Common Canadian Mortgage Terms: (A-Z)
Amortization Period
A time of arrangement for paying off a mortgage by equal instalments 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.
Appraised Value
A dollar amount assigned to taxable property, by the assessor. Used by the Lender to determine the value for mortgage purposes.
Assets
What the borrower owns. Liquid assets are those that can be quickly converted to cash.
Assumption of Mortgage
A purchaser of property assumes the liability for an existing mortgage against a property and becomes liable for a timely payment of the mortgage. This action might occur with or without approval of the existing mortgagee.
Blanket Mortgage
A single document which is registered covering more than one property. (Also known as an lnter-Alia Mortgage.)
Blended Mortgage
Combining the amount owing on an existing mortgage with additional mortgage money for the purpose of buying another property.
Blended Payments
The method or 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 the time between completing the purchase of one property and finalizing arrangements to pay for it. This is often the result of mismatched closing dates.
Broker Fee
A fee charged by a Mortgage Broker for arranging mortgage financing. A fee is usually charged if there are past credit problems, or problems with job stability. In all cases where a fee has been charged, a Disclosure Statement must be completed in triplicate and signed by both the borrower and the Mortgage Broker.
Closed Mortgage
The restriction or denial of repayment rights until the maturity of the mortgage.
Closing Date
The date on which the sale of a property becomes final and the new owner takes possession.
Co-ownership
The co-ownership occurs when the ownership of the whole property is divided (not necessarily on a pro-rated basis) between two 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 or 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 used for purposes such as home renovations 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.
Conventional Mortgage
A first mortgage, outside the conditions of NHA (the National Housing Act), granted by an institutional lender such as a bank, trust company, life insurance company or private individual 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 six or 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.
Debt Service
The amount of principal and interest repayments made under a mortgage on a periodic basis. If payments are equal they are ìconstant paymentsî, if amounts vary they are known as ìvariable payments.î
Demand Note
Payment is made on demand, usually within a few days notice to the borrower.
Deposit
A sum of money (in the form of cash) required to be paid with an offer to purchase as a symbol of the purchaserís 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.
Equity
The remaining interest an owner of real property has. Itís total value subtracting all the debt against it.
First Mortgage
A first charge registered against the property. Upon sale foreclosure of the mortgage, the first mortgagee must be fully satisfied out of the proceeds before any subsequent claims.
Foreclosure
Remedial court action taken by a mortgagee when default occurs on a mortgage, to cause forfeiture of the equity of redemption of the mortgage.
Freehold
The ownership of a tract of land on which the building(s) are located. The most common type of ownership of real estate.
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.
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 propertyís lending value; the higher loan amount is made possible by a mortgage insurance plan. e.g. CMHC or GE Capital. Used when there is less than 25% down payment.
Holdback
An amount of money retained by a construction lender or owner until satisfactory completion of the work performed by a contractor.
Income/Expense Ratio
Ratio of operation expenses to gross income and expressed as a percentage (also known as an operating ratio.)
Interest
Annual profit on a loan of money. The price paid to rent money.
Interest Adjustment Date (lAD)
The date on which the mortgage really begins, usually the first of the month. The borrower is required to pay interest on the loan between the date of receiving the funds and the lAD before regular mortgage payments start.
Interest Only Loan
Borrower pays back interest only on the loan and there is no amortization period until later or until the end of the term.
Joint Tenancy
Ownership of land by two or more persons whereby, on the death of one, the survivor(s) take the whole estate.
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.
Letter of Intent
Similar to a commitment 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 borrowers owe.
Lien
The lenderís legal claim to the borrowerís 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 to Value Ratio
The advance ratio of the principal amount of the mortgage as a function of the lending value of the property.
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 on Title. 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 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.)
National Housing Act (NHA) Loan
A mortgage backed (insured) to a certain maximum by CMHC or GE Capital.
Nominal Rate
The quoted interest rate for a mortgage.
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.
P.I.
Principal and interest due on a mortgage.
P.I.T.
Principal, interest and taxes due on a mortgage.
P.I.T.H.
Principal, interest, taxes and heating costs due on a mortgage. These payments are used to calculated 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 set amount in the terms of the mortgage.
Power of Sale
The right of a mortgage to force sale of the property without judicial proceedings should default occur.
