Amortization The period of time required to reduce a debt to zero
when payments are made regularly. Amortization
periods are most often 15, 20, or 25 years long.
Anniversary Most lenders allow borrowers to make a payment
on the anniversary of the mortgage. (For a mortgage
assumed on June 1, a payment can be made every
subsequent June 1 for the term of the mortgage.) It
is applied against the principal and is a good way of
reducing a loan.
Appraisal A process that determines the market value of a
Appraised An estimated value of a property that is completed
Value by a certified appraiser for mortgage financing.
Approved A lending institution authorized by the Government
Lender of Canada to make loans under the terms of the
National Housing Act. Only Approved Lenders can
negotiate mortgages that require mortgage
Assumption A legal document signed by a homebuyer that
requires the buyer to assume responsibility for the
obligations of a mortgage by the builder or original
Balanced Where demand for property equals the supply of
Market available property. Sellers usually accept reasonable
offers and houses generally sell in sufficient time
periods. Prices remain stable and there is usually a
good number of homes to choose from.
Blended A mortgage payment that includes principal and
Payment interest. It is paid regularly during the term of the
mortgage. The payment total remains the same,
although the principal portion increases over time
and the interest portion decreases.
Building A certificate that must be obtained from the
Permit municipality by the property owner or contractor
before a building can be erected or repaired. It must
be posted in a conspicuous place until the job is
completed and passed as satisfactory by a municipal
Buyer's When there is a higher number of homes to choose
Market from than buyers in comparison. Prices of homes
tend to be lower and they remain available for sale
longer. Buyers usually have more leverage in
negotiating a purchase.
Closed A mortgage loan that has a locked-in payment
Mortgage schedule, which does not vary over the life of the
closed term. A buyer who uses a closed mortgage will
likely have to pay the lender a penalty if you fully
repay the loan before the end of the closed term.
Closing Costs, in addition to the purchase price of a home,
Costs such as legal fees, transfer fees, and disbursements,
that are payable on the closing date. Closing costs
typically range from 2%-4% of a home's selling price.
Closing The date on which the sale of a property becomes
CMHC Canada Mortgage and Housing Corporation. A Crown
corporation that administers the National Housing Act
for the federal government and encourages the
improvement of housing and living conditions for all
Canadians. CMHC also creates and sells mortgage loan
Collateral A mortgage that secures a loan by way of a promissory
Mortgage note. The money borrowed can be used to buy a
property or can be used for another purpose, such as a
home renovation or a vacation.
Commitment Written notification from the mortgage lender to the
Letter / borrower that approves the advancement of a specified
Mortgage amount of mortgage funds under specified conditions.
Conditional An Offer to Purchase that is subject to specified
Offer / conditions, for example, the arranging of a mortgage.
Conditions of There is usually a stipulated time limit within which the
Sale specified conditions must be met.
Conventional A mortgage loan up to a maximum of 75% of the
Mortgage lending value of the property. Mortgage loan insurance
is not required for this type of mortgage.
Covenant A clause in a legal document which, in the case of a
mortgage, gives the parties to the mortgage a right or
an obligation. For example, a covenant can impose the
obligation on a borrower to make mortgage payments
in certain amounts on certain dates. A mortgage
document consists of covenants agreed to by the
borrower and the lender.
Conveyancing The transfer of ownership of any property or real estate
from one person to another.
Deed A legal document, which is signed by both the vendor
and the purchaser transferring ownership. This
document is registered as evidence of ownership.
Default Failure to abide by the terms of a mortgage loan
agreement. A failure to make mortgage payments,
defaulting on the loan, may give cause to the mortgage
holder to take legal action to possess (foreclose) the
Deposit A sum of money placed in trust by the purchaser when
an Offer to Purchase is made typically. The real estate
representative or lawyer holds the sum until the sale is
closed, and then it is paid to the vendor.
Discharge A document signed by the lender and given to the
of Mortgage borrower when a mortgage loan has been repaid in full.
