A

Amortization

The number of years it will take to pay off a mortgage in full.

Appraisal

An accredited appraiser will assess the value and condition of a property, providing an appraisal report for use by the lender.

Assets

Things that you own, including savings, investments, vehicles etc.

Assumption

When someone takes over the responsibility of an existing mortgage, typically when someone purchases a home and “assumes” the existing mortgage on the property.

B

Blended Payments

Mortgage payments that consist of both interest and principal payments. This type of payment is the most common type and will see your balance paid down.

Bridge Financing

When purchasing home prior to the sale of your existing home when your down payment is coming from the sale. A bridge loan provides the funds for the down payment until your existing home sells.

C

CMHC – Canada Mortgage and Housing Corporation

CMCH is s a crown corporation that insures mortgage when you are making less than a 20% down payment.  CMCH charges an insurance fee for this service that is paid by the borrower.

Closed Mortgage

A mortgage that has a fixed closed period during which it cannot by paid above its regular payment amount without incurring a penalty. Most closed mortgages do have provisions to make certain extra payments depending on the lender.

Collateral

An asset that is held as security on a loan.

Conventional Mortgage

A mortgage that is equal to or less than 80% of the value of a property.

Credit

A term referring to your past and present borrowing.

Credit History

A history of your borrowing activity. This can be found on your credit report.

Credit Score

A score that is assigned by credit reporting agencies that is based on many factors, but most importantly how you pay your past and existing accounts. Lenders depend on your credit score when determining whether to approve your mortgage, for how much, and at what rate.

D

Deposit

The sum of money that is offered to secure an offer on a property and held in trust.

E

Equity

The difference between the value of a property and the mortgage balance.

Equifax

A credit reporting agency that gathers information from lenders compiling a credit report, showing your history, and assigning a credit score.

F

Financial Institution

A general term including, banks, trust companies, credit unions, etc.

Fixed Rate Mortgage

A mortgage where your rate is guaranteed for a set period of time or term. This is typically a closed mortgage as well.

G

GDS -Gross Debt Service Ratio

This is percentage of your gross income that would be required to cover the total of your mortgage payment, property tax and heating bill ($100 estimate).

Guarantor

A person willing to guarantee that you will make your mortgage payment. If you are unable to then they will be legally obligated to make the payments on your behalf as well.

H

High Ratio Mortgage

A mortgage that exceeds 80% of the value of a property. This type of mortgage is typically insured by CMHC

Home Equity Line of Credit

A line of credit that is secured against the equity in a property.

I

Interest Adjustment Date (IAD)

The date that is typically the first day of the month following the actually closing date of the month. The interest adjustment is the interest cost between the closing date and the IAD.

L

Land Transfer Tax

This tax is charged by the Provincial Government and is collected by your lawyer at closing. In Toronto there is also an additional Municipal Land Transfer Tax.

In Ontario if you are a “First-time Homebuyer” you may qualify for a full or partial rebate of land transfer taxes. As of January 2017 bona-fide “First-time homebuyers” would receive a full rebate on purchases up to $368,000. On purchases greater than $368,000 the maximum rebate would be $4,000.00

For exact details please contact your lawyer.

M

Mortgage

A loan that is uses real estate as security.

Mortgagee

The entity that is lending the mortgage funds to the borrower.

Mortgagor

The person that borrows the mortgage.

O

Open Mortgage

A mortgage that can be paid in full at any time without penalty

P

Portable Mortgage

A mortgage that is eligible to be moved from one property to another, typically when selling one property and purchasing another.

Prepayment Penalty

A fee that is charged by your lender when a closed mortgage is paid during its term.

Prime

Is the base rate that Home Equity Loans, and Variable Rate Mortgages are based on, and fluctuate with the Bank of Canada prime lending rate.

Principal

The portion of your mortgage payment that goes towards paying down the balance.

R

Refinance

Rewriting an existing mortgage to obtain a better interest rate, pay off other debt, including loans and credit cards to lower monthly payments and reduce interest costs. Can also be done to obtain funds for home improvements, investments, etc.

Renewal

Upon the completion of the term on a closed mortgage, the mortgage is up for renewal. At this time your mortgage becomes open for repayment without penalty and gives you the opportunity to talk with your broker about shopping the mortgage market again for the best deal.

Reverse Mortgage

A mortgage typically utilized by those over 55 years of age, that requires no payments to be made as long as they live in the home. The interest is added to the balance of the mortgage. When the client moves out of the home the mortgage must be paid in full.

Riparian Rights

The ownership of the shoreline or streambed of a water body on or flowing through property

S

Second Mortgage

A mortgage that is secured on a property in addition to the existing first mortgage.

Switch

Moving a mortgage from one lender to another, also referred to as a transfer

T

Term

The period of the time that the interest rate is guaranteed for and the closed period on a fixed mortgage.

TDS – Total Debt Service Ratio

This is percentage of your gross income that would be required to cover the total of your mortgage payment, property tax and heating bill ($100 estimate), and all other debt payments.

Transfer

Moving a mortgage from one lender to another.

V

Variable Rate Mortgage (VRM)

A mortgage where the interest fluctuates with Prime.

VTB – Vendor Take Back Mortgage

A private mortgage that is held by an individual selling their property to the purchaser of the property.

Have more questions regarding any of the above terms? Contact your local mortgage broker in Grimsby & Hamilton today on (905)309-8799.