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Acceleration
The right of the mortgage (lender) to demand the immediate repayment of the mortgage loan balance upon the default of the mortgager (borrower).
Adjustable Rate Mortgage (ARM)
A mortgage in which the interest rate is adjusted periodically based on a pre selected index. Also sometimes known as a variable rate mortgage.
Amortization
Means loan payment by equal periodic payment calculated to pay off the debt at the end of a fixed period, including accrued interest on the outstanding balance. Comes from the French word, “mort”, literally to kill the loan owing.
Appraisal
An estimate of the value of property, made by a qualified professional called an “appraiser”.
Assessment
the value of the property for real property taxation purposes. Similar, but not the same as an "appraisal" see above.
Assumption
Assuming or taking over the existing mortgage on the property being purchased. Depending on the terms within the mortgage document this can be done either with or without a qualifying process.
Balloon payment
A balloon mortgage is one where a lump sum, the balance of the loan principal, becomes payable at the end of the term. A mortgage can be interest only with the whole principal due at the end of the term or it may be calculated to amortize over a longer period, say 30 years, but with the outstanding principal balance payable at the end of, say, 10 years.
Blanket Mortgage
A mortgage covering at least two pieces of real estate as security for the same mortgage. This provides greater security for the Lender. It may be possible to get a "partial" release so the Borrower can sell one of the properties provided a suitable principal reduction is made. Same as inter alia
Blended Payments
A method of repayment where principal and interest remain constant in their amount. Blended Mortgage: If your mortgage is portable – and you need extra funds the new mortgage can be added to the old and the rate/term is blended. Some lenders also offer Split Mortgages so you can take a new term for the extra funds.
Borrower (Mortgagor)
One who applies for and receives a loan in the form of a mortgage with the intention of repaying the loan in full. The mortgage is not actually the loan, it just creates the security interest in the property. It is the promissory note that spells out the repayment terms and interest.
Broker
An individual in the business of assisting in arranging funding or negotiating contracts for a client buy who does not loan the money himself.
Builder’s Lien
A claim registered against the title to land by a contractor, supplier of materials or workman with respect to work done or materials supplied to improve that land..
Closed Mortgage
A mortgage agreement which does not provide for prepayment prior to maturity without some form of prepayment penalty.
CMHC
Canada Mortgage and Housing Corporation. CMHC is one of two institutions offering mortgage insurance; the other is GE Capital.
Credit Report
A report documenting the credit history and current status of a borrower’s credit standing.
Commitment
A promise by a lender to make a loan on specific terms or conditions to a borrower or builder. A promise by an investor to purchase mortgages from a lender with specific terms or conditions.
Completion Date
The date on which the purchase and sale of a property becomes final. Accordingly all documentation must be completed and payment of funds made by this date.
Compound Interest
Interest charged not only on the principal sum but also on interest amounts charged in a previous period.
Construction Loan
A short term interim loan for financing the cost of construction. The lender advance funds to the builder at periodic intervals as the work progresses.
Conventional Mortgage
A mortgage that is 75% or less of the value of the property.
DebtService Ratio
The ratio, expressed as a percentage, which results when a borrower’s monthly payment obligation is divided by his or her gross monthly income.
Default
Failure to meet legal obligations in a contract, specifically, failure to make the monthly payments on a mortgage. This can also mean failure to pay property taxes, maintain insurance on the property or even to maintain the interior and exterior of the property.
Deferred Interest
see Negative Amortization
Delinquency
Failure to make payments on time. This can lead to foreclosure. See default.
Down Payment
Money paid to make up the difference between the purchase price and the mortgage amount. Down payments usually are 25 percent or greater of the sales price on a conventional loan. High Ratio loans are often as low as 5% downpayment. When the down payment is less than 25% the Lender will usually require Mortgage Insurance.
Equity
The difference between the fair market value and current indebtedness, also referred to as the owner’s interest.
Fixed Rate Mortgage
The mortgage interest rate will remain the same on these mortgages throughout the term of the mortgage for the original borrower.
Foreclosure
A legal process by which the lender or the seller forces a sale of a mortgaged property because the borrower has not met the terms of the mortgage. Also known as a repossession of property.