Portable Mortgage
Upon the consent of the lender, the mortgagor may transfer the balance of their existing mortgage to a new property being mortgaged.
Pre-approved Mortgage
Preliminary approval by the lender of the borrowerís application for a mortgage to a certain maximum amount and rate. Usually conditional upon the property being purchased meeting the lenderís criteria.
Pre-authorized Cheque (PAC) or (PAP)
This method of making mortgage payments allows the lender to deduct the agreed upon mortgage (tax & insurance, if applicable) payment directly from the borrowerís 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 charged to compensate the lender for loss of revenue.
Prepayment Options
The clause in the mortgage agreement that specified 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.
Priority of Mortgages (i.e. First, Second)
Date of registration by number and date in the Land Registry Office of the mortgage document. First mortgages have priority over second mortgages; Priority refers to the mortgageeís claim to the property should payment go into default.
Principal
The amount of money borrowed.
Promissory Note
An unconditioned note or written promise by the promiser to pay a sum of money to the payee on demand or at a fixed or determinable future date.
Rate (Interest)
The return the lender received for loaning the borrower the money for the mortgage.
Redemption
The buying bank 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 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 loan where the interest rate is established for a specific term At the end of this term the mortgagee is said to ìroll overî 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.
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 a backing for a loan. In the case of mortgages, the property being purchased with the loan usually forms the security for the loan.
Survey
The accurate mathematical measurements of land and buildings thereon make with the aid of instruments.
Tenancy in Common
Ownership of land by two or more persons; unlike joint tenancy in the interest of the deceased does not pass to the survivor, but is treated as an asset of the deceasedís 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
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 Title System.
Underwriter (mortgage)
A person employed by a mortgage lender or mortgage broker who assesses loan applications based upon the following: quality of the 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 the property.
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.
Vendor Take Back Mortgage
A mortgage which a vendor of real property takes from the purchaser usually as part payment of the purchase price for that property. A private first or second mortgage that the vendor lends to the purchaser/borrower.
Zoning
The public regulation of the character and intensity of the use of real estate. This is accomplished by the establishment of districts in each of which uniform holding restrictions related to use, height, area, bulk and density of population are imposed upon the private property.
A time of arrangement for paying off a mortgage by equal instalments 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.
Appraised Value
A dollar amount assigned to taxable property, by the assessor. Used by the Lender to determine the value for mortgage purposes.
Assets
What the borrower owns. Liquid assets are those that can be quickly converted to cash.
Assumption of Mortgage
A purchaser of property assumes the liability for an existing mortgage against a property and becomes liable for a timely payment of the mortgage. This action might occur with or without approval of the existing mortgagee.
Blanket Mortgage
A single document which is registered covering more than one property. (Also known as an lnter-Alia Mortgage.)
Blended Mortgage
Combining the amount owing on an existing mortgage with additional mortgage money for the purpose of buying another property.
Blended Payments
The method or 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 the time between completing the purchase of one property and finalizing arrangements to pay for it. This is often the result of mismatched closing dates.
Broker Fee
A fee charged by a Mortgage Broker for arranging mortgage financing. A fee is usually charged if there are past credit problems, or problems with job stability. In all cases where a fee has been charged, a Disclosure Statement must be completed in triplicate and signed by both the borrower and the Mortgage Broker.
Closed Mortgage
The restriction or denial of repayment rights until the maturity of the mortgage.
Closing Date
The date on which the sale of a property becomes final and the new owner takes possession.
Co-ownership
The co-ownership occurs when the ownership of the whole property is divided (not necessarily on a pro-rated basis) between two 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 or 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 used for purposes such as home renovations 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.
Conventional Mortgage
A first mortgage, outside the conditions of NHA (the National Housing Act), granted by an institutional lender such as a bank, trust company, life insurance company or private individual 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 six or 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.
Debt Service
The amount of principal and interest repayments made under a mortgage on a periodic basis. If payments are equal they are ìconstant paymentsî, if amounts vary they are known as ìvariable payments.î
Demand Note
Payment is made on demand, usually within a few days notice to the borrower.
Deposit
A sum of money (in the form of cash) required to be paid with an offer to purchase as a symbol of the purchaserís 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.
Equity
The remaining interest an owner of real property has. Itís total value subtracting all the debt against it.
