Mortgage Glossary

A

A 

Agreement of Purchase & Sale

A written agreement between vendor and purchaser in which the purchaser agrees to buy certain real property and the vendor agrees to sell upon terms and conditions as set forth in that agreement.

Amortization Period

The total number of periods over which the payments are made to pay the compounded interest loan to zero balance. The usual mortgage amortization period is 25 years.

Amortization Schedule

A table showing the amounts of principal and of interest comprising each level payment due at regular intervals and the outstanding principal balance of the loan after each level payment is made.

Anniversary Date

The same date in each calendar year during the term of the mortgage with the first anniversary date taking place one year from the date interest is finally adjusted.

Appraisal Report

A verbal or written estimate of value. 

Approved Lender

An institution authorized to lend money on the security of real or immovable property approved by:

  1. The Governor-in-Council for the purpose of making loans under the National Housing Act.
  2. a mortgage insurance company for the purposes of making loans insured by that company

Assessment

A value placed upon property for taxation purposes.

Assignment of Mortgage

The transfer of ownership of a mortgage from one party to another.

Assumption of Mortgage

The act of assuming liability for an existing mortgage on a property by the purchaser of that property.

B

B

Bi-Weekly Payments

Payments made every 2 weeks (26 payments in a year).

Blended Payments

A payment that is applied first to the interest owing and then to the principal.

C

C

CMHC

Canada Mortgage and Housing Corporation, the National Housing Act (NHA)authorized to operate Mortgage Insurance Fund which protect NHA Approved Lenders from losses resulting from borrower default.

Certificate of Location or Land Survey

A document that shows property boundaries and measurements, specifies the location of buildings on the property and describing the type and size of the building including additions, if any, and states easements or encroachments.

Certificate of Search or Abstract of Title

Document setting out instruments registered against the title to Abstract of Title the property, e.g. deed, mortgages, etc.

Closed Mortgage

A mortgage that locks you into a specific payment schedule. A charge usually applies if you prepay, renegotiate or refinance the loan before the end of the closed term.

Closing Costs

Various expenses associated with purchasing a home. These costs can include, but are not limited to, legal/notary fees and disbursements, property land transfer taxes, as well as adjustments for prepaid property taxes or condominium common expenses, if any.

Closing Date

The date on which the sale of a property becomes final and the new owner usually takes possession.

Co-Applicant

A person applying with another for a loan.

Conditional Offer

An offer to purchase subject to conditions. These conditions may relate to securing financing, or the sale of an existing home, or a home inspection. A time limit is typically stipulated in which the conditions must be satisfied.

Condominium

A multiple structure but financed under a registered condominium or strata title plan.

Conventional Mortgage

A mortgage that is not required to be insured, as it is less than a statutory percentage of value (80%).

D

D

Deed

A legal document in writing, duly signed, sealed and delivered, that  conveys title or an interest in real property.

Default

Failure to fulfil contractual obligations.

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, broker, lawyer or notary until the closing of the transaction.

Discharge of Mortgage

A document executed by the mortgagee, and given to the mortgagor when a mortgage loan has been repaid in full before, at, or after the maturity date, releasing them from all obligations and covenants contained in the mortgage.

E

E

Effective Gross Income

(Residential)The annual income before deductions (Single Family) used in the calculation of an applicant's debt service ratios.

Encroachment

An improvement that intrudes illegally upon another's property.

Encumbrance

A mortgage or other charge on property or assets.  Equity In mortgaging, the difference between lending value, or cost, and indebtedness.

F

F

Fee

An inheritable estate in land.  The right of ownership of a property.

Fee Simple

The highest rate or absolute right in real property.

Fire Insurance

Prior to advancing a mortgage, the purchaser must have arranged fire insurance.  A certificate or binder from the insurance campany 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)

First Mortgage

A mortgage registered before all others on title.

Floating Rate or Variable Rate Mortgage

A mortgage, which provides that the interest rage chargeable will change on a periodic basis during the term of the loan according to a pre-determined formula.

Foreclosure

A remedy available to a mortgagee which deprives the mortgagor of his equitable right to redeem where there is default under any of the covenants in the mortgage.

Freehold

An estate of inheritance, or for life, existing in or arising from real property of free tenure.

G

G

Gross Debt Service. 

This is the amount of you monthly shelter costs compared to your gross monthly income.  (Shelter costs include mortgage payment [principle plus interest], property taxes and heating.) Many financial institutions limit to a maximum of 35%.

Gross Household Income

Gross Housesold Income is the total salary, wages, commissions, and other assured income (before deductions), by all household members who are co-applicants for the mortgage.

H

H

High Ratio Loans

A loan that exceeds statutory loan to value limits and is therefore required by statute to be insured

Holdback

The witholding or non-advancement of a portion of a mortgage loan to maintain adequate security,

  1. pending achievement of a performance requirement, or
  2. protection against liens.

Home Equity

The difference between the price for which a home could be sold (market value) and the total debts registered against it.

I

I

I.A.D.

Interest Adjustment Date.

Insurer

One who insures property in consideration of a premium.

