- The period of time, most often 15, 20 or 25 years,
required to reduce a debt to zero when payments are made
regularly.
Appraisal
- A process for estimating the market value of a particular
property. It can help the purchaser determine what price to
offer. It can also be used by the lender for mortgage
purposes. The appraised value seldom matches the actual
purchase price exactly as other factors influence.
Approved Lender -
A lending institution authorized by the Government of
Canada through CMHC to make loans under the terms of the
National Housing Act. Only Approved Lenders can
negotiate mortgages which require mortgage loan insurance.
Assumption Agreement
-
A legal document signed by a home buyer that
requires the buyer to assume responsibility for the
obligations of a mortgage by the builder or the original
owner.
Blended
Payments
- Payments consisting of both a principal and an interest
component, paid on a regular basis (e.g. weekly, biweekly,
monthly) during the term of the mortgage. The principal
portion of payment increases, while the interest portion
decreases over the term of the mortgage, but the total
regular payment usually does not change.
Building
Permit
- A certificate that must be obtained from the municipality
by the property owner or contractor before a building can be
erected or repaired. It must be posted in a conspicuous
place until the job is completed and passed as satisfactory
by a municipal building inspector
Canada
Mortgage and Housing Corporation (CMHC)
- The National Housing Act (NHA) authorized Canada Mortgage
and Housing Corporation (CMHC) to operate a Mortgage
Insurance Fund which protects NHA Approved Lenders from
losses resulting from borrower default.
Certificate
of Location or Survey
- A document specifying the exact location of the building
on the property and describing the type and size of the
building including additions, if any.
Certificate
of Search or Abstract of Title
- A document setting out instruments registered against the
title to the property, e.g. deed, mortgages, etc.
Closed
Mortgage
- A mortgage agreement that cannot be prepaid, renegotiated
or refinanced before maturity, except according to its
terms.
Closing
Costs
- Costs, in addition to the purchase price of the home, such
as legal fees, transfer fees and disbursements, that are
payable on the closing date. Closing costs typically range
from 1.5%-4% of a home’s selling price.
Closing Date
- The date on which the sale of a property becomes final and
the new owner usually takes possession.
CMHC or
GEMICO Insurance Premium
- Mortgage insurance insures the lender against loss in case
of default by the borrower. Mortgage insurance is provided
to the lender by CMHC or GEMICO and the premium is paid by
the borrower.
Collateral
Mortgage
- A mortgage which secures a loan by way of a promissory
note. The money which is borrowed can be used to buy a
property or for another purpose such as home renovation or
for a vacation.
Commitment
Letter / Mortgage Approval
- Written notification from the mortgage lender to the
borrower that approves the advancement of a specified amount
of mortgage funds under specified conditions.
Conventional
Mortgage Loan
- A mortgage loan up to a maximum of 75% of the lending
value of the property. Mortgage loan insurance is not
required for this type of mortgage.
Conditional
Offer/Conditions of Sale
- An offer to purchase subject to conditions. These
conditions may relate to financing, or the sale of an
existing home. Usually a time limit in which the specified
conditions must be satisfied is stipulated.
Covenant
- A clause in a legal document which, in the case of a
mortgage, gives the parties to the mortgage a right or an
obligation. For example, a covenant can impose the
obligation on a borrower to make mortgage payments in
certain amounts on certain dates. A mortgage document
consists of covenants agreed to by the borrower and the
lender.
Debt-Service Ratio
- The percentage of the borrower's gross income that will be
used for monthly payments of principal, interest, taxes,
heating costs and condominium fees.
Deed
(Certificate of Ownership)
- The document signed by the seller transferring ownership
of the home to the purchaser. This document is then
registered against the title to the property as evidence of
the purchaser's ownership of the property.
Deposit
- A sum of money deposited in trust by the purchaser when
making an offer to be held in trust by the vendor's agent,
consultant, lawyer or notary until the closing of the
transaction.
