A
Agreement of Purchase and Sale
The legal contract by which one party agrees to sell and another agrees to purchase.. Its recomended that the offer must be prepared by a professional realtor that has the knowledge and experience to satisfactorily protect you with the most suitable clauses and conditions.
Amortization Period
The gradual repayment of a debt by means of partial payments on the principal at regular intervals. The amortization period is the time required to repay the debt completely.
Appraisal
The process by which the value of the property is determined .
Assets
What you own or can call upon. Often used in determining net worth or in securing financing.
Assumption Agreement
A legal document signed by a buyer that requires the buyer assume responsibility for the obligations of an existing mortgage. If someone assumes your mortgage, make sure that you get a release from the mortgage company to ensure that you are no longer liable for the debt.
Acceleration
The right of the mortgagee (lender) to demand the immediate repayment of the mortgage loan balance upon the default of the mortgagor (borrower), or by using the right vested in the Due-on-Sale Clause.
Adjustable rate mortgage (ARM)
Is a mortgage in which the interest rate is adjusted periodically based on a pre-selected index. Also sometimes known as the renegotiable rate mortgage, the variable rate mortgage or the Canadian rollover mortgage.
Adjustment Date
The date that the interest rate changes on an adjustable-rate mortgage (ARM).
Adjustment interval
On an adjustable rate mortgage, the time between changes in the interest rate and/or monthly payment, typically one, three or five years depending on the index.
Adjustment Period
The period elapsing between adjustment dates for an adjustable-rate mortgage (ARM).
Affordability Analysis
An analysis of a buyers ability to afford the purchase of a home. Reviews income, liabilities, and available funds, and considers the type of mortgage you plan to use, the area where you want to purchase a home, and the closing costs that are likely.
Amortization
Means loan payment by equal periodic payment calculated to pay off the debt at the end of a fixed period, including accrued interest on the outstanding balance.
Annual percentage rate (A.P.R.)
APR is a measurement of the full cost of a loan including interest and loan fees expressed as a yearly percentage rate. Because all lenders apply the same rules in calculating the annual percentage rate, it provides consumers with a good basis for comparing the cost of loans.
Appraised Value
An opinion of a property's fair market value, based on an appraiser's knowledge, experience, and analysis of the property.
Assessment
A local tax levied against a property for a specific purpose, such as a sewer or street lights.
Assignment
The transfer of a mortgage from one person to another.
Assumability
An assumable mortgage can be transferred from the seller to the new buyer. Generally requires a credit review of the new borrower and lenders may charge a fee for the assumption. If a mortgage contains a due-on-sale clause, it may not be assumed by a new buyer.
Assumption Fee
The fee paid to a lender (usually by the purchaser of real property) when an assumption takes place. 
B
Blended Payments
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.
Bridge Financing
Interim financing to bridge between the closing date on the purchase of the new home and the closing date on the sale of the current home.
Broker
An intermediary between the buyer and seller who is licensed to carry out such activities.
Building Permit
A certificate that must be obtained from the municipality by the property owner or contractor before a building can be erected or renovated.
Balloon Mortgage
A loan which is amortized for a longer period than the term of the loan. Usually this refers to a thirty-year amortization and a five year term. At the end of the term of the loan, the remaining outstanding principal on the loan is due. This final payment is known as a balloon payment.
Balloon Payment
The final lump sum paid at the maturity date of a balloon mortgage.
Biweekly Payment Mortgage
A plan to reduce the debt every two weeks (instead of the standard monthly payment schedule). The 26 (or possibly 27) biweekly payments are each equal to one-half of the monthly payment required if the loan were a standard 30-year fixed-rate mortgage. The result for the borrower is a substantial savings in interest.
Blanket Mortgage
A mortgage covering at least two pieces of real estate as security for the same mortgage.
Borrower (Mortgagor)
One who applies for and receives a loan in the form of a mortgage with the intention of repaying the loan in full.
Buy-down
When the lender and/or the home builder subsidized the mortgage by lowering the interest rate during the first few years of the loan. While the payments are initially low, they will increase when the subsidy expires.
