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October 20, 2016

Glossary

Amortization

This is the total number of years it takes to repay a mortgage in full.

Appraised Value

An estimate of the market value of the property used as security for the mortgage. Usually an independent appraiser using a variety of methods determines an estimated value of the property. An appraisal is normally required by a lender. The fee for the appraisal is normally paid by the buyer.

Blended Mortgage Payment

The mortgage payment consisting of both principal and interest in which part is applied toward the accumulated interest and the remainder is applied toward the principal.

Bridge Financing

A loan required to provide the funds needed for the closing of the property you have purchased to the time of the later closing of the property you have sold.

CMHC

The Canada Mortgage and Housing Corporation is a federal crown corporation providing housing programs that allows lenders to loan up to 95% of property value.

Closed Mortgage

Mortgages that are locked in for a specific period. To get out of the mortgage usually requires a penalty payment, often 2 or 3 months of interest.

Closing Date

The date the purchase of the property becomes final and the new owner obtains the title.

Conventional Mortgage

This kind of mortgage requires that you make a down payment of at least 25 per cent of the appraised value, i.e. if the appraised valued is $200,000, a down payment of $50,000 or more is required for it to be considered conventional.

Conveyance

The transfer of the property title from the vendor (seller) to the purchaser on the records at the Land Titles Office.

Deed

A legal document that transfers ownership of the property to the buyer.

Deposit

The amount of money deposited with the listing realtor as good faith to carry through with the offer to purchase and is applied toward the down payment.

Discharge

The removal of the mortgage from the title. The house is then free of that mortgage debt.

Down payment

The difference of money between the purchase price and the mortgage.

Equity

The difference between the current value of a property and the outstanding mortgage amount at any time.

First Mortgage

A mortgage which is registered first in priority against the mortgaged property.

Fixed Rate Mortgage

The rate of interest that is fixed for the mortgage term.

Gross Debt Service Ratio

The total amount of the mortgage payments (principal and interest), heating costs and property taxes (and condominium fees when applicable) divided by the total gross income.

High Ratio Mortgage

A mortgage for more than 75% of the property value. The down payment is less than 25% of the property value.

Lending Value

The appraised value of property or the purchase price, whichever is the least.

Loan To Value Ratio (LTV)

The amount of the mortgage as compared to the appraised value or purchase price.

Maturity Date

The expiry date of the term of the mortgage. The interest rate is in effect until this time.

Mortgage Payment

The regular principal and interest payments made to repay the mortgage.

Mortgagee

This is the mortgage lender.

Mortgagor

This is the borrower.

Mortgage banker

This is a company that provides home loans using its own money. The loans aretypically sold to investors such as insurance companies/Fannie Mae.

Mortgage broker

A company that matches lenders with prospective borrowers who meet the lender’s criteria. The mortgage broker does not make the loan, but receives payment from the lender for services.

Open Mortgage

A mortgage that can be prepaid or renegotiated at any time without penalty.

Pre-Approval

A mortgage approval for a pre-determined amount and interest rate arranged prior to the borrower’s purchasing a property. A pre-approval will determine the borrower’s purchasing power and hold the interest rate for up to 120 days.

Prepayment Options

The amount that allows the borrower to prepay a portion of the original mortgage amount every year and increase payments, without penalty.

Principal

The mortgage balance outstanding at any time.

Second Mortgage

The mortgage next in line after the first mortgage. A second mortgage is usually offered at a higher interest rate than the first mortgage. The amount of the second mortgage is a portion of the difference between the first and the appraised value of the property. It is a method to obtain more money at a later period, or have a lower down payment from the property’s value.

Security

The property being purchased or refinanced forms the security for the mortgage.

Term

The time the interest rate is in effect. The rate is due for renegotiation at the end of this period. Typical terms vary from 6 months to 10 years.

Total Debt Service Ratio

The total amount of the mortgage payments (principal and interest), heating costs and property taxes (and condominium fees when applicable) plus all other contractual debts of the borrower divided by the total gross income.

Underwriting Fees

A charge levied by money lenders to offset their expenses incurred to set up the mortgage loan.

Variable Rate Mortgage

The rate of interest will fluctuate in accordance with a bank trend setting rate. This is typically the bank prime rate. Adjusted on a predetermined basis, usually monthly, the mortgage rate can be set below, equal to or above the trend setting rate and will move up and down accordingly with that rate.

Vendor

The seller in a real estate transaction.