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|
 |
| A |
| Amortization |
The
period of time, most often 15, 20 or 25 years, required to reduce
a debt to zero when payments are made regularly. |
| Appraisal |
A
process for estimating the market value of a particular property. |
| Approved
Lender |
A
lending institution authorized by the Government of Canada through
CMHC to make loans under the terms of the National Housing Act.
Only Approved Lenders can negotiate mortgages which require
mortgage loan insurance. |
| Assumption
Agreement |
A
legal document signed by a home buyer that requires the buyer
to assume responsibility for the obligations of a mortgage by
the builder or the original owner. |
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| B |
| Blended
Payment |
A
mortgage payment that includes principal and interest. It is
paid regularly during the term of the mortgage. The payment
total remains the same, although the principal portion increases
over time and the interest portion decreases. |
| Building
Permit |
A
certificate that must be obtained from the municipality by the
prop- erty owner or contractor before a building can be erected
or repaired. It must be posted in a conspicuous place until
the job is completed and passed as satisfactory by a municipal
building inspector. |
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| C |
| Closing
Costs |
Costs,
in addition to the purchase price of the home, such as legal
fees, transfer fees and disbursements, that are payable on the
closing date. Closing costs typically range from 1.5%-4% of
a home's selling price. |
| Closing
Date |
The
date on which the sale of a property becomes final and the new
owner takes possession. |
| CMHC |
Canada
Mortgage and Housing Corporation. A Crown corporation that administers
the National Housing Act for the federal government and encourages
the improvement of housing and living conditions for all Canadians.
CMHC also creates and sells mortgage loan insurance products. |
| Conditional
Offer/ Conditions of Sale |
An
Offer to Purchase that is subject to specified conditions, for
example, the arranging of a mortgage. There is usually a stipulated
time limit within which the specified conditions must be met. |
| Collateral
Mortgage |
A
mortgage which secures a loan by way of a promissory note. The
money which is borrowed can be used to buy a property or for
another purpose such as home renovation or for a vacation. |
| Commitment
Letter/ Mortgage Approval |
Written
notification from the mort- gage lender to the borrower that
approves the advancement of a specified amount of mortgage funds
under specified conditions. |
| Conventional
Mortgage Loan |
A
mortgage loan up to a maximum of 75% of the lending value of
the property. Mortgage loan insurance is not required for this
type of mortgage. |
| Covenant |
A
clause in a legal document which, in the case of a mortgage,
gives the parties to the mortgage a right or an obligation.
For example, a covenant can impose the obligation on a borrower
to make mortgage payments in certain amounts on certain dates.
A mortgage document consists of covenants agreed to by the borrower
and the lender. |
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| D |
| Deed |
A
legal document which is signed by both the vendor and purchaser,
transferring ownership. This document is registered as evidence
of ownership. |
| Default |
Failure
to abide by the terms of a mortgage loan agreement. A failure
to make mortgage payments (defaulting on the loan) may give
cause to the mortgage holder to take legal action to possess
(foreclose) the mortgaged property. |
| Deposit |
Money
placed in trust by the purchaser when an Offer to Purchase is
made. The sum is held by the real estate representative or lawyer
until the sale is closed, and then paid to the vendor. |
| Discharge
of Mortgage |
A
document signed by the lender and given to the borrower when
a mortgage loan has been repaid in full. |
| Down
Payment |
The
portion of the house price the buyer must pay up front from
personal resources, before securing a mortgage. It generally
ranges from 5%-25% of the purchase price. |
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| E |
| Easement |
A
right acquired for access to or over, or for use of, another
person's land for a specific purpose, such as a driveway or
public utilities. |
| Encumbrance |
A
registered claim for debt against a property, such as a mortgage. |
| Equity |
The
difference between the price for which a home could be sold
and the total debts registered against it. Equity usually increases
as the outstanding principal of the mortgage is reduced through
regular payments. Market values and improvements to the property
also affect equity. |
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| F |
| Foreclosure |
A
legal procedure in which the lender gets ownership of the property
if the borrower defaults on the mortgage loan. |
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| G |
| Gross
Debt Service Ratio (GDS) |
The
percentage of the borrower's gross monthly income that will
be used for monthly payments of principal, interest, taxes,
heating costs and half of any condominium maintenance fees. |
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| H |
| High-ratio
Mortgage |
A
mortgage loan in excess of 75% of the lending value of the property.