C
Commitment
A notice from a mortgage lender to a prospective borrower that the lender will advance mortgage funds of a specified amount under certain conditions.
Condition
A clause in a contract that calls for the happening of some event, or performance of some act before the agreement becomes binding.
Conditional Offer
An offer to purchase subject to specified conditions. These conditions could be the arranging of a mortgage, or the selling of a present home. Usually a time limit in which the specified conditions must be met is stipulated.
Canada Mortgage and Housing Corporation (CMHC)
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 75% of the purchase price or value of the home. The cost of that insurance is paid for by the borrower and is generally added to the mortgage amount. These mortgages are often referred to as "Hi-Ratio" mortgages.
Convertible Mortgage
A short term mortgage usually six or twelve months, allowing the borrower to switch into a longer term at any time without penalty.
Closed Mortgage
A mortgage that cannot be prepaid or renegotiated.
Closing Date
The date on which the new owner takes possession of the property and the sale becomes final.
Conventional Mortgage
A mortgage up to 75% of the purchase price or the value of the property. For which a lender does not require loan insurance.
Collateral
An asset, such as term deposit, Canada Savings Bond, or automobile, that you offer as security for a loan.
Credit Scoring
A system that assesses a borrower on a number of items, assigning points that are used to determine the borrower's credit worthiness.
Cash Flow
The amount of cash derived over a certain period of time from an income-producing property. The cash flow should be large enough to pay the expenses of the income producing property (mortgage payment, maintenance, utilities, etc.)
Closing Costs
These are expenses - over and above the price of the property- that are incurred by buyers and sellers when transferring ownership of a property. Closing costs normally include an origination fee, property taxes, charges for title insurance and escrow costs, appraisal fees, etc. Closing costs will vary according to the area country and the lenders used.
Construction loan
A short term interim loan to pay for the construction of buildings or homes. These are usually designed to provide periodic disbursements to the builder as he or she progresses.
Consumer Reporting Agency (or Bureau)
An organization that handles the preparation of reports used by lenders to determine a potential borrower's credit history. The agency gets data for these reports from a credit repository and from other sources.
Credit Report
A report documenting the credit history and current status of a borrower's credit standing.
D
Debt-to-Income Ratio
The ratio, expressed as a percentage, which results when a borrower's monthly payment obligation on long-term debts is divided by his or her gross monthly income. See housing expenses-to-income ratio.
Deed of trust
In many states, this document is used in place of a mortgage to secure the payment of a note.
Deferred interest
When a mortgage is written with a monthly payment that is less than required to satisfy the note rate, the unpaid interest is deferred by adding it to the loan balance. See negative amortization.
Delinquency
Failure to make payments on time. This can lead to foreclosure.
Down Payment
Money paid to make up the difference between the purchase price and the mortgage amount.
Default
Non-payment of installments due under the terms of the mortgage.
Discharge
The removal of all mortgages and financial encumbrances on the property.
Demand Loan
A loan where the balance must be repaid upon request.
Deposit
A sum of money deposited in trust by the purchaser on making an offer to purchaseas a pledge for fulfillment of the contract.. When the offer is accepted by the vendor (seller), the deposit is held in trust by the listing broker or lawyer 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 forgoes the deposit, and it is given to the vendor as compensation for the breaking of the contract (the offer).
E
Equity
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.
Easement
The right acquired for access to or over another person’s land for a specific purpose, such as for a driveway or public utilities. This is referred to as a “servitude” in the Province of Quebec.
F
First Mortgage
A debt registered against a property that has first call on that property.
Fixed-Rate Mortgage
A mortgage for which the interest is set for the term of the mortgage.
Fixed Installment
The monthly payment due on a mortgage loan including payment of both principal and interest.
Fully Amortized ARM
An adjustable-rate mortgage (ARM) with a monthly payment that is sufficient to amortize the remaining balance, at the interest accrual rate, over the amortization term.
Foreclosure
A legal process by which the lender or the seller forces a sale of a mortgaged property because the borrower has not met the terms of the mortgage. Also known as a repossession of property.
