Resources

ABANDONMENT

When the condition of ownership for a property becomes a burden or is troublesome to the owner, he or she may choose to become a nonpayer and abandon the property. In the event of “abandonment,” creditors can seek to recover their money as the property is no longer part of the estate.

ACCREDITED MORTGAGE PROFESSIONAL

Accredited Mortgage Professional (or AMP) is a professional designation created the by Canadian Association of Accredited Mortgage Professionals. It essentially a designation that demonstrates commitment to ongoing education and ethical behavior in the mortgage industry.

ADJUSTABLE-RATE MORTGAGE (ARM)

An adjustable-rate mortgage is a very specific type of variable rate mortgage where the interest rate is calculated by a relationship to the prime lending rate. An adjustable rate will be quoted as Prime plus or minus an amount to arrive at the rate the interest will be calculated. Example 1: Prime minus 0.90%, if prime is 6.95% the rate will be 6.95% – 0.90% = 6.05%; 6.05% is the rate that interest will be calculated on the loan. If the prime rate changes (6.95%) up or down, then the calculation rate will also change by the same amount. Example 2: Prime changes from 6.95% to 6.70% (-0.25%) then the interest rate in Example 1 will also drop from 6.05% down by the same -0.25% to 5.80%. An adjustable-rate interest rate mortgage term will have adjustable payments for the term, but the amortization will remain constant for the term of the loan.

ADJUSTMENT DATE

An adjustment date, or interest adjustment date, is the date in which the interest will begin to accrue on your mortgage, before the first regular payment is made on the mortgage.

AMORTIZATION PERIOD

Amortization period refers to the number of years it will take to pay down the principal balance of your mortgage to zero balance. The most common amortization period is 25 years on insured mortgages; however, you can choose an amortization period of up to 30 years for uninsured mortgages.

AMORTIZATION SCHEDULE

An amortization schedule is a table of periodic payments made to a mortgage, showing the amount of the regular payment, the amount applied to interest, the amount applied to principal and the remaining balance after the payment is made for the whole term of the mortgage.

APPRAISED VALUE

Appraised value is the fair market value of a piece of property as determined by a licensed and qualified appraiser.

ARTICLES OF INCORPORATION

A document filed with the Government by a corporation’s founders describing the purpose, name, place of business, and other details of the corporation. These will frequently include a certificate of incorporation as well.

ASSET

Something that you own that has value or use. Example: property, sticks, bonds, TSFA’s, RRSPs, vehicle, savings, etc.

ASSUMABLE MORTGAGE

An assumable mortgage is a mortgage that may be transferred to another individual or corporation without changing the terms of the original mortgage. Any assumptions are always at the discretion of the lender.

BLANKET MORTGAGE

A blanket mortgage is when a mortgage is registered as a charge on the title of two or more properties to reduce the risk to the lender by increasing the amount of security of collateral. The technical term for a blanket mortgage is an inter-alia mortgage charge.

BORROWER

An individual or corporation that takes out a loan from another individual, corporation or financial institution under an agreement to pay it back under agreed to terms plus interest and fees.

BRIDGE LOAN

A bridge loan is a type of mortgage loan that is one form of Interim Financing usually registered as a first and/or second mortgage and is blanketed (Inter-Alia) across two or more properties titles to secure the loan. This type of short-term financing is used when one property is purchased and the selling property, where the down payment is coming from for the purchase, is not closing (selling date) until after the purchase date of the new property. A bridge loan is paid off immediately following the closing date of the selling home from the proceeds of the sale.

CLOSED MORTGAGE

A mortgage that, for a specified time, locks you into paying the mortgage for that period. It also locks in a mortgage rate for the same period, which doesn’t increase/decrease if rates do unless it is a variable-rate or adjustable-rate mortgage. Generally, if you break a closed mortgage, you will be required to pay the greater of a three months’ interest penalty or an interest rate differential calculation. The most common term for a traditional residential closed mortgage is five (5) years, and the most common term for a private residential closed mortgage is one (1) or two (2) years.

CLOSING COSTS

These are costs that are associated with completing the mortgage transaction. Some closing costs include, but are not limited to, lawyer fees, title insurance, appraisal fees, fire insurance and home inspection fees.

