Amortization – the number of years it will take to repay a mortgage loan in full.
Appraisal – a process for estimating the market value of a particular property. It can help the purchaser determine what price to offer. It can also be used by the lender for mortgage purposes. The appraisal value seldom matches the actual purchase price as other factors influence price.
Approved Lender - a lending institution authorized by the Government of Canada through CMHC to make loans under the terms of the National Housing Act. Only Approved lenders can negotiate mortgages which require mortgage loan insurance.
Assumption Agreement – a legal document signed by a home buyer that requires the buyer assume responsibility for the obligations of the mortgage by the builder or the original owner.
Blended Payment – a mortgage payment that includes principal and interest. It is paid regularly during the term of the mortgage. The payment total remains the same, although the principal portion increases over time and the interest portion decreases.
Building Permit – a certificate that must be obtained from the municipality by the property owner or contractor before a building can be erected or repaired. It must be posted in a conspicuous place until the job is completed and passed as satisfactory by a municipal building inspector.
Closed Mortgage – a mortgage that cannot be prepaid of renegotiated unless the lender agrees and the borrower is willing to pay an interest penalty.
Closing Costs – costs, in addition to the purchase price of a home, such as legal fees, transfer fees and disbursements, that are payable on the closing date. Closing costs typically range from 1.4%-4% of a home's selling price.
Closing Date – the date the purchase of the property becomes final and the new owner obtains the title and takes possession.
CMHC – Canada Mortgage and Housing Corporation. A Crown corporation that administers the National Housing Act for the federal government and encourages the improvement of housing and living conditions for all Canadians. CMHC also creates and sells mortgage loan insurance products.
Conditional Offer – an offer to buy a property if certain conditions are met.
Collateral Mortgage – a mortgage which secures a loan by way of a promissory notes. The money which is borrowed can be used to buy a property or for another purpose such as home renovation or for a vacation.
Commitment Letter/Mortgage Approval – written notification from the mortgage lender to the borrower that approves the advancement of a specified amount of mortgage funds under specified conditions.
Conventional Mortgage – a first mortgage for up to 75% of the property's appraised value or purchase price, whichever is lower.
Covenant – a clause in a legal document which, in the case of a mortgage, gives the parties to the mortgage a right or an obligation. For example, a covenant can impose the obligation on a borrower to make mortgage payments in a certain amounts on certain dates. A mortgage document consists of covenants agreed to by the borrower and the lender.
Deed – a legal document that conveys (transfers) ownership of a property to a buyer.
Default – money placed in trust by the purchaser when an Offer to purchase is made. The sum is held by the real estate representative or a lawyer until the sale is closed, and then paid to the vendor.
Discharge of Mortgage – a document signed by the lender and given to the borrower when a mortgage loan has been repaid in full.
Deposit – the amount of money paid by the purchaser at the time of making an offer to purchase. It is usually held in trust by the real estate agent or lawyer/notary until the sale closes.
Down Payment – the amount of money put down by the purchaser toward a house purchase. It usually represents the difference between the purchase price of the house, and the amount of the mortgage loan.
Easement – a right acquired for access to or over, or for use of, another person's land for a specific purpose, such as a driveway or public utilities.
Encumbrance – a legal claim registered against a property. It will not necessarily prevent the sale of the property, but it may affect its value.
Equity – the difference between the price for which a home could be sold and the total debts registered against it. Equity usually increases as the outstanding principal of the mortgage is reduced through regular payments. Market values and improvements to the property also affect equity.
Foreclosure – a legal procedure in which the lender gets ownership of the property if the borrower defaults on the mortgage loan.
Fixed Rate Mortgage – a mortgage for which the rate of interest is fixed for a specific period of time.
Gross Debt Service Ratio (GDS) – annual mortgage and other housing-related costs, expressed as a percentage of the borrower's gross annual income.
High-Ratio Mortgage – a mortgage for more than 75% of a property's appraised value or purchase price, whichever is lower.
Holdback – an amount of money withheld by the lender during the progress of construction to ensure that the construction is satisfactory at every stage. A standard hold back amount is 10% of the total cost of the building project.
Interest Rate – the rate of return paid by the borrower (purchaser) to the lender for permitting the borrower to use the funds for the specified term. It is expressed as an annual rate.
