Mortgages

Closed Mortgages

A mortgage that cannot be prepaid or renegotiated for a set period of time without penalties.

Closing Date

The date on which the new owner takes possession of the property and the sale becomes final.

Collateral

An asset, such as term of deposit, Canada Savings Bond, or automobile, that you offer as security for a loan.

CONVENTIONAL MORTGAGE

A mortgage up to 80% of the purchase price or the value of the property. A mortgage exceeding 80% is referred to as a 'Hi-Ratio' mortgage and the lender will require insurance for that mortgage.

Credit scoring

A system that assesses a borrower on a number of items, assigning points that are used to determine the borrower's credit worthiness.

D

Demand Loan

A loan where the balance must be repaid upon request.

Deposit

A sum of money deposited in trust by the purchaser on making an offer to purchase. When the offer is accepted by the vendor (seller), the deposit is held in trust by the listing real estate broker, lawyer, or notary until the closing of the sale, at which point it is given to the vendor. If a house does not close because of the purchaser's failure to comply with the terms set out in the offer, the purchaser forgoes the deposit, and it is given to the vendor as compensation for the breaking of the contract (the offer).

E

Equity

The difference between the market value of the property and any outstanding mortgages registered against the property. This difference belongs to the owner of that property.

H

High-ratio mortgage

A mortgage that exceeds 80% of the purchase price or appraised value of the property. This type of mortgage must be insured. To avoid the cost of the insurance, a 1st mortgage up to 80% is arranged and a 2nd mortgage for the balance (up to 90% of the purchase price).

I

Interest ADjustment Date (IAD)

The date on which the mortgage terms will begin. This date is usually the first date of the month following the closing. The interest cost for those days from the closing date to the first of the month are usually paid at closing. That is why it is always better to close your deal towards the end of the month.

Interest-only mortgage

A mortgage on which only the monthly interest cost is paid each month. The full principal remains outstanding. The payment is lower than an amortized mortgage since one is not paying any principal.

R

Rate commitment

The number of days the lender will guarantee the mortgage rate on a mortgage approval. This can vary lender to lender anywhere from 30 to 120 days.

Renewal

When the mortgage term has concluded, your mortgage is up for renewal. It is open at this time for prepayment in part or in full, then renew with the same lender or transfer to another lender at no cost.

S

Second Mortgage

A debt registered against a property that is secured by a second charge on the property.

Switch

To transfer an existing mortgage from one financial institution to another.

T

Term

The period of time that the financing agreement covers. The terms available are: 6 month,1,2,3,4,5,6,7,10 year terms, and the interest rates will be fixed for whatever term one chooses.

Total debt service (TDS) Ratio

It is the other mathematical calculations used by lenders to determine a borrower's capacity to repay a mortgage. It takes into account the mortgage payments, property taxes, approximate heating costs, and 50% of any maintenance fees, and any other monthly obligations (i.e. personal loans, car payments, lines of credit, credit cards debts, other mortgages, etc.), and this sum is then divided by the gross income of the applicants. Ratios up to 40% are acceptable.

V

Variable Rate Mortgage

A mortgage for which the interest rate fluctuates based on changes in prime.

Vendor take back (VTB) Mortgage

A mortgage provided by the vendor (seller) to the buyer.