Mortgage Terms

Amortization

  • Number of years it takes to repay the mortgage and can be from 5-40 years.

Appraisal

  • Process by which the mortgage lending value of a property is determined.

Bridge Financing

  • Interim financing to bridge between the closing date on the purchase of the new home and the closing date on the sale of the current home.

Building Permit

  • A certificate that must be obtained from the municipality by the property owner or contractor before a building can be erected or renovated.

Closed Mortgage

  • Usually has the lowest fixed rate available. A good choice if you need the security of fixed weekly, bi-weekly or monthly payments for the term of your mortgage. A fixed mortgage lacks the flexibility of being paid out at any time without an interest penalty, which can range from three months interest to an interest rate differential calculated by the lending institution upon payout.

Closing Date

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

CMHC, Genworth or AIG

  • High ratio mortgages must be insured through CMHC (Canada Mortgage and Housing Corporation), Genworth or AIG Insurance. These insurers guarantee the risk of lending to homebuyers who need a high ratio mortgage. The borrower on behalf of the lender pays an insurance premium to CMHC, Genworth or AIG Insurance to protect the lender in the event that the mortgage is not paid. This is not life, disability or job loss insurance. The insurance premium is calculated as a percentage of the mortgage amount, depending on the loan to value and may be added to the mortgage amount or paid separately.

Commitment

  • A notice from a mortgage lender to a prospective borrower that the lender will advance mortgage funds of a specified amount under certain conditions.

Conditional Offer

  • A notice from a mortgage lender to a prospective borrower that the lender will advance mortgage funds of a specified amount under certain conditions.

Conventional Mortgage

  • A mortgage loan of up to a maximum of 80% of the lending value of the property for which a lender does not require loan insurance.

Debt Service Ratio

  • The percentage of the borrower's income that will be used for monthly payments.

Default

  • Non-payment of installments due under the terms of the mortgage.

Discharge

  • The removal of all mortgages and financial encumbrances on the property.

Easement

  • The right acquired for the access to or over person's land for a specified purpose, such as for a driveway or public utilities.

First Mortgage

  • Mortgage given first priority at the Registry/Land Titles Office. Can be conventional or high ratio. They give you the best rate of interest.

High Ratio

  • Loan that exceeds 80% of the property's lending value and is insured through a mortgage insurance plan (CMHC, Genworth or AIG Insurance).

Holdback

  • An amount of money withheld by the lender during the progress of construction of a house to ensure that construction is satisfactory at every stage. The amount of the holdback is generally equivalent to the estimated cost to complete construction.

Mortgage Insurance Premium

  • A premium that is added to the mortgage and paid by the borrower over the life of the mortgage. The mortgage insurance insures the lender against loss in case of default on the part of the borrower.

Offer to purchase

  • A written contract setting forth the terms under which the buyer agrees to purchase a property. Upon acceptance by the seller, it forms a contract, which will form the basis for the final document to be prepared by a lawyer or notary. It includes the legal and/or municipal description (this may consist of lot numbers as well as street address), purchase price, closing date, mortgage and terms of repayment and lists specific items included as part of the sale.

Open Mortgage

  • Lets you pay the total amount of your mortgage at any time, without penalty. Ideal if you plan to sell your home in the near future.

PIT Payment

  • Principal, Interest and Taxes due on a mortgage payment.

PI Payment

  • Principal and Interest due on a mortgage payment. Taxes paid separately with the city.

Penalty

  • A sum of money paid to a lender for the privilege of prepaying a mortgage in part or in full.

Prepayment Option

  • The right to prepay a specified amount of the principal balance. Penalty interest may be incurred on prepayment options.

Principal

  • The amount owing to the lender at any time.

Rate (interest)

  • The return the lender receives for loaning you the money for the mortgage.

Second Mortgage

  • A higher interest rate loan that provides you with additional financing if the first mortgage does not meet your total financial requirements.

Survey 

  •  The accurate mathematical measurement of land and building on there.

Term of a Mortgage

  • The actual length of time money is loaned at the contractual rate of interest. Terms range from three months to twenty-five years. Usually the longer the term, the higher the rate. At the end of the term you may repay the balance of the loan or re-negotiate at current rates and conditions.

Title

  • Evidence of ownership.

Variable Rate Mortgage

  • A mortgage for which the rate of interest may change monthly or quarterly, depending on money market conditions. Depending on the specific features of the product, the regular payments can stay the same for the term or may be adjusted monthly or quarterly. The amount applied towards the principal changes according to the change (if any) in the interest rate. It can also be referred to as a floating rate mortgage or an adjustable rate mortgage.

Vendor Take Back

  • Where the seller of a property provides some or the entire mortgage financing in order to sell the property.