GLOSSARY

Accelerated Mortgage Payment
A payment that has been increased from its original amount, irrelevant of the payment's frequency. Since the payment increment is applied directly against the principal of the mortgage, the accelerated payment automatically shortens the amortization of the mortgage.

Accredited Mortgage Professional (AMP)
A professional designation created the by Canadian Association of Accredited Mortgage Professionals (CAAMP). It is essentially a designation that demonstrates commitment to ongoing education and ethical behavior in the mortgage industry.

Accrued Interest
The interest that has accumulated since the last regular mortgage payment.

Adjustable Rate Mortgage
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).

Agreement of Purchase and Sale
A legal agreement between seller and buyer that offers a certain price for a home. The offer may be firm (no conditions attached), or conditional (certain conditions must be fulfilled before the deal can be closed).

Amortization Period
The period of time over which equal payments would pay off the mortgage in full.

Appraisal
A report prepared by a real estate appraiser that estimates the value of a home and states features/properties of the home. This value may or may not be the same as the purchase price of the home.

Arrears
An overdue payment.

Assumable Mortgage
A mortgage that can be taken over ("assumed") by the buyer when a home is sold, without changing the terms of the original mortgage.

Blanket Mortgage
A single mortgage registered against two or more individual parcels of real property.

Bridge Loan
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.

Canada Guaranty Mortgage Insurance Company (Canada Guaranty)
Canada Guaranty is a 100% Canadian-owned private mortgage insurer, and is supported by the leading financial strength and diversification of its ownership group, comprised of the Ontario Teachers' Pension Plan and National Mortgage Guaranty Holdings Inc.

Canada Mortgage and Housing Corporation (CMHC)
A federal Crown corporation that administers the National Housing Act. CMHC's services include providing housing information and assistance to consumers and providing mortgage default insurance for high ratio mortgages.

Capped Rate Variable Mortgage
A variable rate mortgage on which the lender has set a limit to interest rate increases or decreases.

Carrying Costs
The expenses of living in and maintaining a home and property. This includes mortgage payments, property taxes, heating, repairs, maintenance fees, etc.

Cash Back
A mortgage feature that provides the borrower with cash back, as a percentage of the mortgage principal. This feature is typically offset with a premium on the interest rate.

Charge
The name given to a mortgage document when title is registered under the Land Titles System.

Closed Mortgage
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 change if rates do. Generally, if you break a closed mortgage, you will be required to pay a penalty, which is equivalent to three months' worth of interest or Interest Rate Differential, whichever is higher.

Closing Date
The date on which the property purchase will complete and money will change hands between the buyer and the seller.

Closing Costs
Various 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.

Collateral
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.

Commitment Letter
A written notification from the lender to the borrower that approves the mortgage request, which includes the amount of the mortgage, interest rate, payment and all terms and conditions. When signed by a borrower, this notification becomes a binding contract.

Compound Period
The number of times per year that the interest rate is compounded. In Canada, fixed mortgage interest rates are typically compounded twice per year, while variable mortgage could be compounded as frequently as monthly.

Conditional Offer
An offer to purchase subject to conditions. These conditions may relate to financing, inspection, or the sale of an existing home. Usually a time limit in which the specified conditions must be satisfied is stipulated.

Condo Status Certificate
A report on the current status of a condominium corporation. It provides information on arrears or increases in common expenses, the amount of the reserve fund, any claims against the corporation, or similar.

Conventional Mortgage
A mortgage that does not exceed 80% of the purchase price of the home.

Convertible Mortgage
A mortgage that may be converted to another term at any time, subject to certain conditions.

Credit Bureau
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.

Credit Report
A credit report is a report/history of an individual's credit.

Credit Score
A credit score is a grade given to your credit situation and credit history.

Debt Consolidation
Debt consolidation is a means of combining several debts into one debt that has one monthly payment.

Debt-Service Ratio
The percentage of the borrower's gross income used for the payment of principal, interest, taxes, heating, and where applicable, 50% of condominium fees.

Default
A failure to make regular mortgage payments as agreed, or to meet certain other terms of a mortgage agreement.

Deposit
A sum of money deposited by the purchaser when making an offer to purchase a property. The deposit is held in trust by the vendor's agent, broker, lawyer or notary until the closing of the transaction.

