- Adjustable Rate Mortgage (ARM): This is a type of mortgage loan where the interest rate and payment amount can fluctuate. If the prime interest rate fluctuates, then the payment will fluctuate as well keeping amortization the same.
- Amortization: The period of time required to completely pay off a mortgage if all conditions are met and all payments are made on time.
- Appraisal: An estimate of the current market value of a home.
- Appreciation: An increase in the value of a home or other possession from the time it was purchased.
- Assumable: This is a mortgage feature where the current owner’s mortgage can be transferred to the new owner.
- Closed Mortgage: A mortgage that can’t normally be paid off or renegotiated before the end of the term without the lender’s permission and a financial penalty. Many closed mortgages allow for extra or accelerated payments, but only if specified in the mortgage agreement.
- Closing Date: The date when the sale of the property becomes final and the new owner takes possession of the home.
- Conventional Mortgage: A mortgage loan equal to or less than 80% of the value of a property (that is, where the down payment is at least 20%). Conventional mortgage deon’t usually require mortgage loan insurance.
- Default: Failing to make a mortgage payment on time or to otherwise abide by the terms of a mortgage loan agreement. If borrower’s default on their mortgage payments, their lender can charge them a penalty or even take legal action to take possession of their home.
- Default insurance: This insurance protects the lender in the event that the borrower defaults on their mortgage. The default insurers in Canada are CMHC, Sagen and Canada Guarantee.
- Equity: The cash value that a homeowner has in their home after subtracting the amount of the mortgage or other debts owed on the property. Equity usually increases over time as the mortgage loan is gradually paid. Changes in overall market values or improvements to a home can also affect the value of the equity.,
- Fixed Interest Rate mortgage: A mortgage with a locked in interest rate, meaning it won’t change during the term of the mortgage.
- Gross Debt Service (GDS) Ratio: The percentage of a person or household’s gross monthly income that goes to pay the mortgage principal and interest, property taxes and heating costs, plus 50% of any condominium maintenance fees or 100% of the annual site lease for leasable tenure if applicable. To qualify for a mortgage, the borrower’s GDS ratio must be at or below 35 or 39% (depending on the lender)
- High-Ratio Mortgage: A mortgage loan for more than 80% of the value of a property (that is, where the down payment is less than 20%). A high-ratio mortgage has to be insured against default with mortgage loan insurance provided by a mortgage insurer (CMHC, Canada Guarantee, Sagen)
- Home inspection: A thorough examination and assessment of a home’s state and condition by a qualified professional. The examination includes the home’s structural, mechanical and electrical systems.
- Land Transfer Tax: A tax charged by many provinces and municaplities (usually a percentage of the purchase price) that the buyer must pay upon closing.
- Maturity date: The last day of the term of a mortgage. The mortgage loan must either be paid in full, renegotiated or renewed on this day.
- Mortgage Life Insurance: Protects the famly of a borrower by paying off the mortgage if the borrower dies.
- Mortgage Term: The length of time that the conditions of a mortgage, such as the interest rate and payment schedule, are in effect. At the end of the term, the mortgage loan must either be paid in full, renewed or renegotiated, usually with new conditions.
- Open Mortgage: A flexible mortgage loan that lets a borrower pay off or renegotiate their loan at any time, without having to pay penalties. Because of this flexibility, open mortgages usually have higher interest rates than closed mortgages.
- PITH: An acronym that stands for mortgage “Principal and Interest Payments, Property Taxes and Heating Costs”. All the main costs paid by a homeowner on a monthly basis.
- Portability: This is a mortgage feature that allows you to take your existing mortgage- along with its current rate and terms- from one property and transferring it to a new property you are purchasing.
- Prepayment privileges: The ability to prepay a portion of the mortgage principal before it is due and without penalty. This extra payment on the mortgage would be applied directly to the principal, as your regular monthly payment covers the interest.
- Principal: The amount a person borrows for a loan (not including interest)
- Property taxes: These are the taxes that are charged by the municipality based on the value of the home. In some cases, the lender will collect property taxes as part of the borrower’s mortgage payments and then pay the taxes to the municipality on the borrower’s behalf.
- Title Insurance: Protects against losses or damages that could occur because of anything that affects the title of the property (for example, a defect in the title to a property or any liens, encumbrances or servitudes registered against the legal title to a home).
- Total Debt Service (TDS) Ratio: The percentage of a person or household’s gross monthly income that goes to pay the mortgage principal and interest, obligations such as car payments, personal loans, or credit card debt. To qualify for a mortgage, the borrower’s TDS ratio must be at or below 42% or 44% (depending on the lender).
- Variable Interest Rate Mortgage: A mortgage where the interest rate fluctuates based on the current mortgage conditions. The payments will generally remain the same, but the amount of each payment that goes toward the principal or the interest on the loan changes as interest rates fluctuate.
- Vendor: the seller of a property
- Vendor Take-Back Mortgage: A type of mortgage where the seller, not a bank or other financial institution, finances the mortgage loan for the buyer.
Hi, I’m Jill, your mortgage pro. I am here to make the world of mortgages less confusing so you can feel confident in your financial decisions. Through my blog, I aim to provide you with the knowledge and guidance you need to make informed decisions. Your financial peace of mind is my top priority.
