Agreement of Purchase and Sales
A legal contract that a purchaser and a seller sign. Have your offer made by a professional realtor to ensure you have adequate protection.
Amortization Period
The amount of years it takes to pay off the entire amount of the financing, based on a set of fixed payments.
Appraisal
A process of establishing the market value of a property.
Assets
Is what you own. Is typically used in establishing net worth or securing financing.
Assumption Agreement
A document signed by a buyer informs them of the obligations of an existing mortgage. Get a release from a mortgage company if someone assumes your mortgage. This will ensure that you are no longer liable for the debt.
Blended Payments
These are payments that are equal to both an interest and a principal element. The payment amount does not tend to change. Yet the principal amount will increase, and the interest amount will decrease.
Canada Mortgage and Housing Corporation (CMHC)
The Canada Mortgage and Housing Corporation is a federal corporation, which manages National Housing. They also guarantee mortgages for lenders that are greater than 80% of the purchase price. In addition, the borrower pays for the insurance cost, which is typically added to the whole mortgage amount.
Closed Mortgage
A mortgage that is not permitted to be prepaid for a set period without penalties.
Closing Date
The date on which a new owner takes possession of their new property, and the sale is finalized.
Collateral
An asset that you offer as security for a loan. This can range from a deposit, vehicle, or Canada Savings Bond.
Conventional Mortgage
A mortgage up to 80% of the purchase price or the value of the property. A mortgage exceeding 80% is referred to as a 'Hi-Ratio' mortgage, and the lender will require insurance for that mortgage.
Credit Scoring
A method that assesses a borrower on various items, using a point system to determine their overall creditworthiness.
Demand Loan
A loan where the balance is required to be paid when requested.
Deposit
An amount of money is deposited in trust by the purchaser when they make an offer to purchase. When the seller accepts the offer, the deposit is held in trust by the listing real estate broker or lawyer until the sale's closing. When this time comes, it is given to the vendor.
Equity
The contrast between how much you owe on your mortgage and the value of your property.
First Mortgage
A debt that is registered against a property that has first call on that property.
Fixed-Rate Mortgage
A mortgage where the interest is set for the term of the mortgage.
Gross Debt Service Ratio (GDS)
A numerical calculation used by lenders to establish a borrower's ability to repay a mortgage. It considers mortgage payments, 50% of any maintenance fees, and property taxes. The sum is then divided by the gross income of the applicant.
Guarantor
An individual who has an established credit rating and enough earnings who guarantees to repay a loan for a borrower if the borrower does not.
High-Ratio Mortgage
A mortgage that surpasses 80% of the purchase price or value of the property. This type of mortgage has to be insured. A 1st mortgage of up to 80% is arranged to avoid insurance costs, along with a 2nd mortgage for the balance.
Home Equity Line of Credit
A line of credit secured on a borrower's property. Up to 75% of the purchase price is allowed to be borrowed with this product.
Interest Adjustment Date (IAD)
This is the date when the mortgage term will begin. This date will typically be the first day of the month after the closing.
Interest-Only Mortgage
A mortgage where the monthly interest cost is paid each month, with the total principal remaining outstanding. The payment is lower than an amortized mortgage.
Mortgage
A loan that uses a portion of real estate as security. Once the loan is paid-off, the lender will provide a discharge for that mortgage.
Mortgagee
The financial institution usually called a lender, who lends the money using a mortgage.
Mortgagor
The individual who borrows the money using a mortgage.
Open Mortgage
A mortgage which can be repaid at a borrower's convenience during the term. They will not receive any penalties for when they pay. The interest rate is slightly higher than a closed mortgage, ranging from 0.75-1.00%.
P.I.T.
Stands for principal, interest, and property tax that is due on a mortgage. The lender will allow you to make your property tax payments if your down payment is 25% or larger of the purchase price.
Portable Mortgage
A mortgage that can be transferred to another property. Ensure that you port your mortgage so that you do not receive penalties.
Prepayment Penalty
A payment fee that a lender charges a borrower when they prepay all or part of a mortgage over the amount previously agreed upon. A usual charge is greater of the Interest Rate Differential.
Prime
The smallest rate that a financial institution provides to its best customers.
Principal
The amount of a loan before interest.
Rate Commitment
The amount of days that a lender guarantees a mortgage rate for on a mortgage approval. All lenders are different, yet it can ranger anywhere from 30 to 120 days.
Refinance
Replacement of an debt obligation with an updated debt obligation under contrasting terms. It can be reffered to a debt restructuring if the replacement of debt occurs under financial distress.
A loan can be refinanced for many good reasons:
1.) to take advantage of a better interest rate
2.) reduces the monthly repayment amount
3.) free up cash
A prepayment charge may be included if you break your mortgage contract for a new rate and term. The charge will be based on the interest rate differential. This amount will give you a good idea if you should or should not refinance a mortgage.
Renewal
Your mortgage is ready for renewal when your term has ended. At this time, lenders will usually offer their posted rates, yet you can get something better if you negotiate.
Second Mortgage
A loan that is taken out of a property that is already mortgaged.
Switch
When transferring a mortgage to a different financial institution.
Term
The duration of time which the financing agreement funds. The available terms include six months, one-seven years, and ten years.
Total Debt Service (TDS) Ratio
A numerical calculation that lenders use to establish a borrower's ability to repay a mortgage. They cover all the costs that will be involved, such as property taxes and maintenance fees.
Variable Rate Mortgage
A mortgage which has an interest rate that varies from the prime changing.
Vendor Take Back (VTB) Mortgage
A mortgage lender which a seller offers to a buyer.