Discharge of
Mortgage
- A document signed by the lender and given to the borrower
when a mortgage loan has been repaid in full.
Down Payment - The portion of the house price the buyer must pay up
front from personal resources, before securing a mortgage.
It generally ranges from 5%-25% of the purchase price.
Easement -
A right acquired for access to or over, or for use of,
another person’s land for a specific purpose, such as a
driveway or public utilities.
Encumbrance -A
registered claim for debt against a property, such as a
mortgage
Equity
- The interest of the owner in a property over and above all
claims against the property. It is usually the difference
between the market value of the property and any outstanding
encumbrances.
Fire
Insurance
- Before a mortgage can be advanced, the purchaser must have
arranged fire insurance. A certificate or binder from the
insurance company may be required on closing.
Firm Offer
- An offer to buy the property as outlined in the offer to
purchase with no conditions attached.
Fixed-Rate
Mortgage
- A mortgage for which the rate of interest is fixed for a
specific period of time (the term).
Foreclosure
- A legal procedure whereby the lender eventually obtains
ownership of the property after the borrower has defaulted
on payments.
Gross
Debt Service (GDS) Ratio
- The percentage of gross
income required to cover monthly payments associated with
housing costs. Most lenders recommend that the GDS ratio be
no more than 32% of your gross (before tax) monthly income.
High Ratio
Mortgage
- If you don't have 25% of the lesser of the purchase price
or appraised value of the property, your mortgage must be
insured against payment default by a Mortgage Insurer, such
as CMHC.
Holdback
- An amount of money required to be withheld by the lender
during the construction or renovation of a house to ensure
that construction is satisfactorily completed at every
stage.
Home Equity
- The difference between the price for which a home could be
sold (market value) and the total debts registered against
it.
Inspection
- The examination of the house by a building inspector
selected by the purchaser.
Interest
-The
cost of borrowing money. Interest is usually paid to the
lender in installments along with repayment of the principal
loan amount.
Interest
Rate Differential Amount (IRD)
- An IRD amount is a compensation charge that may apply if
you pay off your mortgage principal prior to the maturity
date or pay the mortgage principal down beyond the
prepayment privilege amount. The IRD amount is calculated on
the amount being prepaid using an interest rate equal to the
difference between your existing mortgage interest rate and
the interest rate that we can now charge when re-lending the
funds for the remaining term of the mortgage.
Interim
Financing
- Short-term financing to help a buyer bridge the gap
between the closing date on the purchase of a new home and
the closing date on the sale of the current home.
Lending
Value
- The purchase price or market value of a property,
whichever is less.
Lien
(Mechanic’s)
- A claim against a property for money owing. A lien may be
filed by a supplier or a subcontractor who has provided
labour or materials but has not been paid. A lien must be
properly filed by a claimant. It has a limited life,
prescribed by statute that varies from province to province.
If the lien holder takes action within the prescribed time,
the homeowner may be obliged to pay the amount claimed by
the lien-holder. Alternatively, the lien holder may force a
sale of the property to pay off the debt.
Loan-to-value Ratio
- The ratio of the loan to the lending value of a property
expressed as a percentage. For example, the loan-to- value
ratio of a loan for $90,000 on a home which costs $100,000
is 90%.
Maturity
Date
- Last day of the term of the mortgage agreement.
Mortgage -
A mortgage is security for a loan on the property that you
own. It is your personal guarantee to repay the loan as well
as a pledge of the property as security for the loan.
Mortgage Loan Insurance
-
If you have a high-ratio mortgage (more than 75% of the
purchase price), your lender will require mortgage loan
insurance — available from CMHC or a private insurer. The
insurance premium will cost between 0.5% and 3.75% of the
amount of the mortgage (additional charges may apply).
Mortgage Life Insurance
-
This insurance guarantees that if you die your mortgage will
be paid in full. This insurance can be conveniently
purchased through your lender and the premium added to your
mortgage payments. However, you may want to compare rates
for equivalent products from an insurance Broker.
