Glossary of Canadian Mortgage Terms
Amortization period:
The actual number of years it will take to pay back your mortgage loan.
Appraised value:
An estimate of the value of the property, conducted for the purpose of mortgage lending by a certified appraiser.
Assumability:
Allows the buyer to take over the seller's mortgage on the property.
Closed mortgage: A mortgage that locks you into a specific payment schedule. A penalty usually applies if you repay the loan in full before the end of a closed term.
Condominium fee:
A payment among owners, which is allocated to pay expenses.
Conventional mortgage:
A mortgage loan issued for up to 75% of the property's appraised value or purchase price, whichever is less.
Down payment:
The buyer's cash payment toward the property that is the difference between the purchase price and the amount of the mortgage loan.
Equity:
The difference between the home's selling value and the debts against it.
High-ratio mortgage:
A mortgage that exceeds 75% of the home's appraised value. These mortgages must be insured for payment.
Interest rate:
The value charged by the lender for the use of the lender's money, expressed as a percentage.
Land transfer tax, deed tax or property purchase tax:
A fee paid to the municipal and/or provincial government for the transferring of property from seller to buyer.
Maturity date:
The end of the term of the loan, at which time you can pay off the mortgage or renew it.
Mortgagee:
The financial institution or person that lends the money.
Mortgage insurance:
Applies to high-ratio mortgages. It protects the lender against loss if the borrower is unable to repay the mortgage.
Mortgage life insurance:
Pays off the mortgage if the borrower dies.
Mortgagor:
The borrower.
Open mortgage:
Allows partial or full payment of the principal at any time, without penalty.
Portability:
A mortgage option that enables borrowers to take their current mortgage with them to another property, without penalty.
Pre-approved mortgage:
Qualifies you for a mortgage before you start shopping. You know exactly how much you can spend and are free to make a firm offer when you find the right home.
Prepayment privileges:
Voluntary payments that are in addition to regular mortgage payments.
Principal:
The amount borrowed or still owing on a mortgage loan. Interest is paid on the principal amount.
Refinancing:
Paying off the existing mortgage and arranging a new one or renegotiating the terms and conditions of an existing mortgage.
Renewal:
Renegotiation of a mortgage loan at the end of a term for a new term.
Second mortgage:
Additional financing, which usually has a shorter term and a higher interest rate than the first mortgage.
Term:
The length of time the interest rate is fixed. It also indicates when the principal balance becomes due and payable to the lender.
Title:
Legal ownership in a property.
Variable rate mortgage:
A mortgage with fixed payments that fluctuates with interest rates. The changing interest rate determines how much of the payment goes towards the principal.
Vendor take-back mortgage:
When the seller provides some or all of the mortgage financing in order to sell their property. |