Down The portion of the house price the buyer must pay up
payment front from personal resources, before securing a
mortgage. It generally ranges from 5%-25% of the
Easement A right acquired for access to or over, or for the use of,
another person's land for a specific purpose, such as a
driveway or public utilities.
Encumbrance A registered claim for debt against a property, such as a
Equity The difference between the price for which a home could
be sold and the total debts registered against the home.
Equity usually increases as the outstanding principal of
the mortgage is reduced through regular payments.
Market values and improvements to the property also
FHLI First Home Loan Insurance - This is a CMHC product of
particular interest to people looking for their first home. It
allows qualified first-time buyers to purchase a home
with as little as 5% down. In these cases, CMHC will
insure mortgages of up to 95% of the home's purchase
price or the market value of the property, whichever is
less. (Restrictions may apply. Contact your local lender.)
Foreclosure A legal procedure in which the lender gets ownership of
the property if the borrower defaults on the mortgage
Gross Debt The percentage of the borrower's gross income that will
Service be used for monthly payments of principal, interest,
Ratio taxes, heating costs, and half of any condominium
High-Ratio A mortgage loan in excess of 75% of the lending value of
Mortgage / the property. This type of mortgage must be insured - for
Insured example, by CMHC - against payment default.
Holdback An amount of money withheld by the lender during
construction of a house to ensure that construction is
satisfactory at every stage. A standard holdback is 10% of
the total cost of the building project.
Interest The cost of borrowing money for a given period of time.
Interest is usually paid to the lender in installments along
with repayment of the principal loan amount.
Interest A date from which interest on the mortgage advanced is
Adjustment calculated for regular payments. This date is usually one
Date ( IAD ) payment period before regular mortgage payments begin.
Interest due between the date the mortgage is advanced
and the IAD is due on closing.
Interest The rate at which you pay interest to the lender. For
Rate example, when the mortgage balance is $100,000, and the
interest rate is 6 per cent, one single annual payment will
include $6,000 interest. More frequent payments will result
in different amounts.
Lending The purchase price or appraised value of a property,
Value whichever is less.
Loan-to- The ratio of the loan to the lending value of a property
Value expressed as a percentage. For example, the loan-to-value
Ratio ratio of a loan for $25,000 on a home which costs $100,000
Lien A claim against a property for money owing. A lien may be
(Mechanics) filed by a supplier or a subcontractor who has provided
labour or materials but has not been paid. A lien must be
properly filed by a claimant. It has a limited life, prescribed
by statutes that vary from province to province. If the lien
holder takes action within the prescribed time, the
homeowner may be obliged to pay the amount claimed by
the lien holder. Alternatively, the lien holder may force a
sale of the property to pay off the debt.
Maturity The last day of the term of the mortgage agreement. On this
Date day the mortgage loan must be paid in full or the agreement
Mortgage Security for a loan to purchase property. It is the purchaser's
personal guarantee to repay the loan and a pledge of the
property as security for the loan.
Mortgage Insurance to pay off your mortgage in full if you die. Many
Life lenders offer this insurance and add the premium to your
Insurance mortgage payments. However, you may want to compare
rates for equivalent products from an insurance broker.
Mortgage Insurance required by lenders for high-ratio mortgages
Loan (more than 75% of the purchase price). It is available from
Insurance CMHC or a private insurer for a cost of between 0.5% and
3% of the amount of the mortgage.
Mortgage A regularly scheduled payment that is blended to include
Payment both principal and interest.
Mortgagee The lender who provides the mortgage loan.
Mortgagor The borrower who pledges the property as security for the
Net Worth A person's total financial worth, calculated by subtracting
total liabilities from assets.
NHA Insurance required by lenders for high-ratio mortgages
Premium (more than 75% of the purchase price). It is available from
CMHC or a private insurer for a cost of between 0.5% and
3% of the amount of the mortgage. The premium can be
added to your mortgage loan and paid off as part of your
regular mortgage payments, or paid off in a lump sum at
the time of purchase to save interest charges on the
Offer to A written contract setting out the terms under which the
Purchase buyer agrees to buy. If accepted by the seller, it forms a
legally binding contract subject to the terms and conditions
stated in the document.