Discharge of Mortgage/Charge
A legal document executed by the lender, and given to the borrower when a mortgage has been repaid in full, releasing him or her from all obligations and covenants contained in the mortgage.

Disclosure Statement
A written statement disclosing information about a specific loan and potential conflicts of interest required under various consumer protection acts.

Down Payment
The amount of cash paid towards the purchase transaction by the buyer of a home.

Equity
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.

Equity Loan
A loan secured by real estate.

Fair Market Value
The price a ready, willing and able buyer, with knowledge of all pertinent facts, is willing to pay for a certain piece of property.

Firm Offer
An offer to buy the property as outlined in the offer to purchase with no conditions attached.

First Mortgage
The mortgage whose holder has the first place claim on assets in the event of default.

Fixed-Rate Mortgage
A mortgage for which the interest rate has been fixed for a certain period of time (generally the length of a mortgage term).

Foreclosure
A legal procedure whereby the mortgage lender sells the mortgaged property because the borrower has defaulted on his or her mortgage loan.

Genworth Canada
A private provider of mortgage default insurance in Canada.

Gift Letter
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.

Gross Debt Service Ratio (GDS)
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, 50% of condo fees will also be worked into this ratio.

Guarantor
One who promises to pay a debt or perform an obligation contracted by another in the event the original borrower fails to pay or to perform as contracted.

HELOC
A HELOC is an acronym standing for Home Equity Line of Credit.

High Ratio Mortgage
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.

Holdback
An amount of money required to be withheld by the lender during the construction or renovation of a house to ensure that construction is satisfactorily completed at every stage.

Home Insurance
Home insurance provides payment to the homeowner in the event of loss due to fire, theft, or damage through certain natural elements such as hail, tornado, lightning and flooding.

Home Insurance Policy
A home insurance policy is an insurance policy covering your physical home in the event of fire or other casualty, the contents of the home and other losses you may suffer due to destruction of the property, in whole or in part.

Inspection
The examination of the house by a building inspector selected by the purchaser.

Interest Adjustment Date
The date from which the interest is calculated at the rate and compounded at the frequency set out in the mortgage contract. It is normally the first day of the month following the closing of the mortgage transaction.

Interest Rate
The percentage of the mortgage loan charged by the lender for use of the lender's money.

Interest Rate Differential (IRD)
A compensation charge that may apply if you pay off your mortgage principal prior to the maturity date or pay the mortgage principal down beyond the prepayment privilege amount. The IRD amount is calculated on the amount being prepaid using an interest rate equal to the difference between your existing mortgage interest rate and the interest rate that can be charged when re-lending the funds for the remaining term of the mortgage.

Interim Financing
Also known as a bridge financing, 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.

Job Letter
A letter from one's employer stating the length of the employment, the guaranteed number of hours worked, the income, etc.

Lien
A claim against a property to secure the payment of a debt or other obligation.

Loan to Value Ratio (LTV)
The amount of the mortgage expressed as a percentage of the value of the home. For example, if the borrowed amount is $90,000 against a home that is valued at $100,000, the Loan to Value Ratio is 90%.

Market Value
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.

Maturity Date
The date that your mortgage term ends. At this point, you can either pay off your mortgage in full, renew it with the same institution, or move it to another institution via switch/transfer or refinance.

Mortgage
To pledge a property to a lender as security on a loan.

Mortgage Affordability
Mortgage affordability is the amount of money a mortgage borrower can make on a monthly basis towards a mortgage, based upon their income, expenses, and the proposed monthly payment.

Mortgage Brokers Act
Legislation that regulates the activities of mortgage brokers across Canada.

Mortgage Insurance
The insurance that is required for high-ratio mortgages (mortgages that are higher than 80% of the value of the property, for income-qualifying applications). 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 Canada United Guaranty.

Mortgage Disability Insurance
A form of insurance that pays the mortgage payments in the event the borrower becomes ill or disabled and is unable to work.

Mortgage Life Insurance
This is insurance that pays off the mortgage in the event of death.

Mortgage Payment
A mortgage payment is a periodic amount paid to a mortgage holder for repayment of a mortgage loan.

