GLOSSARY OF MORTGAGE TERMS -

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[A] Amortization Period The actual number of years it will take to repay a mortgage loan in full, when the agreed upon repayment schedule is adhered to. Appraisal An estimate of the fair market value of a property, usually done by a registered and accredited professional for a Lender when financing of the property is required. Assets Items of value owned, such as investments, savings, cars, stocks, real estate, etc. Assumable Mortgage An Assumable Mortgage is a mortgage that is transferable to a new owner from the old owner if the property is sold. Assumable mortgages are usually subject to the Lender's acceptance of the new owner as the mortgagor (borrower). Once the new owner has been qualified and approved by the Lender, they assume responsibility for the existing mortgage and its full repayment. Blanket Mortgage (or Interalia Mortgage) A single mortgage document registered over more than one property. Also called an Interalia Mortgage. Blended Payments A fixed payment consisting of both principal and interest paid regularly during the term of a mortgage. While the payment remains constant, usually the amount going towards interest drops over time and the amount allocated to principal reduction increases. Most residential mortgages are repaid with Blended Payments. Bridge Financing (or Interim Financing) A short-term loan or mortgage provided to cover (bridge) the gap in time between the completion of a property sale and the purchase of another property. The bridge loan is usually paid off from the sale proceeds of the sold property. Also called Interim Financing. [C]     Jump To: Top;  F;  M;  R Canada Mortgage and Housing Corporation (CMHC) A crown corporation that administers the National Housing Act for the federal government. CMHC provides Mortgage Loan Insurance to qualified applicants. Closed Mortgage A mortgage agreement that cannot be prepaid, renegotiated or refinanced before maturity except by payment of compensation to the lender. Some lenders will not allow prepayment before the maturity date unless the property has been sold. Closing Costs Costs associated with the purchase of property. For example, B.C. Property Transfer Tax, Legal Fees and Disbursements, Property Tax Adjustments, Goods and Services Tax, etc. Closing Date The date on which the sale of a property becomes final and the new owner takes possession. This date is not the same as the Occupancy Date, which usually comes after the Closing Date. Collateral Mortgage A loan secured by a promissory note and a mortgage on a property. Funds are often used for home renovations, debt consolidation, vacations, etc. Commitment Fee A fee charged by a lender for keeping an agreed amount of funds available to the borrower for a specified period of time. Usually charged by Private Lenders and to purchasers of commercial property. Compound Interest Interest charged not only to the principal sum but also on interest amounts charged in a preceding period. Conditional Offer An offer to buy a property where certain conditions must be met before the offer is considered as firm. Condominium A condominium is the name given to a separate unit of space in a real estate project (i.e. apartment building or town homes). The Condominium owner shares ownership of common space, such as parking garage and recreation areas, with other owners of the property. Since ownership of common space is shared, so are repairs, maintenance and replacement costs. Condominium owners pay these costs indirectly through a monthly maintenance fee which is determined based on their proportional ownership of the common areas. Conventional Mortgage First mortgage financing granted by an institutional lender that does not exceed 75% of the appraised value, or purchase price of a property whichever is less. Mortgage Loan Insurance is not normally required for this type of mortgage. Convertible Mortgage A short-term mortgage, usually six or twelve months, allowing the borrower to switch into a longer term at any time without paying a penalty. Terms and conditions will vary from lender to lender. Co-ownership This occurs when the ownership of the whole property is divided (not necessarily equally) between two or more individuals. Usually there is a written agreement between each of the co-owners in which the rights of each is described. Each co-owner may sell their right of ownership or dispose of it as they wish. Down payment That part of the purchase price of a property that the buyer pays in cash and does not finance with a mortgage. Effective Interest Rate The real rate of interest after the effects of compounding are considered. More frequent compounding adds up to a higher interest rate. Equity Equity is the difference between the market value of a property and all mortgages and other charges registered against the property, after they are deducted. [F]     Jump To: Top;  C;  M;  R Fixed Rate Mortgage A mortgage which has a fixed rate of interest for a specified period of time. Foreclosure A legal procedure where the lender obtains ownership of the property after the borrower has defaulted on payment. Freehold The ownership and full use of a piece of land and any buildings located on it for an unrestricted period of time. Genworth A private provider of Mortgage Loan Insurance with terms and conditions similar to CMHC. Gross Debt Service Ratio (GDS) The percentage of gross income required to cover monthly payments associated with housing. Housing costs included in this calculation are usually monthly mortgage payment, 1/12th annual property taxes, heat allowance and ½ maintenance fees, where applicable. The maximum GDS most lenders will usually consider is 32% of your before tax income. For self-employed borrowers not on salary lenders usually consider 32% of taxable income not gross income. Guarantor A third party person without interest in the property being purchased who agrees to assume responsibility for a debt in the event it is not repaid by the borrower. High Ratio Mortgage A mortgage is considered high-ratio when the down payment is equal to less than 25% of the purchase price. CMHC or a private insurer, such as Genworth must insure high-ratio mortgages. Holdback An