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GLOSSARY
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A
- Accrued Interest
- Interest, which has accumulated unpaid since last payment date.
- Amortization
- The gradual retirement of a debt by means of partial payments of the principal at regular intervals.
- Amortization Period
- A time of arrangement for paying off a mortgage by equal installments or periodic constant payments. Repayments of principal and interest in “blended” amounts. Fully amortized means complete repayment without a “balloon” payment at the end of the term. Can be as short as 5 years or as long as 40 years.
- Amortization schedule
- The amortization schedule shows monthly installments of principal and interest and how much of the payment is allocated to each. It also shows the unpaid principal balance.
- Appraised Value
- A dollar value assigned to taxable property, by the assessor, for the purpose of equalizing the burden of taxation.
- Assets
- What the borrower owns. Liquid assets are those that can be quickly converted to cash.
- Assignment of mortgage
- The assigning of a mortgagee’s interest in the mortgage to a new mortgagee. The legal sale of the mortgage with or without an agreement to repurchase.
- Assumption of mortgage
- The purchaser of property assumes the liability for an existing mortgage against a property and becomes liable for timely payment of the mortgage. This action might occur with or without approval of the existing mortgagee depending on the terms of the existing mortgage.
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B
- Blanket mortgage
- A single document, which is registered covering more than one title to property.
- Blended mortgage
- Combining the amount owing on an existing mortgage with additional mortgage money for the purpose of buying another property. The interest rate change to one that combines the rate on the old loan with the rate in effect at the time you add additional financing.
- Blended payments
- The method of repayment where periodic payments of principal and interest are made in such a way that the payments remain constant in amount, although the portions attributed to principal and interest vary with each payment.
- Bridge financing
- A special short-term loan needed to cover (bridge) the gap in time between completing the purchase of one property and finalizing arrangements to pay for it. This is often the result of mismatched closing dates.
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C
- Carrying costs
- The actual cost of living and maintaining property, including mortgage payments, property tax, heating, repairs and so on.
- Closed mortgage
- The restriction or denial of repayment rights until the maturity of the mortgage.
- Closing date
- The date on which the sale of property becomes final and the new owner takes possession.
- CMHC
- Canada Mortgage and Housing Corporation, a Crown Corporation that administers the National Housing Act.
- Co-operative
- The ownership of a separate amount of space in a multiple dwelling or other multiple-occupancy building with proportioned tenancy in common ownership of common elements. Used jointly with other owners however, the owner does not own his/her specific unit but he/she becomes a shareholder of the corporation, which owns all the real property and occupies by way of a tenancy agreement subject to a shareholders agreement administered by an elected board of directors.
- Co-ownership
- Co-ownership occurs when the ownership of the whole property is divided (not necessarily on a pro-rated basis) between tow or more persons. Usually there is a written agreement between the co-owners in which the rights of each co-owner is described. Each co-owner may sell his/her right of ownership of dispose of it as he/she wishes.
- Collateral mortgage
- A loan backed by a promissory note and the security of a mortgage on a property. The money borrowed may be sued for another purpose, such as home r3enovations or a vacation.
- Commitment
- A notice from a mortgage lender to a prospective borrower that the lender will advance mortgage funds in a specified amount under certain conditions.
- Commitment fee
- This fee is charged by a lender for keeping an agreed amount of funds available to the borrower for a specified period of time.
- Compound Interest
- Interest charged not only to the principal sum but also on interest amounts charged in a preceding period.
- Condominium
- The ownership of a separate amount of space in a multiple dwelling or other multiple-occupancy building with proportioned tenancy in common ownership of common elements used jointly with each owners.
- Contract
- An agreement between two or more parties given receipt of lawful consideration to do or refrain from doing some act.
- Conventional mortgage
- A first mortgage, outside the conditions of NHA (the National Housing Act), granted by an institutional lender such as a bank, mortgage, loan or trust company wherein the amount of the loan does not exceed 75% of the appraised lending value of the property.
- Convertible mortgage
- A short-term mortgage, usually 6(six) or 12 (twelve) months, allowing the borrower to switch into a longer term at any time without penalty. There are several different variations to the convertible mortgage.
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D
- Debt service
- The amount of principal and interest repayments made under a mortgage on a periodic basis. If payments are equal they are “constant payments”, if amounts vary they are known as “variable payments”.
- Deed
- An instrument in writing, duly executed and delivered, that conveys title or an interest in real property.
- Default
- Failure to fulfill an obligation.
- Demand note
- Payment is made on demand, usually within a few
- Deposit
- A sum of money (in the form of cash) required to be paid with an offer a purchase as a symbol of the purchaser’s commitment. If the offer is accepted, the deposit is applied to the down payment. If the offer is later turned down by the buyer, the deposit may or may not be returned.