First Mortgage
A first charge registered against the property. Upon sale foreclosure of the mortgage, the first mortgagee must be fully satisfied out of the proceeds before any subsequent claims.
Foreclosure
Remedial court action taken by a mortgagee when default occurs on a mortgage, to cause forfeiture of the equity of redemption of the mortgage.
Freehold
The ownership of a tract of land on which the building(s) are located. The most common type of ownership of real estate.
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.
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 propertyís lending value; the higher loan amount is made possible by a mortgage insurance plan. e.g. CMHC or GE Capital. Used when there is less than 25% down payment.
Holdback
An amount of money retained by a construction lender or owner until satisfactory completion of the work performed by a contractor.
Income/Expense Ratio
Ratio of operation expenses to gross income and expressed as a percentage (also known as an operating ratio.)
Interest
Annual profit on a loan of money. The price paid to rent money.
Interest Adjustment Date (lAD)
The date on which the mortgage really begins, usually the first of the month. The borrower is required to pay interest on the loan between the date of receiving the funds and the lAD before regular mortgage payments start.
Interest Only Loan
Borrower pays back interest only on the loan and there is no amortization period until later or until the end of the term.
Joint Tenancy
Ownership of land by two or more persons whereby, on the death of one, the survivor(s) take the whole estate.
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.
Letter of Intent
Similar to a commitment 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 borrowers owe.
Lien
The lenderís legal claim to the borrowerís 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 to Value Ratio
The advance ratio of the principal amount of the mortgage as a function of the lending value of the property.
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 on Title. 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 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.)
National Housing Act (NHA) Loan
A mortgage backed (insured) to a certain maximum by CMHC or GE Capital.
Nominal Rate
The quoted interest rate for a mortgage.
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.
P.I.
Principal and interest due on a mortgage.
P.I.T.
Principal, interest and taxes due on a mortgage.
P.I.T.H.
Principal, interest, taxes and heating costs due on a mortgage. These payments are used to calculated 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 set amount in the terms of the mortgage.
Power of Sale
The right of a mortgage to force sale of the property without judicial proceedings should default occur.
Portable Mortgage
Upon the consent of the lender, the mortgagor may transfer the balance of their existing mortgage to a new property being mortgaged.
Pre-approved Mortgage
Preliminary approval by the lender of the borrowerís application for a mortgage to a certain maximum amount and rate. Usually conditional upon the property being purchased meeting the lenderís criteria.
Pre-authorized Cheque (PAC) or (PAP)
This method of making mortgage payments allows the lender to deduct the agreed upon mortgage (tax & insurance, if applicable) payment directly from the borrowerís 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 charged to compensate the lender for loss of revenue.
Prepayment Options
The clause in the mortgage agreement that specified 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.
Priority of Mortgages (i.e. First, Second)
Date of registration by number and date in the Land Registry Office of the mortgage document. First mortgages have priority over second mortgages; Priority refers to the mortgageeís claim to the property should payment go into default.
Principal
The amount of money borrowed.
Promissory Note
An unconditioned note or written promise by the promiser to pay a sum of money to the payee on demand or at a fixed or determinable future date.
Rate (Interest)
The return the lender received for loaning the borrower the money for the mortgage.
Redemption
The buying bank 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 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 loan where the interest rate is established for a specific term At the end of this term the mortgagee is said to ìroll overî 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.
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 a backing for a loan. In the case of mortgages, the property being purchased with the loan usually forms the security for the loan.
Survey
The accurate mathematical measurements of land and buildings thereon make with the aid of instruments.
Tenancy in Common
Ownership of land by two or more persons; unlike joint tenancy in the interest of the deceased does not pass to the survivor, but is treated as an asset of the deceasedís 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
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 Title System.
Underwriter (mortgage)
A person employed by a mortgage lender or mortgage broker who assesses loan applications based upon the following: quality of the 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 the property.
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.
Vendor Take Back Mortgage
A mortgage which a vendor of real property takes from the purchaser usually as part payment of the purchase price for that property. A private first or second mortgage that the vendor lends to the purchaser/borrower.
Zoning
The public regulation of the character and intensity of the use of real estate. This is accomplished by the establishment of districts in each of which uniform holding restrictions related to use, height, area, bulk and density of population are imposed upon the private property.