Insured Mortgages

Mortgages insured by outside body, i.e. Canada Mortgage Housing Corporation (CMHC).  The purpose of insurance is to protect the lender against default.  Mortgage loan insurance is required for loan amounts that exceed 80% of the value of the home or purchases with less that 20% down payment.

Interest Adjustment Rate

This is the date one month prior to commence of amortization when accrued interest computed on the monies advanced becomes due.

Interest Penalty

A penalty you pay to your lender to terminate your loan agreement early.  The amount you pay is specified in the loan agreement.

 

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L

L

Land Survey or Certificate of Location

A document that shows property boundaries and measurements, specifies the location of buildings on the property, describes the type and size of the buidling including additions, if any, and states easements of ecroachments.

Land Title System

This is a system of land registration under which the register or mast of titles passes on the validity of the instrument, determines its legal effect, and the Government guarantees title.

Leasehold Mortgage

A mortgage loan on a home where the buidling is on leased land (a leasehold interest in designated lands is subject to a charge, pledge, mortgage attachment, levy, seizure, distress or execution) where the lender takes an interest in the lease.

Legal Description

The written geographical description of property as described in the land register.

Loan-to-Value Ratio

The ratio of the mortgage loan to the appraised value or purchase price of the property, whichever is less, expressed as a percentage.

Lump Sum Prepayment

An extra payment, made in lump sum, to reduce the principal balance of your mortgagem with or without penalty.

M

M

Maturity Date

The last day of the term of the mortgage loan agreement. On this day, the mortgage loan must either be paid in full or the agreement renewed.

Mortgage

A form of security taken to protect mortgage loans and/or loans whereby a documented claim is registered against a real property by the lender.

Mortgagee

The Lender

Mortgage Loan Insurance

If you have a high-ratio mortgage (more than 80% of the lending value of the property) the lender may require mortgage loan insurance, which is available from CMHC or a private company.

Mortgage Term

The number of years or months over which you pay a specified interest rate.

Mortgagor

The Borrower

N

N

N.H.A.

National Housing Act

National Housing Act Loan

A mortgage loan insured by Canada Mortgage and Housing Corporation (CMHC).

O

O

Offer to Purchase

A formal, legal agreement between the buyer and the seller setting out terms (price and conditions) under which the buyer agrees to buy the home. The Offer to Purchase may be conditional (certain conditions must be fulfilled) or firm (no conditions attached).

Open Mortgage

 A mortgage loan that may be paid in part or in full at any time without penalty.

P

P

P.I.T.

Principal, Interest and Taxes. Together, these make up the regular payment on a mortgage if you elect to include property taxes in your mortgage payments.

Porting

Allows the repeat users of CMHC insured mortgage financing to save money by reducing or eliminating the premium on a new insured loan for the purchase of another home.

Prepayment Charge

A fee charged by the lender when the borrower prepays all or a portion of a closed mortgage more quickly than is provided for in the mortgage loan agreement.

Prepayment Privileges

The ability to prepay a portion of the principal balance of the mortgage loan without penalty.

Principle

The amount of money you borrowed for a new mortgage loan.

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R

R

Refinance

The process of renegotiating your existing mortgage agreement for an increased loan amount or paying out the mortgage in full.

Renew

To extend a mortgage agreement with the same lender, setting a new term on a previously expired term.

Renewal Fee

A fee charged by the lender when you renew the term on your mortgage.

Residential Property

Real property consisting of buildings that are used, or are to be used, to the extent of at least one half of the floor space thereof as one or more private dwellings.

S

S

Second Mortgage

A mortgage registered secondly on title after another mortgage.

Semi-Monthly Payments

Payments made twice a month. (24 a year)

Single Detached Dwelling

A residential structure containing one dwelling unit that is completely separated on all sides above and below ground from any other dwelling or structure.

T

T

T.D.S.

Total Debt Service. This is the total amount of your monthly shelter costs plus all other monthly obligations, compared to your monthly gross income. (Shelter costs include mortgage payment [principal plus interest], property taxes and heating. Other monthly obligations are car payment, credit card payment, etc.). Many financial institutions limit it to a maximum of 42%.

Term

In a mortgage, "term" is the period of time over which the interest rate, payment and other mortgage terms are set. A mortgage may be amortized over a longer period such as 25 years with a shorter term of six months to five years. At the end of the term, the mortgage is due and payable, unless renewed.

Term, Closed

You cannot pay off the mortgage during the term without a penalty.

Term, Open

You can pay off the mortgage with no penalty and have more flexibility depending on the lender.

Title

The means of evidence by which the owner of land has lawful ownership thereof.

Title Search

An examination of public records to determine the state of title.

U

U

Uninsured Mortgage

The Lender is permitted, on an uninsured basis, to lend up to 80% of the lender's estimate of value of the property or 80% of the purchase price, whichever is less. This includes all residential mortgage loans not classified as insured.

V

V

Variable Rate Mortgage

A mortgage for which the rate of interest may change if other market conditions change, sometimes referred to as a floating rate mortgage.

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X, Y, Z

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