Interest Adjustment Date (IAD) – a date from which interest on the mortgage advanced is calculated for your regular payments. This date is usually one payment period before regular mortgage payments begin. Interest due from the date of your mortgage is advanced to IAD is due on closing.
Lending Value – the purchase price or market value of a property, whichever is less.
Lien (Mechanic's) – a claim against a property for money owing. A lien may be filed by a supplier or a subcontractor who has provided labour or materials but has not yet been paid, A lien must be properly paid filed by the claimant. It has a limited life, prescribed by statute that varies from province to province. If the lien holder takes action within the prescribed time, the homeowner may be obliged to pay the amount claimed by the lien holder. Alternatively the lien holder may force a sale of the property to pay off the debt.
Loan-To-Value Ratio – the ratio of the loan to the lending value of a property expressed as a percentage. For example, the loan-to-value ratio of a loan for $90,000 on a home which costs $100,000 is 90%.
Maturity Date – the last day of the term of the mortgage agreement. On this day the mortgage loan must be either paid in full or the agreement renewed.
Mortgage – a loan used to purchase a home. The borrower pledges the property as security for the loan.
Mortgage Loan Insurance – if you have a high-ratio mortgage (more than 75% of the purchase price), your lender will require mortgage loan insurance (available from CMHC or a private insurer). The insurance premium will cost between 0.5% and 3.75% of the amount of the mortgage (additional charges may apply).
Mortgage Life Insurance – this insurance guarantees that if you die your mortgage will be paid in full. This insurance can be conveniently purchased through your lender and the premium added to your mortgage payments.
Mortgage Payment – the amount of money that the purchaser pays to the lender on an established, regular basis to repay the principal and pay interest on the mortgage loan.
Mortgagee – the lender.
Mortgagor – the borrower.
Multiple Listing Service (MLS) – a computer-based system for relaying information to real estate agents about properties for sale.
Net Worth – the difference between total assets and total liabilities.
Offer to Purchase – a written contract setting out the terms under which the buyer agrees to buy. If accepted by the seller, it forms a legally binding contract subject to the terms and conditions stated in the document.
Option Agreement – a document stipulating that, in exchange for a deposit, a specified individual is to be given the first chance of buying a property at or within a specified period of time. An option holder who does not buy at or within the specified period loses the deposit and the agreement is cancelled.
Open Mortgage – a mortgage that can be prepaid or renegotiated at any time and in any amount without interest penalty.
P.I.T. (Principal, Interest, and Taxes) – payments due on a regular basis under the terms of the mortgage agreement. Generally, payments are made monthly and include one-twelfth of the estimated annual municipal and school taxes. Since these taxes change from year to year, this section of the mortgage will change accordingly.
P.I.T.H. (Principal, Interest, Taxes, and Heating) – costs used to calculate the Gross Debt Service ratio (GDS).
Principal – the amount of money borrowed for a mortgage.
Realtor – a real estate representative who is a member of an organization of persons engaged in the business of buying and selling real estate, such as the Canadian Real Estate Association.
Refinance – to pay off a mortgage or other registered encumbrance and arrange for a new mortgage (sometimes with a different lender).
Second Mortgage – an additional mortgage on a property that already has a mortgage.
Statement of Adjustments – a document detailing the exact amount owed by the purchaser to the vendor upon closing. It includes the balance of the purchase price, reimbursement for any prepaid utilities or services and lawyer/notary fees and costs.
Survey – a document providing details of a property's boundaries, measurements and structures. It also describes and easements, rights-of-way, or encroachments by either your property or adjoining properties.
Term – the length of time that a mortgage agreement covers. When the term expires, the mortgage is usually repaid in full or renegotiated for another term.
Title – the legal evidence of ownership to a property.
Title Search – a detailed examination of the ownership documents to ensure there are no liens or other encumbrances on the property, and not question regarding the seller's ownership claims.
Total Debt Service Ratio – the total of annual mortgage payments and all other debts, expressed as a percentage of gross annual income.
Vendor – the seller in a real estate transaction.
Vendor Take Back Mortgage – mortgage financing arranged between the seller of the property and the buyer. The title in transferred to the buyer. Often this type of loan is a second mortgage which the seller is willing to arrange at below market rates to ensure the buyer can purchase the house. Most of these arrangements are not renewable or transferable to the next owner of the house.
Zoning Bylaws – municipal or regional laws that specify or restrict land usage.