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When the condition of ownership for a property becomes a burden or is troublesome to the owner, he or she may choose to become a nonpayer and abandon the property. In the event of “abandonment,” creditors can seek to recover their money as the property is no longer part of the estate.
Mortgage payments that are made every two weeks (the date of which won’t always fall on the first day of a month). If you choose accelerated bi-weekly payments, you will make 26 payments a year.
Accredited Mortgage Professional (or AMP) is a professional designation created the by Canadian Association of Accredited Mortgage Professionals. It essentially a designation that demonstrates commitment to ongoing education and ethical behavior in the mortgage industry.
Also known as an ARM, this is a mortgage where the payments change and the interest rate is periodically adjusted based on an index (in Canada, the index is the prime lending rate).
The date that the interest rate changes on an adjustable rate mortgage.
The number of years it will take to pay down the principal balance of your mortgage. The most common amortization period is 25 years, however you can choose an amortization period of up to 35 years.
A report prepared by a real estate appraiser that estimates the value of a home and states features/properties of the home. Lenders generally require appraisals to verify that the buyer has purchased the home for a fair market price, to determine what the market rents are for the home, to ensure that the home meets the lender’s standards, to determine how much equity the home owner has in the home, etc.
The estimated value of a home as determined by a real estate appraiser.
A document filed with the Government of Alberta by a corporation’s founders describing the purpose, place of business, and other details of the corporation (such as its name). These will frequently include a certificate of incorporation as well.
Something that you own that has value or use. Example: RRSPs, vehicle, savings, home, etc.
Also known as interim financing, a bridge loan is a second mortgage that is paid of immediately following the closing date of the buyer’s current home. Bridge financing is typically used when the sale of the buyer’s current home closes after the purchase of his or her new home closes.
A mortgage that, for a specified term, locks you into paying the mortgage for that period of time. It also locks in a mortgage rate, which doesn’t increase/decrease if rates do. Generally, if you break a closed mortgage, you will be required to pay three months’ interest payments as a penalty. The most common term for a closed mortgage is five years.
These are costs that are associated with completing the mortgage transaction. Some closing costs could be lawyer fees, title insurance, appraisal fees, fire insurance and home inspection fees.
The date on which the buyer(s) and seller(s) meet, and the property and funds legally change hands.
A security or guarantee pledged for the repayment of a loan if an individual does not have enough funds to repay. In respect to mortgage loans, the collateral is the property being mortgaged.
The number of times per year that the interest rate is compounded. In Canada, mortgage interest rates are compounded semi-annually, or twice per year.
If living in a condominium, the monthly fee that is charged to maintain common areas and any other maintenance costs involved with the property.
A mortgage loan that is up to 80% of the home’s appraised value or purchase price (whichever is less).
A credit reporting agency that gathers credit information and compiles it into a credit report. The two credit bureaus in Canada are Equifax Canada and Trans Union of Canada.
A credit report is a report/history of an individual’s credit. To read more about credit reports and how to understand them, please click here.
Failure to pay a debt as agreed. In respect to mortgages, failure to pay mortgage payments.
The amount of cash that the buyer can initially invest in the property. The down payment is the difference between the purchase price and the value of the mortgage loan.
The value of the property beyond any amounts being owed, therefore the difference between the price that a home could be sold for and the amount still owing on any mortgages.
The mortgage whose holder has the first place claim on assets in the event of default.
A mortgage for which the interest rate has been fixed for a certain period of time (generally the length of a mortgage term).
The legal process in which the mortgage lender sells the mortgaged property because the borrower has defaulted on his or her mortgage loan.
GDS stands for Gross Debt Service. This is the percentage of annual gross income that is required to cover mortgage principal payments, mortgage interest payments, property taxes, and heat payments. If the property is a condominium, condo fees will also be worked into this ratio.
This is a letter stating that the gift giver (an immediate family member) in making a gift of a certain amount to the gift receiver for the down payment of a home. It also states that the gift is genuine and that the gift receiver (or home buyer) is not required to pay back the gift at any time.
A mortgage that is more than 80% of the home’s appraised value or purchase price (whichever is less). High-ratio mortgages must be insured to protect the lender against default.
A document that is proof that you have home insurance on the property being mortgaged. For a purchase, this is required when all final documentation is signed at the lawyer’s. For a refinance or Smith Manoeuvre, this is documentation that is required to be provided to the brokerage before the mortgage is instructed.
The percentage of the mortgage loan charged by the lender for use of the lender’s money. In Canada, this mortgage rate is compounded semi-annually, or twice per year.
Also known as a bridge, a interim financing is a second mortgage that is paid of immediately following the closing date of the buyer’s current home. Interim financing is typically used when the sale of the buyer’s current home closes after the purchase of his or her new home closes.
A letter from your employer stating your length of employment, guaranteed number of hours worked per week, and income amount.
A fee paid to the municipal and/or provincial government for the transferring of property from seller to buyer.
A financial obligation of an individual, such as credit card debt, car payments, mortgage payments, etc.
A Licensed Mortgage Associate is the most common person within a brokerage to deal with clients. A Mortgage Associate will take clients’ applications on behalf of the brokerage, and walk them through the mortgage process.
A claim against a property to secure the payment of a debt or other obligation.
A borrowed amount of money that is generally repaid in full as well as with a certain amount of interest.