Graduated Payment Mortgage (GPM)
A type of flexible-payment where the payments increase for a specified period of time and then level off. This type of mortgage may have negative amortization built into it.
Gross Debt Service Ratio (GDSR)
This is the total cost of housing payments (includes principal, interest, taxes, and sometimes heat and maintenance) divided by the family’s total gross income Generally this ratio should not exceed 32%.
Interest Adjustment Date
A date usually one month prior to the first regularly scheduled mortgage payment date from which interest is calculated for monies advanced previous to that date.
Interim Financing
A construction loan made during completion of a building or a project. A permanent loan usually replaces this loan after completion.
Lien
A claim upon a piece of property for the payment of a debt or obligation.
Loan-to-Value Ratio
The relationship between the amount of the mortgage loan and appraised value of the property expressed as a percentage.
Market Value
The highest price that a buyer would pay and the lowest price a seller would accept on a property. Market value may be different from the price a property could actually be sold for at a given time.
Mortgage Insurance
Money paid to insure the mortgage when the down payment is less than 25 percent. The mortgage insurance insures the lender against loss in case of default by the borrower.
Mortgagee
The lender.
Mortgagor
The borrower or home owner.
Non Assumption Clause
A statement in a mortgage contract forbidding the assumption of the mortgage without the prior approval of the lender. Note: The signed obligation to pay a debt, as a mortgage note.
Offer to Purchase
A formal legal document which offers a specific price for a specified real property. The offermay be firm (with no conditions) or conditional (certain conditions yet to be fulfilled.)
PIT
Principal, Interest and Taxes
Power of Attorney
A legal document authorizing one person to act on behalf of another.
Prepayment
A privilege in a mortgage permitting the borrower to make payments in advance of their due date. This can enable the mortgage to be paid off much more quickly, with a major savings in total interest costs. Usually 15 to 20% of the original mortgage amount can be paid off on every anniversary
Prepayment Penalty
Money charged for an early repayment of debt. Usually equal to three months of interest.
Principal
The amount of debt, not counting interest left on a loan.
Refinance
Obtaining a new mortgage loan on a property already owned. Often to replace existing loans on the property.
Restrictive Covenant
A restriction the use of the land of the covenantor (the Servient Tenement) for the benefit of land belonging to the covenantee (the Dominant tenement). An example would be a restriction on the height of a building on one piece of land so that adjacent or adjoining lands are not put in shadow..
Reverse Annuity Mortgage (RAM)
A form of mortgage in which the lender makes periodic payments to the borrower using using the borrower’s equity in the home as Satisfaction of Mortgage (The document issued by the mortgagee when the mortgage loan is paid in full.
Second Mortgage
A mortgage made subsequent to another mortgage and subordinate to the first one. If the borrower does not make payments on the first mortgage.
Simple Interest
Interest which is computed only on the principal balance.
Survey
A measure of land, land prepared by a registered land surveyor, showing the location of the land with reference to known points, its dimensions and the location and dimensions of any buildings.
Sweat Equity
Equity created by a purchasers work on a property purchased.
Term
The length of time the mortgage agreement exists. At the expiry of the term the contract may generally be renewed for a further term and the rate renegotiated.
Title
A document that gives evidence of an individual’s ownership of property
Title Insurance
A policy, usually issued by a title insurance company which insures a home buyer or lender against errors in the title search. The cost of the policy is usually a function of the value of property, and is often borne by the purchaser and /or seller.
Title Search
An examination of municipal records to determine the legal ownership of the property. Usually is performed by a title company.
Total Debt Service Ratio (TDSR)
This is the total cost of housing payments plus all other installment payments divided by the family’s total gross income. Generally this ratio should not exceed 42%.
Underwriting
The decision whether to make a loan to a potential home buyer based on credit, employment, assets and other factors and the matching of this risk to an appropriate rate and term or loan amount.
Usury
Interest charged in excess of the legal rate established by law.
Variable Rate Mortgage
see Adjustable Rate Mortgage
Verification of Deposit (VOD)
A document signed by the borrower’s financial institution verifying the status and balance of his or her financial accounts.
Verification of Employment (VOE)
A document signed by the borrower’s employer verifying his or her position and salary.
