JASON KILBORNE
Professional Mortgage Specialist
204-995-5722
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(Click To Call on Mobile Device)
JASON KILBORNE
Glossary Of Mortgage Terms
Below is a list of commonly used mortgage terms and their definitions. If there are any words missing and you'd like to know the meaning, please contact me anytime.
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Accelerated Payments - A payment frequency options which allows the borrower to pay down their mortgage more quickly than if they were to just make regular monthly or semi-monthly payments. Accelerated payments can either be made bi-weekly or weekly. Amortization - The number of years it takes to repay the entire amount of your mortgage. Appraisal - A report created by an Appraiser documenting the Appraisers opinion of the market value of a property. Assessment - The value of your property set by a local municipality used to calculate property taxes. Assumable Mortgage - A mortgage feature that allows for the mortgage to be taken over by a different person than the original mortgagor. Blended Mortgage - A combination of two mortgages, one with a higher interest rate than the other, to create a new mortgage with an interest rate somewhere between the two original rates. Blended Mortgage Payments - Equal or regular mortgage payments, consisting of both a principal and interest component. With each successive payment, the amount applied to interest declines and the amount applied to the principal increases although the total payment amount doesn't change. Closing - The real estate transaction's completion, when the parties involved agree that all legal and financial obligations have been met and the deed to the property is transferred from seller to buyer. |
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Compound Period - The number of times per year in which the interest rate is compounded. In Canada, mortgages are generally compounded semi-annually, which is twice per year.
Conventional Mortgage - A first mortgage issued for up to 80% of the property's appraisal or purchase price, whichever is lower.
Debt Service Ratio - The percentage of a borrower's gross income that can be used for housing costs, including the mortgage payment and taxes (and condominium fees, when applicable).
Deed - A legal document that transfers ownership of the property to the buyer.
Down Payment - The Home buyer's initial investment in the property.
Equity - The difference between a property's market value and the the mortgage amount remaining on the property. Equity is the owner's stake in the property.
High Ratio Mortgage - A mortgage for more than 80% of a property's appraised value.
Interest Rate - The value charged by the lender for the use of the lender's money expressed as a percentage.
Land Transfer Tax - Payment to the provincial government based on the value of the property for transferring ownership of the property from seller to buyer.
Lien - Any legal claim against a property, filed to ensure payment of a debt.
Loan To Value Ratio (LTV) - The ratio of the loan to the appraised value or purchase price of the property, whichever is lower.
Maturity Date - The end of the mortgage term.
Mortgagee - The lender
Mortgagor - The borrower
Mortgage Default Insurance - An insurance policy issued by one of the 3 Mortgage Default Insurers in Canada (CMHC, Genworth, Canada Guaranty) that protects the mortgage lender in case the borrower fails to make their mortgage payments. The premium for this insurance becomes part of the mortgage principal. This insurance is only required when a home buyer's down payment is less than 20% of the purchase price.
Open Mortgage - A mortgage in which the principal can be paid partially or in full at any time without penalty.
Portable Mortgage - A mortgage that can be transferred from one property to the next by the borrower.
Pre-Approval - A process that a Home Buyer goes through where information and documentation is collected and credit is checked in order to ensure that the Home Buyer can qualify for a mortgage and how much of a mortgage they qualify for.
Prepayment Privilege - A mortgage feature that allows the borrower to prepay a portion or all of the principal balance with or without penalty. This is frequently restricted to specific amounts and times.
Principal - The mortgage amount initially borrowed, or the portion still owing. Interest in calculated on the principal amount.
Refinancing - Paying off the existing mortgage and arranging a new one, or renegotiating the terms and conditions of an existing mortgage.
Renewal - The renegotiation of a new mortgage term when the original term has matured (expired).
Stress Test - The name given to a regulation put in place by the Federal Government where home buyers must qualify for their mortgage at a higher interest rate than what's available in the market. The idea behind this is to ensure that Canadian home buyers are still able to afford their mortgage if interest rates were to rise in the future.
Term - The length of time that the interest rate is fixed. It also indicates when the principal balance is due and payable to the lender.
Title Insurance - A one-time premium insurance that protects the title of your property against losses incurred as a result of undetected or unknown title issues.
Variable Rate Mortgage - A mortgage for which the interest rate is based on the Prime Lending Rate and therefore will fluctuate along with the Prime Rate.
Conventional Mortgage - A first mortgage issued for up to 80% of the property's appraisal or purchase price, whichever is lower.
Debt Service Ratio - The percentage of a borrower's gross income that can be used for housing costs, including the mortgage payment and taxes (and condominium fees, when applicable).
Deed - A legal document that transfers ownership of the property to the buyer.
Down Payment - The Home buyer's initial investment in the property.
Equity - The difference between a property's market value and the the mortgage amount remaining on the property. Equity is the owner's stake in the property.
High Ratio Mortgage - A mortgage for more than 80% of a property's appraised value.
Interest Rate - The value charged by the lender for the use of the lender's money expressed as a percentage.
Land Transfer Tax - Payment to the provincial government based on the value of the property for transferring ownership of the property from seller to buyer.
Lien - Any legal claim against a property, filed to ensure payment of a debt.
Loan To Value Ratio (LTV) - The ratio of the loan to the appraised value or purchase price of the property, whichever is lower.
Maturity Date - The end of the mortgage term.
Mortgagee - The lender
Mortgagor - The borrower
Mortgage Default Insurance - An insurance policy issued by one of the 3 Mortgage Default Insurers in Canada (CMHC, Genworth, Canada Guaranty) that protects the mortgage lender in case the borrower fails to make their mortgage payments. The premium for this insurance becomes part of the mortgage principal. This insurance is only required when a home buyer's down payment is less than 20% of the purchase price.
Open Mortgage - A mortgage in which the principal can be paid partially or in full at any time without penalty.
Portable Mortgage - A mortgage that can be transferred from one property to the next by the borrower.
Pre-Approval - A process that a Home Buyer goes through where information and documentation is collected and credit is checked in order to ensure that the Home Buyer can qualify for a mortgage and how much of a mortgage they qualify for.
Prepayment Privilege - A mortgage feature that allows the borrower to prepay a portion or all of the principal balance with or without penalty. This is frequently restricted to specific amounts and times.
Principal - The mortgage amount initially borrowed, or the portion still owing. Interest in calculated on the principal amount.
Refinancing - Paying off the existing mortgage and arranging a new one, or renegotiating the terms and conditions of an existing mortgage.
Renewal - The renegotiation of a new mortgage term when the original term has matured (expired).
Stress Test - The name given to a regulation put in place by the Federal Government where home buyers must qualify for their mortgage at a higher interest rate than what's available in the market. The idea behind this is to ensure that Canadian home buyers are still able to afford their mortgage if interest rates were to rise in the future.
Term - The length of time that the interest rate is fixed. It also indicates when the principal balance is due and payable to the lender.
Title Insurance - A one-time premium insurance that protects the title of your property against losses incurred as a result of undetected or unknown title issues.
Variable Rate Mortgage - A mortgage for which the interest rate is based on the Prime Lending Rate and therefore will fluctuate along with the Prime Rate.