Mortgage Refinancing
Mortgage refinancing is the process of replacing your mortgage or mortgages on your property with a new mortgage.

Mortgage Renewal
A new agreement to extend or renew mortgage terms with your existing mortgage holder.

Mortgage Statement
A statement received from your mortgage lender that includes such information as property address, outstanding principal balance, monthly payment, interest rate, mortgage term, etc.

Mortgage Term
A mortgage term is the length of time, usually in years, in which the parameters of a mortgage have legal effect.

Mortgagee
The party that advances the funds for a mortgage loan, i.e. the lender.

Mortgagor
The party that uses their home as a security for a mortgage, i.e. the borrower.

Notice of Assessment
Also known as the "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.

Open Mortgage
A mortgage which can be prepaid at any time prior to maturity, without penalty.

Overnight Rate
The interest rate at which large banks borrow money, short term, among themselves.

Paystub
A document you receive from your employer on your pay-day stating your gross earnings, deductions (such as CPP, EI, taxes, etc), and your net income. The paystub typically includes the "year-to-date" amounts of all the aforementioned income and deductions.

Payment Frequency
The choice of making regular mortgage payments every week, every other week, twice a month or monthly.

Portable Mortgage
A mortgage that can be transferred from one property to another without having to lose the existing mortgage rate.

B>Power of Sale
A clause generally inserted in mortgages, giving the lender the right and power, on default by the borrower, to sell the mortgaged property by public auction, private contract or tender.

Pre-Approved Mortgage
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.

Pre-Authorized Cheque
Direct withdrawals of payments due from a borrower's bank account in accordance with authority granted by the borrower.

Pre-Payment Charge
A fee charged by the lender when the borrower prepays all or part of a closed mortgage more quickly than is set out in the mortgage agreement. Typically, the penalty is equivalent to three months worth of interest or Interest Rate Differential, whichever is higher.

Pre-Payment Option
The right set out in the mortgage agreement that allows the borrower to pay a specified amount of the principal balance prior to the maturity date of the mortgage, without incurring additional penalty.

Prime Rate
The lowest commercial interest rate charged by a banks at a particular time.

Principal
The amount of money borrowed, or still owing on a mortgage.

Private Mortgage
A mortgage provided by private corporations and individuals.

Rent Roll
A statement listing the tenants in occupancy, the area or unit occupied by each, their lease expiry dates and rent payable, as well as other leasing details that may be required.

Reverse Mortgage
A type of mortgage loan available in Canada that is designed for homeowners 60 years and older.

Security
Property, or assets, offered as backing for a loan. In the case of mortgages, the property being purchased or refinanced forms the security for the loan.

Second Mortgage
A mortgage placed on real property which is already encumbered with one mortgage. Determination of first, second, third mortgage, etc. is determined by priority of registration (time and date).

Secondary Financing
Financing real estate with a loan, or loans, subordinate to a first mortgage.

Simple Interest
The cost of borrowing money, calculated by applying the interest rate to the original principal amount only. In contrast to compound interest, interest is not charged on interest.

Skip Payment Option
A mortgage clause that gives the borrower the ability to skip a regular payment without the mortgage going into default.

Subprime Transactions
Classification of lending based on the payment risk that the lender faces. Subprime transactions (also known as "B" and "C" deals) face a higher risk that the amount of money lent will not be repaid, compared to prime deals (also known as "A" deals).

Sweat Equity
Equity created by a purchaser or homeowner by performing work on a property being purchased or refinanced.

Tax Account
An account that is created by a lender to hold property taxes collected as part of the mortgage payments on behalf of the homeowner. The lender will then remit the taxes to the municipality from this dedicated account.

Title
The legal evidence of ownership to a property.

Title Insurance
Insurance that protects the owner or mortgagee of the property from any lawsuits or claims arising from a defective title.

Title Search
A detailed examination of the registered title documents to ensure there are no liens or other encumbrances, or claims, on the property, and no question regarding the seller's statement of ownership.

Total Debt Service (TDS) Ratio
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, 50% of condo fees will also be worked into this ratio.

Variable Rate Mortgage
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).

Vendor Take-Back Mortgage
A mortgage in which the vendor uses his or her own equity to provide some or all of the mortgage financing in order to sell the property.

Void Cheque
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.

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