G
Graduated Payment Mortgage (GPM)
A type of flexible-payment mortgage where the payments increase for a specified period of time and then level off. This type of mortgage has negative amortization built into it.
Guaranty
A promise by one party to pay a debt or perform an obligation contracted by another if the original party fails to pay or perform according to a contract.
Guarantee Mortgage
A mortgage that is guaranteed by a third party.
Gross Debt Service (GDS.) Ratio
Gross Debt Service Ratio is a primary calculation used by lenders and mortgage insurer to determine an applicant's ability to service their respective mortgage request and their capacity to repay a mortgage. It takes into account the mortgage payments, property taxes, approximate heating costs, and 50% of any maintenance fees, and this sum is then divided by the gross income of the applicants. Ratios up to 32 % are acceptable.
Guarantor
A person with an established credit rating and sufficient earnings who guarantees to repay the loan for the borrower if the borrower does not.
H
Hi-Ratio Mortgage
Loan that exceeds 75% of the purchase price or appraised value of the property. This type of mortgage must be insured through a mortgage insurance plan.
Hold-back
An amount of money withheld by the lender during the progress of construction of a house to ensure that construction is satisfactory at every stage. The amount of hold-back is generally equivalent to the estimated cost to complete construction.
Home Equity Line of Credit
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
Insured Mortgage
A mortgage that is protected by the Federal Housing Administration (FHA) or by private mortgage insurance (MI).
Interest Accrual Rate
The percentage rate at which interest accrues on the mortgage. In most cases, it is also the rate used to calculate the monthly payments.
Interest Rate Buydown Plan
An arrangement that allows the property seller to deposit money to an account. That money is then released each month to reduce the mortgagor's monthly payments during the early years of a mortgage.
Interim Financing
A construction loan made during completion of a building or a project. A permanent loan usually replaces this loan after completion.
Investor
A money source for a lender.
Interest Adjustment Date (IAD)
The date on which the mortgage term will begin. This date is usually the first day of the month following the closing. The interest cost for those days from the closing date to the first of the month are usually paid at closing. That is why it is always better to close your deal towards the end of the month.
Interest-Only Mortgage
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
Late Charge
The penalty a borrower must pay when a payment is made a stated number of days (usually 15) after the due date.
Lease-Purchase Mortgage Loan
An alternative financing option that allows low- and moderate-income home buyers to lease a home with an option to buy. Each month's rent payment consists of principal, interest, taxes and insurance (PITI) payments on the first mortgage plus an extra amount that accumulates in a savings account for a down payment.
Liabilities
A person's financial obligations. Liabilities include long-term and short-term debt.
Lien
A claim upon a piece of property for the payment or satisfaction of a debt or obligation.
Loan
A sum of borrowed money (principal) that is generally repaid with interest.
Loan-to-Value Ratio
The relationship between the amount of the mortgage loan and the appraised value of the property expressed as a percentage.
LTT
Land Transfer Tax Refund Program.
M
Mortgage Insurance Premium
A premium which is added to the mortgage and paid by the borrower over the life of the mortgage. The mortgage insurance insures the lender against loss in case of default on the part of the borrower.
Mortgage Life Insurance
A form of reducing term insurance available for all mortgagors. In the event of a death of the owner or one of the owners, the insurance pays the balance owing on the mortgage. The intent is to protect survivors from losing their home.
Mortgage Loan Insurance (High Ratio)
High ratio mortgages must be insured through CMHC (Canada Mortgage and Housing Corporation) or GENCOR (G.E. Capital Corporation). These Insurers guarantee the risk of lending to home buyers who need a high ratio mortgage. An insurance premium is paid by the borrower on behalf of the lender. The insurance premium that is paid to CMHC is to protect the lender in the event that the mortgage is not paid. This is not life, disability, or job loss insurance. The insurance premium is calculated as a percentage of the mortgage amount, depending on the loan to value, and may be added to the mortgage amount. The premiums are as follows:
Loan to Value Premium
0 - 65% 0.50%
65.1 - 75% 0.65%
75.1 - 80% 1.00%
80.1 - 85% 1.75%
85.1 - 90% 2.00%
90.1 - 95% 3.25%
Other high ratio financing costs include an appraisal of $235.00 plus 8% PST on the insurance premium.