amount of money retained by a lender until satisfactory completion of specified work or conditions. Interest Adjust Date (IAD) The date the mortgage really begins, often the first of the month for monthly payment mortgages. The borrower is required to pay interest on the mortgage loan between the date the funds are received and the IAD. Joint Tenancy When buying property with one or more other persons, as joint tenants, each owner holds an equal share in the property regardless of their individual financial contribution. If one of the owners dies without any specific arrangements have been made, their share is automatically transferred to the surviving owners. Leasehold Property purchased where the owner has use of the land and any buildings on it for a predetermined or limited period of time. In the case of a residential home purchase, the purchaser owns the building but not the land on which it sits. Liabilities Financial obligations or debts. Lien The mortgage lender's legal claim to the borrower's property. Loan to value ratio The principal amount of a mortgage as a percentage of the value of a property. For example, a mortgage of $150,000 on a property worth $300,000 would have a loan to value ratio of 50%. [M]     Jump To: Top;  C;  F;  R Maturity Date The maturity date is the last day of the term of the mortgage agreement. This is the date where the mortgage is usually either renewed, paid off or transferred to another lender. Mortgage Insurance Premium The premium charged for Mortgage Loan Insurance to insure the lender against loss in case of default by the borrower. The premium is determined based on the 'loan to value' ratio and ranges from .50% to 2.75%. Mortgage Life Insurance Insurance under which the benefits are used to pay off the balance due on a mortgage upon the death of the insured borrower(s). The purpose is to protect survivors from losing their home and to provide a debt-free inheritance. Not the same as Mortgage Loan Insurance. Mortgage Loan Insurance This is insurance provided by CMHC, or an approved private lender such as Genworth, to protect lenders against default. The insurance premiums, ranging from .50% to 2.75%, are paid by the borrower and are usually added directly onto the mortgage amount. Not the same as Mortgage Life Insurance. Mortgagee The mortgage holder or lender. Mortgagor The borrower. The one who makes the payments. Open Mortgage A mortgage which can be repaid, in full or in part, at anytime without penalty. P.I.T. or P.I.T.H. P.I.T. stands for principal, interest and property taxes. The H. stands for heating costs. This information is used to help calculate the Gross Debt Service Ratio (GDS) and the Total Debt Service Ratio (TDS) of a borrower. Penalty A sum of money paid to a lender for the privilege of prepaying a mortgage, in full or in part, outside the normal prepayment privileges set out in the terms of the mortgage. Portable Mortgage A portable mortgage is one where the terms, conditions and balance outstanding on the existing mortgage are moved from one property to another property with the consent of the lender at the time the original property is sold, or shortly thereafter. Pre-approved Mortgage A commitment by a lender to guarantee an interest rate for a specified period of time for a set amount of money, subject to certain conditions being met before the mortgage is finalized. Prepayment options A clause in the mortgage that outlines when and how much of the mortgage principal, over and above the regular payments, can be prepaid during the term of the mortgage and under what conditions. Principal The mortgage amount actually borrowed. This would include mortgage insurance where it is required. [R]     Jump To: Top;  C;  F;  M Refinance To repay in full a mortgage and any other financial charges by arranging for a new mortgage with a different lender. Renegotiate To change the terms and conditions of a mortgage agreement prior to the maturity date, with the existing lender. Second Mortgage A mortgage on a property that has one other mortgage registered ahead of it. Whether a mortgage is a second, third or fourth charge is determined by when it was registered (i.e. time, date). Survey Certificate A measurement of land prepared by a registered land surveyor, showing the location of the land and its dimensions, and the location and dimensions of any buildings on the land. Tenants in Common or Undivided Ownership Where each owner holds a specified portion of the property but the portions do not have to be equal. Each individual owner can sell or assign their share to any other person, subject to any restrictions that were originally stated when the ownership was registered. Rights of survivorship do not exist in this case, so upon the death of one of the owners, their share becomes part of their estate and is dealt with according to the provisions of their will. Term The length of time a mortgage agreement covers, which is usually considered as the length of time the interest rate is guaranteed. At the end of the term the mortgage comes up for 'renewal' and the rate and terms are renegotiated with the current or a new lender. Total Debt Service Ratio The percentage of gross income needed to cover monthly payments towards housing (see Gross Debt Service Ratio) and all other debts and financing obligations. The maximum TDS most lenders will usually consider is 40% of your before tax income. For self-employed borrowers not on salary lenders usually consider 40% of taxable income not gross income. Transfer Mortgage An existing mortgage debt that is transferred from one lender to another without the borrower having to go through new registration of legal documents and incurring legal fees, etc. Variable Rate Mortgage A mortgage for which the rate of interest changes as money market conditions change. The regular payments may stay the same for a specified period. However, the amount applied toward principal changes according to the change (if any) in the rate of interest. Often referred to as a 'floating rate mortgage'. Vendor-Take Back When the vendor (seller) of a property agrees to provide a mortgage for some or all of the required mortgage financing in order to sell the property.

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