Open A type of mortgage loan where the borrower can make a
Mortgage partial or full payment of the principal amount at any time,
Option A document stipulating that, in exchange for a deposit, a
Agreement specified individual is to be given the first chance to buy a
property at or within a specified period of time. An option
holder who does not buy at or within the specified period
loses the deposit and the agreement is cancelled.
P.I.T. Principal, Interest, and Taxes - payments due on a regular
basis under the terms of a mortgage agreement. Generally,
payments are made monthly and include one-twelfth of the
estimated annual municipal and school taxes. Since these
taxes change from year to year, this section of the
mortgage will change accordingly.
P.I.T.H. Principal, Interest, Taxes, and Heating - costs used to
calculate the Gross Debt Service ratio (GDS).
Portability An option available on a mortgage that enables the
mortgagor to take their current mortgage loan with them
to another property without penalty.
Pre- When a lender approves the potential mortgagor for a
Approved specified amount, based on how much money the lender
Mortgage is prepared to lend to the borrower. This allows buyers to
shop for homes that they already know they can obtain
financing for and not homes that are potentially too
expensive, or out of the borrowers means to finance.
Prepayment Allows the borrower to make voluntary payments on the
Privileges mortgage loan, in addition to the regular, scheduled
Principal The amount of money borrowed.
Property A toll paid to the provincial and/or municipal
Purchase or government(s) for transferring property to the buyer
Land from the seller.
Realtor® A trademark name for a real estate representative who is
a member of an organization of persons engaged in the
business of buying and selling real estate, such as the
Canadian Real Estate Association.
Refinance To pay off a mortgage or other registered encumbrance
and arrange for a new mortgage, sometimes with a
Regular With this type of mortgage, you pay between 10% and
Mortgage 25% of the cost of the home as a down payment. The
remaining balance is the amount of the mortgage loan
required. A high-ratio mortgage requires mortgage loan
insurance. CMHC offers it for a premium of 0.5%-3% of
the mortgage amount. This fee can be added to your
mortgage payments or paid in full on closing.
Renewal At the end of a mortgage term, the borrower
re-negotiates the loan for a new term.
Second An additional mortgage on a property that already has a
Seller's More buyers are looking for homes than there are homes
Market for sale. There is a smaller inventory of homes available
for sale and many buyers looking to purchase. House
prices generally increase and homes sell quickly.
Strata or A payment made by all owners of condominiums or
Condo within a particular complex that is allocated to pay
Fee expenses such as maintenance, repairs and management
Statement of A balance sheet statement that indicates credits to the
Adjustment(s) vendor - for example, the purchase price - and any
prepaid taxes and credits to the buyer, such as the
deposit, and the balance due on closing.
Survey A document that illustrates the property boundaries and
measurements, specifies the location of buildings on the
property, and indicates any easements or
Term The length of time during which a mortgagor pays a
specific interest rate on the mortgage loan. The entire
mortgage principal is usually not paid off at the end of
the term because the amortization period is normally
longer than the term.
Title Legal possession. A freehold title gives the holder
(freehold or of land and buildings for an indefinite period of time. A
leasehold) leasehold title gives the holder a right to use and occupy
land and buildings for a defined period of time. In a
leasehold arrangement, actual ownership of the land,
sometimes along with the buildings, remains with the
Total Debt The percentage of gross annual income required to cover
Service all payments for housing and all other debts, such as car
Ratio ( TDS ) payments.
Variable-rate A type of mortgage with fixed payments but fluctuating
Mortgage interest rates. The change in current interest rates doesn't
alter the amount of the mortgage payment, but
determines how much of each payment is applied against
the principal amount and how much goes to pay interest
to the lender.
Vendor Mortgage financing arranged between the seller of the
Take-Back property and the buyer. Often this type of loan is a
Mortgage second mortgage, which the seller is willing to arrange at
below market rates to allow the buyer to purchase the
house. Most of these arrangements are not renewable or
transferable to the next owner of the house.
Zoning Municipal or regional laws that specify or restrict land use.