Glossary of Mortgage Terms

A mortgage in which the interest rate is adjusted periodically based on a pre-selected index. Also sometimes known as the re-negotiable rate mortgage, the variable rate mortgage or the Canadian rollover mortgage.

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 1 year or as long as 40 years. The amortization is the actual number of years it will take to repay the mortgage loan in full. It is possible to select shorter amortization periods. Choosing a shorter amortization of 15 or 20 years for example, will mean higher monthly payments, but a significantly lower interest cost. Amortization is not the same as term.

Accredited Mortgage Professional. The AMP is the mortgage industries national designation for educated mortgage professionals. If your Broker has the AMP attached to his or her name, you know you are working with an experienced professional.

An interest rate reflecting the cost of a mortgage as a yearly rate. This rate is likely to be higher than the stated note rate or advertised rate on the mortgage, because it takes into account points and other credit costs. The APR allows home buyers to compare different types of mortgages based on the annual cost for each loan.

The process of determining the value of a home, usually for lending purposes. This value may differ from the purchase price of the home. Lenders require an independent assessment of the value of the home you are buying before agreeing to finance the purchase.

The process of determining the value of a home, usually for lending purposes. This value may differ from the purchase price of the home. Lenders require an independent assessment of the value of the home you are buying before agreeing to finance the purchase.

The value placed on land and buildings by a government agency for tax purposes ASSESSMENT A tax or charge levied on property by a taxing authority to pay for improvements such as sidewalks, streets, and sewers.

Items of value owned by an individual, this could include real estate, savings, vehicles, RRSPs, GICs, stocks, bonds, household goods, etc.

Buyer assuming responsibility of seller's existing mortgage at the interest rate and terms as laid out in the original mortgage documents.

The amount of the loan owing or outstanding at any time.

Usually a short-term fixed-rate loan which involves small payments for a certain period of time and one large payment for the remaining amount of the principal at a time specified in the contract.

A provision of Federal Law whereby a debtor surrenders his assets to the Bankruptcy Court and is relieved of the future obligation to repay his unsecured debts. After bankruptcy, the debtor is discharged and his unsecured creditors may not pursue further collection efforts against him. Secured creditors, those holding deeds of trust or judgment liens, continue to be secured by the property, but they may not take other action to collect from the debtor.

A person named to receive a benefit from a trust. A contingent beneficiary has conditions attached to his rights; usually someone else must die first.

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.

Portions of each mortgage loan payment are applied toward both the principle and the interest of the loan. Over the term of the mortgage the principal portion of the payment increases, while the interest portion decreases. This is the norm for mortgage payments. Blended payments are separate from the concept of a blended rate mortgage.

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.

An individual in the business of assisting in arranging funding or negotiating contracts for a client but who does not personally loan the money.

Provincial or locally adopted regulations that control the design, construction, repair, quality of building materials, use, and occupancy of any structure under its jurisdiction.

When the lender and/or the home builder subsidized the mortgage by lowering the interest rate during the first few years of the loan. While the payments are initially low, they will increase when the subsidy expires.

The expenses of living in, and maintaining a home and property. Carrying costs include mortgage payments, property taxes, heating, repairs, and so on.

Buyers beware. The buyer must inspect the property and satisfy him/herself it is adequate for his/her needs. The seller is under no obligation to disclose defects but may not actively conceal a known defect or lie if asked.

A written opinion by an attorney setting forth the status of title to the property as shown on the public records. The certificate does not certify as to matters not of record and affords no protection unless the author was negligent.

A written opinion by an attorney setting forth the status of title to the property as shown on the public records. The certificate does not certify as to matters not of record and affords no protection unless the author was negligent.

A document detailing out instruments registered against the title to the property. For example, a deed or mortgage may be registered against the title.

Articles of personal property such as household goods, furnishings, and fixtures that are not permanently affixed to the house.

The restriction or denial of repayment rights until the end of the mortgage term.

The meeting (usually in a lawyer's office) at which the transfer of title of property passes from the seller to the buyer. Also called settlement.

