Get familiar with some mortgage terms:

A

A mortgage whose interest rate and payments are changed at an agreed upon frequency based on a plus/minus adjustment to the prime lending rate. Frequently referred to as ARM or VRM (Variable Rate Mortgage). This product may be converted to a fixed rate mortgage for a term equal to or greater than the remaining term, usually at the current fixed rate offered by the lending institution.
Common expenses, if any, such as property taxes and utility bills, that have been prepaid by the vendor, are pro-rated and paid by the purchaser to the vendor on closing. The Statement of Adjustments will also account for any outstanding balance owed by the purchaser with regard to an agreed upon deposit/downpayment schedule.
The legal contract a purchaser and a vendor enter into, for the purchase of real property. It is recommended that you have the offer prepared by a professional Realtor who has the knowledge and experience to satisfactorily protect your interests, with the most suitable clauses and conditions. It is further advised that you have the offer reviewed by a real estate lawyer.
The time over which the mortgage is to be completely repaid, assuming equal payments. For example, if you have a mortgage with a 25-year amortization period, it would take 25 years to bring the balance to zero, if all regular payments are made on time.
The number of years it takes to repay the entire amount of the financing based on a set of fixed payments.
A schedule of periodic payments for the term of the current contract. Each periodic payment reflects the portion of funds applied toward the principal and the interest, as well as the remaining balance. Special calculators are available on our site to assist you with paying down your mortgage faster, saving you valuable money otherwise absorbed by interest charges. For additional assistance, contact your licensed Strategic Capital representative.
The process of determining the market value of a property.
A legal document signed by a buyer that requires the buyer to assume responsibility for the obligations of the vendor’s existing mortgage. If someone assumes your mortgage, make sure that you get an immediate release from the mortgage company to ensure that you are no longer liable for the debt. Often referred to as an Assumable Mortgage, this valuable clause in the existing mortgage contract may make provisions for a purchaser to benefit from a better rate than what is available in the current market. This clause is often a point of negotiation during the offer stage, as it has real monetary value

B

Equal payments consisting of both an interest and a principal component. Typically, while the payment amount does not change, the principal portion increases, while the interest portion decreases.

C

CMHC is a federal Crown corporation that administers the National Housing Act (NHA). Among other services, they also insure mortgages for lenders that are greater than 80% of the purchase price or value of the home. The cost of that insurance (factored as a percentage of the mortgage principal) is paid for by the borrower and is added to (or “capitalized” on) the mortgage amount, meaning that your mortgage payments do not change but rather continue for a few more months after the original mortgage amount is paid to zero. The borrower will be required to pay the tax portion of the insurance at the time of closing. These mortgages are often referred to as Hi-Ratio mortgages.
A mortgage that cannot be prepaid or renegotiated for a set period of time without penalties.
The date on which the new owner takes possession of the property and the sale becomes final.
An asset, such as a term deposit, Canada Savings Bond, vehicle, or other piece of real estate that is offered as additional security for a loan.
A mortgage of up to a maximum of 80% of the appraised market value of the property.
A feature that allows borrowers to fix the rate of their variable rate mortgage to a term equal to or greater than the remaining term with no penalty.
A system that assesses a borrower on a number of items, assigning points that are used to determine the borrower’s credit worthiness.

D

A loan where the balance must be repaid upon request.
A sum of money placed in trust by the purchaser at the time of offer to purchase, or by installment as agreed to by both parties. 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 surrenders the deposit, and it is given to the vendor as compensation for breaking the contract (the offer).

E

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.

F

A charge registered against the title to a property that has priority ahead of all debts secured or unsecured, except for tax debt.
A mortgage with a fixed rate for a specific term.

G

One of the mathematical calculations used by lenders to determine a borrower’s capacity to repay a mortgage. It takes into account the sum of the mortgage payments, property taxes, approximate heating costs, and 50% of any condo maintenance fees, and then divided by the gross income of the applicants. Acceptable ratios vary by lending institution and, where applicable, mortgage insurer.
A person with a satisfactory credit rating and sufficient earnings who guarantees to repay the loan for the borrower, in the event of the borrower’s inability or failure to repay the debt. The Guarantor is equally responsible for repayment of the entirety of the debt, however is only called upon to satisfy said obligation as discussed above.

H

A mortgage loan that exceeds 80% of the appraised market value of a property, and which is either insured through a mortgage insurance program or a self insured lender (premium lending rates may apply).
A personal line of credit secured against the borrower’s property. Generally up to 75% of the purchase price or appraised value of the property is allowed to be borrowed with this product.

I

The date, based on the final closing date and before the first regular scheduled payment, on which a pro-rated interest payment is calculated and paid, calculated using the compounded rate set out in the mortgage contract, in order to align with all future payments in the agreed upon payment schedule.
The rate of return the lender gets for letting the borrower use the mortgage money for a specified term. The interest rate is usually expressed as an annual percentage rate.
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 once is not paying any principal

L

A calculation that expresses the amount of a first mortgage lien as a percentage of the total appraised value of the property. The resulting percentage is commonly called the loan to value ratio.

Example: An appraised property value of $120,000 and a first mortgage of $90,000
produce an LTV ratio of 75%. Lenders consider loan to value as one of the key risk factors when qualifying borrowers.

M

A mortgage is a loan that uses a piece of real estate as a security. Once that loan is paid-off, the lender provides a discharge for that mortgage.
The Mortgagee is the lender that advances the funds for a mortgage loan; the Mortgagor (that�s you!) is the borrower who gives title to, or a lien on, real property to a Mortgagee to secure repayment of a mortgage loan.

O

A mortgage that can be repaid at any time during the term without any penalty. For this convenience, the interest rate is between 0.75-1.00% higher than a closed mortgage. A good option if you are planning to sell your property or pay-off the mortgage entirely.

P

Principal, interest, and property tax due on a mortgage. If your down payment is greater than 25% of the purchase price or appraised value, the lender will allow you to make your own property tax payments.
A sum of money paid to a lender for the privilege of prepaying a mortgage in part, or in full, before the mortgage matures.
A feature that allows an existing mortgage to be transferred to a new property (generally with credit approval and property appraisal).
Full or partial payment of all or part of the principal amount owing. A separate payment from regular payments allowed in a mortgage agreement.
A fee charged a borrower by the lender when the borrower prepays all or part of a mortgage over and above the amount agreed upon. Although there is no law as to how a lender can charge you the penalty, a usual charge is the greater of the Interest Rate Differential (IRD) or 3 months interest.
The lowest rate a financial institution charges its best customers.
The amount of the loan owed to the lender at any specified time, not including interest.

R

The number of days the lender will guarantee the mortgage rate on a mortgage approval. This can vary from lender to lender anywhere from 30 to 120 days.
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 same lender or transfer to another lender at no cost (we can arrange).

S

A debt registered against a property that is secured by a second charge on the property.
To transfer an existing mortgage from one financial institution to another. We can have this arranged for you at no cost to you.

T

The length of the current mortgage agreement.
Right of ownership of property, including evidence of such ownership.
A contract by which the insurer, a title insurance company, agrees to pay the insured a specific amount for any loss caused by insured defects to title of a property, for which the insured has an interest as purchaser, lender or otherwise.
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 card debts, other mortgages, etc.), and this sum is then divided by the gross income of the applicants. Ratios up to 40 % are acceptable.

V

A mortgage for which the interest rate fluctuates based on changes in prime.
A mortgage provided by the vendor (seller) to the buyer.