Mortgage Payment
- A regularly
scheduled payment that is blended to include both principal
and interest.
Mortgage
Term
- The number of years or months over which you pay a
specified interest rate. Terms usually range from six months
to 10 years.
Mortgagee
-
The lender who provides the mortgage loan.
Mortgagor
-
The borrower who pledges the property as security for the
loan.
Net Worth -
Your total financial worth, calculated by subtracting your
total liabilities from your total assets.
Offer To Purchase
-
A written contract setting out the terms under which the
buyer agrees to buy. If accepted by the seller, it forms a
legally binding contract subject to the terms and conditions
stated in the document.
Open
Mortgage
- A mortgage which can be prepaid at any time, without
penalty.
Option Agreement
- A document stipulating that, in exchange for a deposit, a
specified individual is to be given the first chance of
buying a property at or within a specified period of time.
An option holder who does not buy at or within the specified
period loses the deposit and the agreement is cancelled
P.I.T.
-
Principal, interest and taxes - payments due on a regular
basis under the terms of the mortgage agreement. Generally,
payments are made monthly and include one-twelfth of the
estimated annual municipal and school taxes. Since these
taxes change from year to year, this section of the mortgage
will change accordingly.
P.I.T.H.
- Principal, interest, taxes and heating - costs used to
calculate the Gross Debt Service ratio (GDS).
Porting
- This allows you to move to another property without having
to lose your existing interest rate. You can keep your
existing mortgage balance, term and interest rate plus save
money by avoiding early discharge penalties.
Prepayment
Option
- The ability to prepay all or a portion of the principal
balance. Prepayment charges may be incurred on the exercise
of prepayment options.
Prepayment
Penalty
- A fee charged by the lender when the borrower prepays all
or part of a closed mortgage more quickly than is set out in
the mortgage
agreement.
Principal
- The amount of money borrowed for a new mortgage.
Realtor -
A real estate representative who is a member of an
organization of persons engaged in the business of buying
and selling real estate, such as the Canadian Real Estate
Association.
Refinancing
- Renegotiating your existing mortgage agreement. May
include increasing the principal or paying out the mortgage
in full.
Renewal
- At the end of a mortgage term, the mortgage may "roll
over" on new terms and conditions acceptable to both the
lender and the borrower. This is known as renewing a
mortgage. Otherwise, the lender is entitled to be repaid in
full. In this case, the borrower may seek alternative
financing.
Second Mortgage
-
An additional mortgage on a property that already has a
mortgage.
Security
- In the case of mortgages, real estate offered as
collateral for the loan.
Term
- The length of the current mortgage agreement. A mortgage
may be amortized over a long period (such as 25 years) with
a shorter term (six months to five years or more). After the
term expires, the balance of the principal then owing on the
mortgage can be repaid or a new mortgage agreement can be
entered into at the then current interest rates.
Title
- A freehold title gives the holder full and exclusive
ownership of land and buildings for an indefinite period of
time. In condominium ownership, land and common elements of
buildings are owned collectively by all unit owners, while
the residential units belong exclusively to the individual
owners. A leasehold title gives the holder a right to use
and occupy land and buildings for a defined period of time.
Total Debt
Service (TDS) Ratio
- The percentage of gross income needed to cover monthly
payments for housing and all other debts and financing
obligations. The total should generally not exceed 37% of
gross monthly income.
Variable
Rate Mortgage
- A mortgage for which the rate of interest may change if
other market conditions change. This is sometimes referred
to as a floating rate mortgage.
Vendor Take Back Mortgage
- Mortgage financing arranged between the seller of the
property and the buyer. The title is transferred to the
buyer. Often this type of loan is a second mortgage which
the seller is willing to arrange at below market rates to
ensure the buyer can purchase the house. Most of these
arrangements are not renewable or transferable to the next
owner of the house.
Zoning Bylaws
-
Municipal or regional laws that specify or restrict land
use.