- Discharge of mortgage
- A document executed by the mortgagee, and given to the mortgagor when a mortgage loan has been repaid in full before, at, or after the maturity date.
- Down payment
- The amount of money (in the form of cash) put forward by the buyer toward the purchase price of a home.
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E
- Effective interest rate
- The actual interest rate on investment where a debt or loan was brought at a discount or at a premium.
- Equity
- The remaining interest an owner of real property has in its total value after allowing for encumbrances and creditors’ claims.
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F
- First mortgage
- A mortgage on property creating a prior claim over any subsequent mortgages or charges and usually conveying the legal estate to the mortgagee. Upon foreclosure of the mortgage, the first mortgagee must be fully satisfied out of the proceeds before any subsequent claims.
- Fixed-rate mortgage
- This is the usual form of mortgage where interest rate remains the same during the entire life of the loan.
- Floating rate of interest
- Rate of interest, which fluctuates a certain number of percentage points above or below prime lending rates.
- Foreclosure
- Remedial court action taken by a mortgagee when default occurs on a mortgage, to cause forfeiture of the equity of redemption of the mortgagor.
- Freehold
- The ownership of a tract of land on which the building(s) are located. The most common type of ownership of real estate.
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G
- Gross Debt Service Ratio (GDS)
- The annual charges for principal, interest and taxes as a function of gross income of the mortgagor.
- Gross income
- The scheduled income from the operation of the business of the management of the property, customarily stated on an annual basis. Also refers to the total personal income (from all sources) of an individual, before taxes and other deductions.
- Guarantor
- A third party person without interest in the property who agrees to assume responsibility for a debt in the event of default by the mortgagor.
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H
- High ratio mortgage
- A mortgage loan that exceeds the normal limit of a conventional first mortgage, in regard to the ratio of the loan amount to the property’s lending value; the higher loan amount is made possible by a mortgage insurance plan e.g. CMHC
- Holdback
- An amount of money retained by a construction lender or owner until satisfactory completion of the work performed by a contractor.
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I
- No entries at this time
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J
- No entries at this time
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K
- No entries at this time
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L
- Leasehold
- A person has use of the property for a limited time. This person can rent the building or own the building and rent the land on which the building sits.
- Leasehold mortgage
- A mortgage for the purchase of a home or improvements to a home where the building is on land that is leased or rented.
- Lending value
- An independent appraiser’s value interpreted by the lender as to the worth of a property in the current market given a reasonable time period to sell the property.
- Letter of intent
- Similar to a commitment letter where a lender issues a letter to a borrower outlining their intent to lend them money for a specific purpose and under what conditions that money will be loaned.
- Liabilities
- What the borrower owes.
- Lien
- The lender’s legal claim to the borrower’s property.
- Line of credit
- A maximum credit limit allowed by a lender to a borrower, as long as the borrower maintains an acceptable balance on account or has a good credit rating. The credit line will vary from time to time according to the changing circumstances of the borrower or the lender.
- Loan coverage
- The ratio of net operating income to mortgage debt service; in general, loan coverage of 1.2 is considered adequate.
- Loan fee
- A charge for making a loan in addition to the interest charged to the borrower.
- Loan to value ratio
- The advance ratio of the principal amount of the mortgage as a function of the lending value of the property.
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M
- Maturity date
- The last day of the term of the mortgage agreement. The mortgage must be paid in full or the agreement renewed by the maturity date.
- Mortgage
- A conveyance of property to a creditor, as security for payment of a debt. Such security is redeemable or recoverable on the payment or discharge of the debt at a specified date. More recently referred to as a Charge in the new Polaris registry system. An encumbrance registered on the title of the lands.
- Mortgage Insurance Premium
- A premium, which is charged as a percentage of the mortgage. The mortgage insurance insures the lender against loss in case of default by the borrower.
- Mortgage Life Insurance
- A form of reducing term insurance recommended for the borrower. In the event of the death of the borrower or one of the co-borrowers, the insurance pays the balance owing on the mortgage. The intent is to protect survivors from losing their home.
- Mortgagee
- The one to whom property is conveyed. (The lender). The holder of the mortgage.
- Mortgagor
- The one who makes the payments. The owner of the property (The borrower).
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N
- National Housing Act (NHA) loan
- A mortgage backed (insured) to a certain maximum by CMHC or an approved private insurer.
- Net rate of interest
- The interest rate received by a mortgage lender net of the servicing fee deducted by a loan correspondent etc.
- Nominal rate
- The quoted interest rate for a mortgage.
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O
- Offer to purchase
- A formal, legal agreement that offers a certain price for a specified property. The offer may be firm (no conditions attached) or conditional (certain conditions must be fulfilled).
