Glossary

A clause in your mortgage which allows the lender to demand payment of the outstanding loan balance for various reasons. The most common reasons for accelerating a loan are if the borrower defaults on the loan or transfers title to another individual without informing the lender.

A mortgage in which the interest changes periodically, according to corresponding fluctuations in an index.

The actual number of years it will take to repay a mortgage in full. This period is always longer than or equal to the loan’s term. For example, your mortgage might be amortized on a 25-year period and you might choose a 5-year term.

The process of determining the value of property, usually for lending purposes. This value may or may not be the same as the price of the home.

A market-value estimate of the home and property that you pledge as security for the mortgage.

The increase in the value of a property due to changes in market conditions, inflation, or other causes.

The “assessed” value of a property is a historical, static estimate of the value of your property used by a municipal government as a basis for calculating annual property taxes. This may be different from the “appraised” value of the property.

Payments consisting of both a principal and an interest component, paid on a regular basis (e.g. weekly, biweekly, monthly) during the term of the mortgage. The principal portion of payment increases, while the interest portion decreases over the term of the mortgage, but the total regular payment usually does not change.

The CMHC, is a federal Crown corporation that administers the National Housing Act. CMHC provides mortgage default insurance for high ratio mortgages.

A title that is free of liens or legal questions as to ownership of the property.

A mortgage that generally may not be prepaid, or renewed early, unless the borrower is willing to pay an interest penalty.

Various expenses associated with purchasing a home. These costs can include, but are not limited to, legal/notary fees and disbursements, property land transfer taxes, as well as adjustments for prepaid property taxes or condominium common expenses, if any.

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

A report of an individual’s credit history prepared by a credit bureau and used by a lender in determining a loan applicant’s creditworthiness.

A mortgage that is up to 75% of the property’s appraisal or its purchase price, whichever is lower.

The document signed by the seller transferring ownership of the home to the purchaser. This document is then registered against the title to the property as evidence of the purchaser’s ownership of the property.

Failure to repay an outstanding debt as agreed.

A decline in the value of property; the opposite of appreciation. Depreciation is also an accounting term which shows the declining monetary value of an asset and is used as an expense to reduce taxable income. Since this is not a true expense where money is actually paid, lenders will add back depreciation expense for self-employed borrowers and count it as income.

The difference between the price for which a property could be sold and the total amount owing on it.

Equity Take Out is a type of refinancing where you decide to “take money out” of the equity in your property to use for other purposes (ie: consolidation of debts, payment of tuition fees, home renovation costs, purchase of additional real estate or other investments).

A mortgage for which the rate of interest is fixed for the term.

The percentage of your monthly income, before tax, that can be used to pay the housing costs, including the mortgage payment (principal and interest), heating costs and property taxes (and condominium fees when applicable).

A third party who agrees to guarantee payment to the lender in the event that you are in default.

A mortgage for more than 75% of either a property appraisal or its purchase price. In other words, your down payment is less than 25% of the amount used for the calculation.

The annual percentage amount charged in return for borrowing funds.

A date, usually one month before monthly mortgage payments begin, when interest on monies advanced before that date is calculated and must be paid by the borrower.

Your loan-to-value (LTV) ratio is a calculation factor of the fair market value of your property to the value of the mortgage that will finance its purchase.

For example, if your property is worth $100,000 and you made a down payment of $25,000, your LTV is 75% (($100,000 – $25,000) x 100%). That means you have 25% of your personal equity invested in your property.
The LTV tells the lender if it will be possible to recoup its losses by selling your property, in case of default.
The LTV also determines whether or not mortgage default insurance is required.

An agreement in which the lender guarantees a specified interest rate for a certain amount of time at a certain cost.

The last day of your mortgage term, as stated in an agreement signed with your lender. The mortgage must be paid in full or renewed at this date.

A mortgage is both a loan used to purchase or refinance a property and a security for the repayment of the loan.

An independent, third party who arranges transactions between borrowers and a large selection of lenders by streamlining the application, approval process and by finding the most favorable terms for the buyer. A mortgage broker works for you, not for the lender. Many financial institutions pay finders fees to mortgage brokers who refer business to them, thus making it possible for the consumer to secure the best mortgage product at no cost.

Insurance that pays your mortgage payments should you become ill or disabled and unable to work.

Government-backed or privately backed insurance protecting the lender against the borrower’s default on a high-ratio mortgage.

Insurance that pays off your mortgage debt in the event of your death.

A mortgage loan which is insured by CMHC.

An open mortgage can be paid off at anytime prior to maturity date without an interest penalty.

A fee charged by the lender when the borrower pays off all or a portion of a mortgage more quickly than provided for in the mortgage agreement.

A mortgage for a set maximum amount and interest rate that is arranged prior to the purchaser finding a house. Often arranged prior to shopping for a home, this option can help the purchaser establish an affordable price range.

The ability to prepay all or a portion of the principal balance. Prepayment charges may be incurred on the exercise of prepayment options.

The interest rate that banks charge to their preferred customers. Changes in the prime rate are widely publicized in the news media and are used as the indexes in some adjustable rate mortgages, especially home equity lines of credit. Changes in the prime rate do not directly affect other types of mortgages, but the same factors that influence the prime rate also affect the interest rates of mortgage loans.

To arrange a new mortgage for an increased amount. The old mortgage(s) is paid off (discharged) from the proceeds of the new loan. This type of loan is also referred to as equity take out.

To extend a mortgage agreement with the same lender for another term. The length of the term and the conditions (such as the rate of interest) may be changed.

A second mortgage is a mortgage granted on a property that is already part of a mortgage agreement. If the borrower defaults and the property is sold, the second mortgage is paid after the first.

A survey is a document providing details of your property’s boundaries, measurements and structures. It will also describe any easements, rights-of-way, or encroachments made by either your property or by adjoining properties onto your property.

The length of time a lender will lend mortgage funds to a borrower. After this period, you can either repay the balance (the remaining principal plus interest) of the mortgage, or renew the mortgage for another term. The total amortization of a mortgage is usually made up of several successive terms.

The legal evidence of ownership to a property.

Title insurance protects your investment against fraud, forgery, title defects and survey problems. This insurance offers greater coverage than a traditional solicitor’s opinion and is accepted by lending institutions in lieu of a survey.

The percentage of a borrower’s gross (before tax) monthly income needed to cover payments for housing costs (principal, interest, taxes, condominium fees, heating costs) and all other debts and obligations (typically loans and credit cards).

A mortgage for which the rate of interest fluctuates as market rates change.