A

AMORTIZATION

A term used to describe the period of time over which the entire mortgage is to be paid assuming regular payments.

APPRAISAL

An independent assessment of the property by a qualified individual.

ASSUMING A MORTGAGE

Taking over the previous owner’s (or builder’s) mortgage when you buy a property.

B

BUY DOWN RATE

This is the portion of the interest rate on a buyer’s mortgage that you assume when they buy your home. If you’re selling your home and the prospective buyer doesn’t like the interest rate on their mortgage, you can offer to add a certain percentage of it onto your existing mortgage.

C

CAPPED RATE

An interest rate with a pre-determined ceiling – usually associated with a variable-rate mortgage.

CLOSED MORTGAGE

A mortgage that cannot be prepaid, renegotiated or refinanced prior to maturity, unless stated in the agreed terms.

CLOSING COSTS

Costs that are in addition to the purchase price of a property and which must be paid on the closing date. Examples include legal fees, land transfer taxes, and disbursements.

CONVENTIONAL MORTGAGE

A mortgage where the borrower is contributing more than 20% or more of the value of the property as the down payment.

CONVERTIBLE MORTGAGE

A mortgage that you can change from short-term to long-term, depending on your financial needs.

D

DEBT SERVICE RATIO

The percentage of the borrower’s income used for monthly payments of principal, interest, taxes, heating costs and condo fees (if applicable).

DEFAULT

A homeowner is ‘in default’ when he or she breaks the terms of a mortgage agreement, usually by not making required mortgage payments or by not making payments on time.

DOWN PAYMENT

The money that you pay up-front for a house. Down payments typically range from 5%-20% of the total value of the home.

E

EQUITY

The difference between the market value of a property and the amount owed on the property. This difference is the amount a homeowner actually owns outright.

H

HIGH RATIO MORTGAGE

A mortgage where the borrower is contributing less than 20% of the value of the property as the down payment.

HOME INSPECTION

A visual inspection of the major components of a home by a qualified individual, who will give the home buyer a true and unbiased picture of the home’s condition.

HOME INSURANCE

Insurance to cover both your home and its contents (also referred to as property insurance). This is different from mortgage life insurance, which pays the outstanding balance of your mortgage in full if you die.

I

INTEREST ADJUSTMENT

The amount of interest due between the date your mortgage starts and the date the first mortgage payment is calculated from. Sometimes there is a gap between the closing date of your home purchase and the first payment date of your mortgage.

L

LAND TRANSFER TAX

A tax that is levied (in some provinces) on any property that changes hands.

LEGAL FEES AND DISBURSEMENTS

Some of the legal costs associated with the sale or purchase of a property. It is in your best interest to engage the services of a real estate lawyer (or a notary in Quebec).

LUMP SUM PAYMENT

An extra payment that you make to reduce the amount of your mortgage. This is the same as pre-paying, which you cannot do if you have a closed mortgage.

M

MORTGAGE

A loan that you take out in order to buy property. The collateral is the property itself.

MORTGAGEE/MORTGAGOR

Mortgagee is the lender; mortgagor is the borrower.

MORTGAGE BROKER

A company or individual who helps the homeowner find the right financing to buy a property. A broker does not actually lend money but seeks out a lender and arranges the mortgage terms. This may include negotiating with the lender for the best possible deal for the homebuyer.

MORTGAGE DEFAULT INSURANCE

Required if you are contributing between 5% and 20% of the value of the property as the down payment.

MORTGAGE LIFE INSURANCE

This form of insurance pays the outstanding balance of your mortgage in full if you die. This is different from home or property insurance, which insures your home and its contents.

MORTGAGE RATE

The percentage interest that you pay on top of the loan principal. For example, you may take out a mortgage of $100,000 at a rate of 12%. Your monthly payments will consist of a portion of the original $100,000, plus 12% interest.

MORTGAGE TERM

The length of time the interest rate is guaranteed for a mortgage. Mortgage terms normally rate from six months to five years or more, after which you can repay the balance of the principal owning or re-negotiate the mortgage at current rates.

MOVING EXPENSES

The cost hiring of packers, movers or renting a van.

MULTIPLE LISTING SERVICE (MLS)

A computerized listing of the properties available in your area, including information and pictures of each property.

O

OFFER TO PURCHASE/CONDITIONAL OFFER

A written contract outlining the terms under which the buyer agrees to purchase the property. There may be conditions attached to the offer, for example: offer being subject to arranging the mortgage or selling a home.

OPEN MORTGAGE

A mortgage which you can pay off, renew or refinance at any time. The interest rate for an open mortgage is usually higher than a closed mortgage rate.

P

PORTING

Transferring an existing mortgage from one home to a new home when you move. This is known as a “portable” mortgage.

PRE-APPROVED MORTGAGE CERTIFICATE

A written agreement that you will get a mortgage for a set amount of money at a set interest rate. Getting a pre-approved mortgage lets you shop for a home without worrying how you’ll pay for it.

PRE-PAID PROPERTY TAX AND UTILITY ADJUSTMENTS

The amount you will owe if the person selling you the home has pre-paid any property taxes or utility bills. The amount to reimburse them will be calculated based on the closing date.

PRE-PAYMENT

Repaying part of your mortgage ahead of schedule. Depending on your mortgage agreement, there may be a penalty for pre-paying.

PROPERTY SURVEY

A legal description of your property and its location and dimensions. An up-to-date survey is usually required by your mortgage lender. If not available from the vendor, your lawyer can obtain the property survey for a fee.

R

REFINANCING

Increasing the amount of your current mortgage, at a new interest rate. The term of the new mortgage must be equal to or greater than the term remaining on your current mortgage.

RENEWAL/RENEWING

Once the original term of your mortgage expires, you have the option of renewing it with the original lender or paying off all of the outstanding balance.

S

SALES TAXES

Taxes applied to the purchase cost of a property. Some properties are sales tax exempt (GST and/or PST), and some are not. For instance, residential resale properties are usually GST exempt, while new properties require GST. Always ask before signing an offer.

SERVICE CHARGES

The extra costs payable for hooking up hydro, gas, phone, etc. to a new address.

V

VARIABLE RATE MORTGAGE

A mortgage with an interest rate that changes with the market. The rate changes each month, so the portion of your monthly payment that goes towards interest may go up or down each month. But your total monthly payment will probably stay the same.

Source: Genworth Canada