Mortgage Term
The actual length of time money is loaned at the contractual rate of interest. Terms range from three months to twenty five years. Traditionaly the longer the term the higher the rate.
Mortgage
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.
Mortgagee
The financial institution or person (lender) who is lending the money
Mortgagor
The person who borrows the money using their house as a security.
N
Negative Amortization
Occurs when your monthly payments are not large enough to pay all the interest due on the loan. This unpaid interest is added to the unpaid balance of the loan. The danger of negative amortization is that the home buyer ends up owing more than the original amount of the loan.
O
Open Mortgage
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.
OHOSP
Ontario Home Ownership Plan.
Offer to Purchase
A written contract setting forth the terms under which a buyer agrees to purchase a property. Upon acceptance by the seller, it forms a contract, which will form the basis for the final document to be prepared by a lawyer or notary. It includes the legal and/or municipal description (this may consist of lot numbers as well as street address), purchase price, closing date, mortgage and terms of repayment, and lists specific items included as part of the sale..
P
P.I.T.
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.
Portable Mortgage
An existing mortgage that can be transferred to a new property. One would want to port their mortgage in order to avoid any penalties, or if the interest rate is much lower than the current rates.
Prime
The lowest rate a financial institution charges its best customers.
Prepayment Penalty
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.
Principal
The original amount of a loan owing to the lender at any time before interest.
Penalty
A sum of money paid to a lender for the privilege of prepaying a mortgage in part or in full.
Power of Sale
The right of a mortgagee to force the sale of the property without judicial proceedings should default occur.
Prepayment Option
The right to prepay a specified amount of the principal balance. Penalty interest may be incurred on prepayment options.
Prepayment
Full or partial payment of all or part of the principal, separate from the regular payments called for under a mortgage agreement.
Purchase Plus Plan
The Purchase Plus Plan lets you add the cost of improvements to your home onto your mortgage.
Power of Attorney
A legal document authorizing one person to act on behalf of another.
Pre-Approval
The process of determining how much money you will be eligible to borrow before you apply for a loan.
Prepaid Expenses
Necessary to create an escrow account or to adjust the seller's existing escrow account. Can include taxes, hazard insurance, private mortgage insurance and special assessments.
R
Rate Lock
A commitment issued by a lender to a borrower or other mortgage originator guaranteeing a specified interest rate and lender costs for a specified period of time.
Realtor®
A real estate broker or an associate holding active membership in a local real estate board affiliated with the National Association of Realtors.
Real Estate Agent
A person licensed to negotiate and transact the sale of real estate on behalf of the property owner.
Rate Commitment
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.
Renewal
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).
Rate (interest)
The return the lender receives for loaning you the money for the mortgage.
Real Estate
Includes real property, leasehold and business whether with or without premises, fixtures, stock in trade, good of chattels in connection with the operation of the business.
Roll-Over Mortgage
A mortgage loan where the interest rate is established for a specific term. At the end of this term, the mortgage is said to "roll-over" and the borrower and lender may agree to extend the loan. If satisfactory terms cannot be agreed upon, the lender is entitled to be repaid in full. In this case, the borrower may seek alternative financing.
S
Survey
The accurate mathematical measurement of land and building there on.
Second Mortgage
A debt registered against a property that is secured by a second charge on the property.
Switch
To transfer an existing mortgage from one financial institution to another. We can have this arranged for you at no cost to you..
T
Term
The period of time the financing agreement covers. The terms available are: 6 month, 1,2,3,4,5,6,7,10 year terms, and the interest rates will be fixed for whatever term once chooses.
Total Debt Service (TDS) Ratio
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.
Title
Evidence of ownership.
V
Variable-Rate Mortgage
A mortgage for which the interest rate fluctuates based on changes in prime.
Vendor Take Back (VTB) mortgage
A mortgage provided by the vendor (seller) to the buyer in order to sell the property.
Z
Zoning Laws
Municipal laws restricting the use of land for special purposes.
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