The ratio of the value of the mortgage loan to the appraised value or purchase price of the property (whichever is less). For example, if someone purchased a home for $100,000 and had $20,000 as a down payment, the mortgage would be $80,000, or 80% of the value of the home (therefore an 80% LTV).
The highest price a buyer would pay and the lowest price a seller would accept on a property. Market value could differ from the price that the property could be sold for at a given time.
The date that your mortgage term ends. At this point, you can either pay off your mortgage or renew it.
To pledge a property to a lender as security on a loan.
Please see amortization period.
A mortgage brokerage must employ a mortgage Broker to oversee the brokerage employees. Generally Brokers are responsible for the management role within the brokerage. They are also responsible for ensuring that the brokerage complies with the Real Estate Act. An individual must be a Licensed Mortgage Associate for two years before being eligible to become a Broker.
A mortgage brokerage is a legal identity licensed to trade in mortgages. Mortgage Brokers and Licensed Mortgage Associates must be licensed under a brokerage.
This is insurance that is required for high-ratio mortgages. It protects the lender in the event that a borrower defaults on a mortgage. The three mortgage insurers in Canada are CMHC (Canadian Mortgage and Housing Corporation), Genworth, and AIG. Prior to the creation of CMHC, Canadians could not purchase a home without a 25% down payment.
This is insurance that pays off the mortgage in the event of death or disability. To read more about mortgage life insurance, please click here.
A statement received from your mortgage lender that includes such information as property address, outstanding principal balance, monthly payment, interest rate, mortgage term, etc.
The party that advances the funds for a mortgage loan; the lender.
The party that uses their home as a security for a mortgage; the borrower.
This is also known as an NOA. It is the summary form that Revenue Canada sends you after your income tax has been filed. It specifies what you claimed on your taxes last year, as well as the amount of taxes you owe, or the amount of money that you will be received as a tax refund.
This is a mortgage with no term, which means that you can pay off your mortgage either fully or partially at any time with no penalty. Open mortgage rates are usually higher than closed mortgage rates.
Usually a document you receive from your employer on your pay day stating, for that pay period, your gross earnings, the amount of CPP payments deducted, the amount of EI payments deducted, the amount of income income taxes deducted, net income, etc. Your pay stub should also state the year to date amounts of all the aforementioned income and payments.
A feature of a mortgage that allows the borrower to “port” their mortgage to a new property if they move before his or her mortgage term is up (with no penalty).
A pre-approved mortgage qualifies you for a loan amount before you start looking for houses. It also acts as a rate hold, guaranteeing you today’s interest rates until up to 120 days in the future.
If you “break” (or pay off) your mortgage before your term is up, you’ll have to pay a prepayment penalty. The penalty is generally three months’ interest payments.
Some mortgages allow you prepayment privileges. Examples of these are doubling up payments, paying off a certain percentage of your mortgage principal a year, or increasing your monthly mortgage payments by a certain percentage.
The amount of money borrowed or still owing on a mortgage.
The document from the city you live in stating the amount of annual property taxes you owe.
A legally binding document stating your (the buyer’s) intention to purchase a home from the seller provided that certain conditions be met (such as condition of financing, condition of a home inspection, etc.)
A person who is authorized to act as an agent for the sale of real estate on behalf of the property owner.
A real estate agent who is a member of a local real estate board, the Canadian Real Estate Association and a provincial association.
Paying off the existing mortgage and arranging a new one with a different lender, or re-negotiating a new term, interest rate, etc. of an existing mortgage.
The re-negotiation of the terms, interest rates, etc. of a mortgage at the end of the term.
A legally binding document stating the seller’s intention to sell their home to you (the buyer) provided that certain conditions be met (such as condition of financing, condition of a home inspection, etc.)
The mortgage whose holder has the second place claim on assets in the event of default.
The property that will be pledged as collateral for a loan.
Mortgage payments that are made on the first and fifteenth of the month, amounting to 24 payments per year.
Equity created by a purchaser or homeowner by performing work on a property being purchased or refinanced.
TDS stands for Total Debt Service. This is the percentage of annual gross income that is required to cover mortgage principal payments, mortgage interest payments, property taxes, and heat payments, plus monthly payments of any other debt the borrower holds. If the property is a condominium, condo fees will also be worked into this ratio.
The length of time the interest rate is fixed. The end of the term is also the time when the borrower must either pay the outstanding mortgage balance, or re-negotiate a new mortgage with the lender. If the borrower pays of his or her mortgage before the term is up, prepayment penalties may apply.
The mortgage whose holder has the third place claim on assets in the event of default.
Legal ownership in a property.
Insurance that protects the owner or mortgagee of the property from any lawsuits or claims arising from a defective title.
The process of deciding whether or not to provide a mortgage loan to a home buyer based on credit, employment, assets and other factors. This is also the matching of the home buyer to a mortgage lender, mortgage product, interest rate, mortgage term, etc.
A mortgage that has fixed payments, but whose principal portion of the payment fluctuates with interest rate changes. Variable rate mortgages generally fluctuate in respect to the prime lending rate. For example, Prime Rate minus 0.09%.
A personal, pre-printed cheque with “void” written across is. This is provided to the lender for the account your mortgage payments will be coming out of, as proof that the account is, indeed, yours.