- Open mortgage
- A way of registering a mortgage which allows the mortgagor to make extra payments, make principal repayments, or pay the loan off in full at any time without penalty.
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P
- P.I.
- Principal and interest due on a mortgage.
- P.I.T.
- Principal, interest and property taxes due on a mortgage.
- P.I.T.H.
- Principal, interest, taxes and heating costs due on a mortgage. These payments are used calculate the GDS and TDS of a borrower.
- Penalty
- A sum of money paid to a lender for the privilege of prepaying a mortgage in part or in full, outside the privileges set out in the terms of the mortgage.
- Portable Mortgage
- Upon the consent of the lender, the mortgagor may transfer the balance of their existing mortgage to a new property being mortgaged.
- Power of sale
- The right of a mortgagee to force sale of the property without judicial proceedings should default occur.
- Pre-approved mortgage
- Preliminary approval by the lender of the borrower’s application for a mortgage to a certain maximum amount and rate. Usually conditional upon the property being purchased meeting the lender’s criteria.
- Pre-Authorized payment (PAP)
- This method of making mortgage payments allows the lender to deduct the agreed upon mortgage (tax & insurance, if applicable) payment directly from the borrower’s chequing account.
- Prepayment charge
- A fee charged by the lender when the borrower prepays all or part of a mortgage more quickly than stated in the mortgage agreement. The fee is charge to compensate the lender for loss of revenue.
- Prepayment options
- The clause in the mortgage agreement that specifies when, how much and how prepayments of the mortgage principal (above and beyond the regular mortgage payments) can be made by the borrower.
- Prime rate
- The rate charged by banks to their most credit-worthy borrowers.
- Principal
- The amount of money borrowed. Could be part of the repayment plan that lowers this original amount.
- Priority of mortgages (i.e. first, second, third)
- Dates of registration by number and date in the local Registry Office and/or Land Titles, then given to the mortgagee. First mortgages have priority over second mortgages; second mortgages have priority over third mortgages; and so on. Priority refers to the mortgagee’s claim to the property should payments go into default.
- Promissory note
- An unconditional note or written promise by the promisor to pay a sum of money to the payee on demand or at a fixed or determinable future date.
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Q
- No entries at this time
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R
- Rate (interest)
- The return the lender receives for loaning the borrower the money for the mortgage.
- Redemption
- The buying back of a mortgage estate by payment of the sum due on the mortgage.
- Refinance
- To pay in full and discharge a mortgage and any other registered encumbrances and arrange for a new mortgage with the same or a different lender.
- Renegotiate
- To change the terms and conditions of a mortgage agreement prior to maturity. Renegotiation occurs with the lender who currently holds the mortgage.
- Renewal agreement
- An agreement whereby the lender may agree to extend the term of the loan, but possibly on revised terms as to principal repayments and interest rate.
- Reserve fund
- A fund set up by a condominium corporation for major repairs and replacement of such items as the roof, elevators, plumbing, heating systems etc. All condo corporations, by law, require a reserve fund.
- Roll-over Mortgage
- A mortgage loan where the interest rate is established for a specific term. At the end of the 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.
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S
- Second mortgage
- A mortgage placed on real property, which is already encumbered with one mortgage. Determination of first, second, third etc mortgage is by priority of registration (time and date).
- Security
- Property offered as backing for a loan. In the case of mortgages, the property being purchased with the loan usually forms the security for the loan.
- Shelter payment ratio
- Gross debt service plus annual heat costs as a function of the gross income of the mortgagor.
- Survey
- The accurate mathematical measurements of land and buildings thereon made with the aid of instruments.
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T
- Tenancy in common
- Ownership of land by two or more persons; unlike joint tenancy in that the interest of the deceased does not pass to the survivor, but is treated as an asset of the deceased’s estate.
- Term of loan
- The actual length of time for which the money is borrowed. Anywhere from one month to 25 years. The period for which the mortgage is registered, in months.
- Total debt service ratio (TDS)
- Gross debt service plus payments on other debts such as bank loans, finance company loans, credit card payments, alimony, etc. as a function of the gross income of the borrower.
- Transfer
- To convey from one person or institution to another.
- Transfer of charge
- Assignment of a mortgage under the Land Titles System.
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U
- Underwriter (mortgage)
- A person employed by a mortgage lender or mortgage broker who assesses loan applications based upon the following; Quality of real property, credit worthiness and ability to pay of the applicant and guidelines of the lender with regard to ratio of mortgage loan to value of property.
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V
- Variable interest mortgage
- A loan where the interest rate may vary during the term of the mortgage. The variance is usually tied to some specific factor such as prime bank rate or the guaranteed investment certificate rate for a designated lender.
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W
- No entries at this time
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X
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Y
- No entries at this time
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Z
- No entries at this time
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