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

All the charges that are attached to the closing ceremony. These one-time fees include charges for title search, attorney's fees, appraisal fee, title search and insurance fees, survey, taxes and other costs assessed at settlement. The cost of closing usually is about 1 percent to 3 percent of the mortgage amount.

Canada Mortgage and Housing Corporation, a Crown Corporation which administers the National Housing Act.

If your down payment is less than 25%, 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 is another insurer and also provides mortgage insurance to many of Canada's financial institutions.

Property or items which have resell value, pledged to secure a loan.

A mortgage which secures a loan by way of a promissory note. The money borrowed can be used for the purchase of a home, or more commonly for another purpose such as a vacation, or home renovations.

The payment given by the seller of a property to a Real Estate firm for his/her services.The amount is usually a percentage of the sale price and is usually paid at closing.

A promise by a lender to make a loan on specific terms or conditions to a borrower or builder. A promise by an investor to purchase mortgages from a lender with specific terms or conditions.

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.

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.

Interest charged on both the principal amount of a loan as well as on the interest charged in a preceding period.

An Offer to Purchase subject to conditions. These conditions often relate to financing, home inspection, or the sale of an existing home. Usually a time limit is stipulated in which the specified conditions must be satisfied.

A system of individual fee simple ownership of portions (units) in a multi-unit structure, combined with joint ownership of common areas. Each individual may sell or encumber his own unit.

A short term interim loan for financing the cost of construction. The lender advances funds to the builder at periodic intervals as the work progresses.

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.

A written agreement or restriction on the use of land or promising certain acts. Homeowner Associations often enforce restrictive covenants governing architectural controls and maintenance responsibilities. However, land could be subject to restrictive covenants even if there is no homeowner's association.

A first mortgage granted by an institutional lender such as a bank or trust company, where the amount of the loan does not exceed 75% of the lending value of the property.

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.

Transfer of ownership of real estate property from one individual to another.

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.

A legal document signed by the seller transferring ownership of the home to the buyer. This document is then registered against the title to the property as evidence of the buyer's ownership of the property.

Failure to abide by the terms of a mortgage loan agreement. May result in the lender taking legal action to foreclose the mortgaged property.

When a mortgage is written with a monthly payment that is less than required to satisfy the note rate, the unpaid interest is deferred by adding it to the loan balance.

Failure to make payments on time. This can lead to foreclosure.

A sum of money deposited in trust by the purchaser when an Offer to Purchase is made. The deposit is held in trust by the seller's agent, broker, lawyer or notary until the closing of the transaction, at which time it is paid to the vendor. If the offer is later turned down by the buyer, the deposit may or may not be returned.

The option to make twice the normal regular payment at a regular payment due date.

Money paid to make up the difference between the purchase price and the mortgage amount. Down payments usually are 5% or more of the purchase price.

The right to use the land of another for a specific limited purpose.

The physical intrusion of a structure or improvement on the land of another. Examples include a fence or driveway over the property line.

A registered claim of debt against a property, such a mortgage.

The value an owner has in real estate over and above the obligation against the property.

A form of joint ownership between an owner/occupant and an owner/investor. The investor takes depreciation deductions for his share of the ownership. The occupant receives a portion of the tax write-offs for interest and taxes and a part of his monthly payment is treated as rent. The co-owners divide the profit upon sale of the property.

Funds that are set aside and held in trust, usually for payment of taxes and insurance on real property. Also earnest deposits held pending loan closing.

The purchaser must have fire insurance before a mortgage can be advanced. Verification of fire insurance may be required on closing.

An offer to buy the property, as outlined in the Offer to Purchase, with no conditions attached.

A mortgage for which the rate of interest is set at a specific level for a certain term, ranging from six months to twenty five years.

A legal process by which the lender or the seller forces a sale of a mortgaged property because the borrower has not met the terms of the mortgage. Also known as a repossession of property.

The percentage of the borrower's gross (before tax) monthly income that can be used to pay housing costs, including monthly mortgage payments, property taxes, heating costs, and condominium fees. Most lenders recommend that the GDS ratio not exceed 32% of monthly gross income. The GDS is not the same as the total debt service ratio (TDSR).

