs are used to pay for the current year's taxes while your monthly tax installments are accumulated in an account to pay the tax bills for the following year. return to glossary Term The length of time a mortgage has been committed for. The interest rate usually remains constant during this term unless the commitment states otherwise. return to glossary Total Debt Service Ratio (TDS) Percentage of gross annual income of a borrower required to maintain annual payments of mortgage, property taxes, hydro and other debts such as loans, credit card payments, child support and leases. return to glossary Underwriting The assessment of loan applications based on: the value of real property, a borrowers credit worthiness and ability to pay and the lending guidelines of the lender. return to glossary Variable Rate Mortgage A mortgage where the interest rate varies during the term of the mortgage, usually based on the prime bank rate or the GIC rate of the lender. return to glossary Weekly and Bi-Weekly Payments You can usually choose to make your mortgage payments once a week or once every two weeks. This accelerates the reduction of your mortgage because you are making the equivalent of one extra monthly payment per year. return to glossary |
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