Mortgage Glossary
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- Adjustment Date
- The date that is regarded as the official beginning of a mortgage.
- Amortization Period
- A time of arrangement for paying off a mortgage by equal installments of periodic constant payments. Repayments are of principal and interest in blended amounts.
- ARM
- Adjustable rate mortgage. The interest rate fluctuates with the prime interest rate.
- Appraisal
- An estimate of the market value of a property.
- APR
- The annual percentage rate is an interest rate that is different from the mortgage rate. It is commonly used to compare loan programs from different lenders and does not affect you monthly mortgage payments.
- Assumption of Mortgage
- A legal document signed by a home owner that allows the home buyer to assume responsibility for the obligation for the former owner's mortgage.
- Blended payments
- Equal payments consisting of both a principal and an interest component, paid each month during the term of the mortgage. Each month, the principal portion increases while the interest portion decreases, but the total monthly payment does not change.
- Closed Mortgage
- A mortgage agreement which does not provide for prepayment, renegotiation or refinancing prior to maturity without some form of prepayment penalty.
- CMHC
- Canada Mortgage and Housing Corporation is a Crown Corporation which administers the National Housing Act and provides mortgage insurance for high ratio mortgages.
- Conventional Mortgage
- A first mortgage loan which does not exceed 75% of the purchase price or appraised value (whichever is less).
- Conveyance
- Transfer of ownership to the property at Land Titles Office from the vendors name to the purchaser's name.
- Equity
- The remaining interest or equity an owner has in real property excluding above the amount of any mortgage.
- First Mortgage
- A first charge on property which ranks ahead of any other subsequent mortgages or encumbrances.
- Genworth Insurance
- Formerly GE Mortgage Insurance Canada. The largest private sector mortgage insurance company in the world providing mortgage insurance to lenders to grant high ratio mortgages.
- Gross Debt-Service Ratio (GDSR)
- The percentage of the borrower's gross income that will be used for monthly payments of principal, interest, taxes, heating costs and 50% of the condominium fees, when applicable. Generally this ratio should not exceed 32%.
- High Ratio Mortgage
- A mortgage that exceeds 75% of the value of the property.
- Interest
- The rate of charge (or cost) of borrowing money.
- Interest Adjustment Date
- A date usually one month prior to the first regularly scheduled mortgage payment date from which interest is calculated for monies advanced previous to that date.
- Leasehold Mortgage
- A mortgage on a property which is on land leases as opposed to freehold.
- LIRA
- Locked-in Retirement Savings Plan Account
- Loan to Value (LTV)
- The ratio, expressed as a percentage, of the mortgage to the appraised value or purchase price (which ever is less.)
- Market Value
- The highest price estimated in terms of money which a property will bring if exposed for sale in the open market.
- Mortgage Agent
- An intermediary who matches the needs of a borrower with the requirements of a lender on behalf of a brokerage.
- Mortgage Insurance Premium
- A premium 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 the default by the borrower.
- Mortgagee
- The lender.
- Mortgagor
- The borrower.
- Maturity Date
- When the balance of the mortgage is due and payable.
- Offer to Purchase
- A formal legal document which offers a specific price for a specified real property. The offer may be firm (with no conditions) or conditional (with certain conditions yet to be fulfilled.)
- Open Mortgage
- A mortgage that permits prepayment in whole or in part of the principal balance without notice or bonus.
- Penalty
- A sum of money paid to a lender for the privilege of prepaying a mortgage in part or in
- full.
- PI (Principal and Interest)
- The principal and interest due on a mortgage.
- PIT (Principal, Interest and Taxes)
- The principal, interest and taxes due on a mortgage.
- Prepayment Option
- The right to prepay specified amounts of the principal balance. Penalty interest may be incurred on prepayment options.
- Principal
- The amount of money borrowed. The amount owing to the lender at any time during the amortization period.
- Qualifying
- The process of qualifying the borrower and/or lender to ensure they respectfully have the financial ability and inclination to undertake the mortgage.
- Rate (Interest)
- The return the lender receives for loaning the money for the mortgage.
- Real Estate / Real Property
- Land, buildings and other fixed improvements.
- Second Mortgage
- A mortgage placed on a property on top of an existing first mortgage.
- Term
- The length of time for which money is borrowed.
- Total Debt-Service ratio (TDSR)
- The total cost of housing payments plus all other installment payments divided by the family's total gross income. Generally this ratio should not exceed 40%.
- Underwriting Fees
- A sum of money collected by some lenders to offset expenses incurred in the lending transaction.
- Variable Rate Mortgage
- A mortgage loan for which payments can be fixed for one to five years but the rate of interest could change monthly with market conditions.
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