A mortgage for more than 75% of a property's appraised value or purchase price, whichever is less. This type of mortgage must be insured against payment default by a Mortgage Insurer, such as CMHC or Genworth.

A sum of money withheld by the lender during the construction or renovation of a house to ensure that construction is satisfactorily completed at every stage. The standard holdback is 10% of the total cost of the project.

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.

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.

A loan granted for a short term, to cover the time gap between completing the purchase of one property and finalizing payment arrangements. The need for this type of financing often results from mismatched closing dates of the sale of an existing house and the purchase of a new one.

Two or more persons own a property. A joint tenant with the common law right of survivorship means the survivor inherits the property without reference to the decedent's will. Creditors may sue to have the property divided to settle claims against one of the owners.

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.

Outstanding debts of an individual. Mortgages, loans, credit card balances.

A charge registered against a property.

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.

The amount a lender adds to the index on an adjustable rate mortgage to establish the adjusted interest rate.

The highest price that a buyer would pay and the lowest price a seller would accept on a property. Market value may be different from the price a property could actually be sold for at a given time.

Last day of the term of the mortgage agreement. The mortgage agreement must be renewed, or paid in full, by this date.

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.

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, and 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.

The lender of mortgage funds.

Insurance that pays the mortgage debt in full should the insured borrower die.

The regular installments made towards paying back the principal and paying interest on a mortgage.

The borrower of mortgage funds.

A computer-based system providing information to Real Estate agents about properties for sale.

The value of ones assets minus their liabilities.

A mortgage that allows the borrower to pay off, renew or refinance as much of the outstanding balance as desired, without penalty, at any time.

The ability to transfer your mortgage including rate and terms, from your existing property to a new property.

Preliminary approval granted by the lender of the borrower's application for a mortgage to a certain maximum amount and rate. Often arranged prior to home-shopping, this option can help the purchaser establish an affordable price range. Pre-approvals do not mean the purchaser is 100% approved on any property. The pre-approval is always subject to conditions.

These options allow the borrower to prepay a portion, or all of the principle balance, with or without penalty. These options are typically restricted to specific amounts and times and vary from lender to lender.

A fee charged by the lender when the borrower prepays all or part of a closed mortgage more quickly than as stipulated in the mortgage agreement.

The mortgage amount initially borrowed from the lender. Does not include interest costs.

The annual percentage amount charged in return for borrowing funds.

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.

A real estate professional who is a member of a local real estate board, such as the Canadian Real Estate Association, that is engaged in the business of buying and selling real estate.

To pay off your mortgage or other registered encumbrance and arrange for a new mortgage.

At the end of a mortgage term, new terms and conditions acceptable to both the lender and the borrower must be agreed upon. This is known as renewing a mortgage. If satisfactory terms cannot be agreed upon, the borrower may seek alternative financing to repay the lender in full.

An additional mortgage on a property that already has a registered mortgage. If the borrower defaults and the property is sold, the second mortgage is paid after the first.

Assets offered as collateral for a loan. In the case of mortgages, the property being purchased or refinanced forms the security for the loan.

Interest which is computed only on the principle balance.

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.

A document describing details of a property's boundaries, measurements and structures. It will also describe any easements, rights-of-way, or encroachments made by either your property or by adjoining properties.

Equity created by a purchaser performing work on a property being purchased.

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.

The length of time a mortgage has been committed for. The interest rate usually remains constant during this term unless the commitment states otherwise.

The legal evidence of ownership of a property.

A detailed search of the registered title documents to ensure there are no liens or other encumbrances (claims) on the property, establishing the seller's statement of ownership.

Insurance that provides an indemnity against loss or damage as a result of defect in title ownership to a particular piece of property. Title insurance covers mistakes made during a Title Search as well as matters which could not be found or discovered in the public records such as missing heirs, mistakes, fraud and forgery.

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.

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.

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.

The seller in a real estate transaction.

Mortgage financing arranged between the seller of a property and the buyer. Usually this type of loan is in the form of a second mortgage that the seller is willing to arrange at below market values in order to allow the buyer to purchase the house.

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.