This type of mortgage must be insured-for example, by CMHC-against
payment default. |
| Holdback |
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. A standard holdback amount is 10% of the total
cost of the building project. |
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| I |
| Interest |
The
cost of borrowing money. Interest is usually paid to the lender
in instalments along with repayment of the principal loan amount. |
| Interest
Adjustment Date (IAD) |
A
date from which interest on the mortgage advanced is calculated
for your regular payments. This date is usually one payment
period before regular mortgage payments begin. Interest due
from the date your mortgage is advanced to the IAD is due on
closing. |
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| L |
|
Lending Value
|
The
purchase price or market value of a property, whichever is less. |
| Lien
(Mechanic's) |
A
claim against a property for money owing. A lien may be filed
by a supplier or a subcontractor who has provided labour or
materials but has not been paid. A lien must be properly filed
by a claimant. It has a limited life, prescribed by statute
that varies from province to province. If the lienholder takes
action within the prescribed time, the homeowner may be obliged
to pay the amount claimed by the lien- holder. Alternatively,
the lienholder may force a sale of the property to pay off the
debt. |
| Loan-to-value
Ratio |
The
ratio of the loan to the lending value of a property expressed
as a percentage. For example, the loan- to-value ratio of a
loan for $90,000 on a home which costs $100,000 is 90%. |
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| M |
| Maturity
Date |
The
last day of the term of the mortgage agreement. On this day
the mortgage loan must be either paid in full or the agreement
renewed. |
| Mortgage |
A
mortgage is security for a loan on the property that you own.
It is your personal guarantee to repay the loan as well as a
pledge of the property as security for the loan. |
| Mortgage
Loan Insurance |
If
you have a high-ratio mortgage (more than 75% of the purchase
price), your lender will require mortgage loan insurance- available
from CMHC or a private insurer. The insurance premium will cost
between 0.5% and 3.75% of the amount of the mortgage (additional
charges may apply). |
| Mortgage
Life Insurance |
This
insurance guarantees that if you die your mortgage will be paid
in full. This insurance can be conveniently purchased through
your lender and the premium added to your mortgage payments.
However, you may want to compare rates for equivalent products
from an insurance broker. |
| Mortgage
Payment |
A
regularly scheduled payment that is blended to include both
principal and interest. |
| Mortgagee |
The
lender who provides the mortgage loan. |
| Mortgagor |
The
borrower who pledges the property as security for the loan. |
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| N |
| Net
Worth |
Your
total financial worth, calculated by subtracting your total
liabilities from your total assets. |
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| O |
| Offer
To Purchase |
A
written contract setting out the terms under which the buyer
agrees to buy. If accepted by the seller, it forms a legally
binding contract subject to the terms and conditions stated
in the document. |
| Option
Agreement |
A
document stipulating that, in exchange for a deposit, a specified
individual is to be given the first chance of buying a property
at or within a specified period of time. An option holder who
does not buy at or within the specified period loses the deposit
and the agreement is cancelled. |
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| P |
| P.I.T. |
Principal,
interest and taxes - payments due on a regular basis under the
terms of the mortgage agreement. Generally, payments are made
monthly and include one-twelfth of the estimated annual municipal
and school taxes. Since these taxes change from year to year,
this section of the mortgage will change accordingly. |
| P.I.T.H. |
Principal,
interest, taxes and heating-costs used to calculate the Gross
Debt Service ratio (GDS). |
| Principal |
The
amount of money actually borrowed. |
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| R |
| Realtor |
A
real estate representative who is a member of an organization
of persons engaged in the business of buying and selling real
estate, such as the Canadian Real Estate Association. |
| Refinance |
To
pay off a mortgage or other registered encumbrance and arrange
for a new mortgage, sometimes with a different lender. |
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| S |
| Second
Mortgage |
An
additional mortgage on a property that already has a mortgage. |
| Statement
of Adjustment |
A
balance sheet statement that indicates credits to the vendor,
such as the purchase price and any prepaid taxes, and credits
to the buyer, such as the deposit and the balance due on closing. |
| Survey |
A
document that illustrates the property boundaries and measurements,
specifies the location of buildings on the property, and indicates
any easements or encroachments. |
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| T |
| Term |
The
length of time during which a mortgagor pays a specific interest
rate on the mortgage loan. The entire mortgage principal is
usually not paid off at the end of the term because the amortization
period is normally longer than the term. |
| Title |
A
freehold title gives the holder full and exclusive ownership
of land and buildings for an indefinite period of time. In condominium
ownership, land and common elements of buildings are owned collectively
by all unit owners, while the residential units belong exclusively
to the individual owners. A leasehold title gives the holder
a right to use and occupy land and buildings for a defined period
of time. |
| Total
Debt Service Ratio (TDS) |
The
percentage of gross monthly income required to cover all monthly
payments for housing and all other debts, such as car payments. |
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| V |
| Vendor
Take Back Mortgage |
Mortgage
financing arranged between the seller of the property and the
buyer. The title is trans- ferred to the buyer. Often this type
of loan is a second mortgage which the seller is willing to
arrange at below market rates to ensure the buyer can purchase
the house. Most of these arrangements are not renewable or transferable
to the next owner of the house. |
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| Z |
| Zoning
Bylaws |
Municipal
or regional laws that specify or restrict land use. |
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