CLOSING DATE

The closing date represents the day ownership of a home transfers from the seller to the buyer and is stated and agreed to by all parties on the sale contract.

COLLATERAL

A security or guarantee pledged for the repayment of a loan if an individual does not have enough funds to repay. In respect to mortgage loans, the collateral is the property being mortgaged.

COMMERCIAL MORTGAGE

A commercial mortgage is secured by commercial property such as an apartment complex, mall, office building, development land, industrial site, warehouse, mixed use building, etc.

COMPOUND PERIOD

The number of times per year that the interest rate is compounded. In Canada, mortgage interest rates are compounded semi-annually, or twice per year for fixed rate traditional mortgages.

CONDO FEE

Condo fees consist of the monthly payments collected that cover a resident’s shared expenses for the upkeep of all common areas, sometimes called Strata Fees.

CONVENTIONAL MORTGAGE

This is a legacy mortgage term, the new term for this type of mortgage is an Uninsured Mortgage. This is a mortgage loan that is uninsured up to 80% of the home’s appraised value or purchase price (whichever is less).

CREDIT BUREAU

A credit reporting agency that gathers credit information and compiles it into a credit report. The two credit bureaus in Canada are Equifax Canada and Trans Union of Canada.

CREDIT REPORT

A credit report is a report/history of an individual’s credit. Lenders use this information to determine a borrower’s credit worthiness and likelihood to repay the mortgage loan as agreed.

CREDIT SCORE

A credit score is a number given to your credit situation and credit history by one of the credit reporting bureaus/agencies in Canada, it may be referred to as the FICO score. The score generally ranges from 300 on the lowest side to 900 on the highest side. Although most traditional mortgages require at least a credit score of greater than 600, to get the best rates and terms it typically needs to be above 700 or 720 depending on the lender. Private lenders will typically look at any or no credit score and adjust the rate based upon the risk associated with a low or no score.

DEBT CONSOLIDATION

Debt consolidation is a means of combining several debts into one debt that has one monthly payment.

DEFAULT

Failure to pay a debt as agreed. In respect to mortgages, failure to make mortgage payments as agreed in the mortgage loan contract.

DEPOSIT FINANCING

Short-term financing when a client has sold their home, and they need financing for the deposit on the new home they have purchased. The down payment is typically coming from the sale of their current home, and they may not have the funds available for a deposit that is needed at the time of an accepted offer to purchase is signed to secure the deal. There must be enough available equity in the home to be paid when the purchase and sale complete.

DOWN PAYMENT

The amount of cash that the buyer can initially invest in the property. The down payment is the difference between the purchase price and the value of the mortgage loan.

EQUITY

The fair market value of the property above and beyond any amounts being owed by any secured debts like mortgage and HELOC’s. It is basically the difference between the price that a home could be sold for in an open real estate market less the amount still owing on any mortgages. An example would be a home appraised for $1,000,000 that has an outstanding mortgage balance of $600,000; there would be $400,000 of equity remaining in the home ($1,000,000 – $600,000 = $400,000)

EQUITY LOAN

An equity loan is a loan secured by real estate against the unsecured portion of the equity in the property.

EQUITY TAKE OUT (ETO) MORTGAGE

An equity take-out mortgage is simply a mortgage loan used to ‘take out’ equity from a property.

FAIR MARKET VALUE

Fair market value (FMV) is defined as the price a ready, willing and able buyer, with knowledge of all pertinent facts, is willing to pay for a certain piece of property in an open real estate market. This is usually determined for lenders by having an appraisal completed on the property.

FIRST MORTGAGE

A first mortgage is the primary lien charge registered on the title of a property in “first” position. The mortgagee (lender) loans money to a mortgagor (borrower) who grants a mortgage on a property as security. There can be as many liens registered on a title as there are lenders willing to provide funds to borrowers. This is the highest position of security in the event of default of all secured debts on the property.

FIXED RATE MORTGAGE

A mortgage where the interest rate has been fixed for a certain length of time, generally known as the mortgage term. The rate is guaranteed for the term stated and can be anywhere from 1 to 10 years in Canada.

FORECLOSURE

The legal process in which the mortgage lender sells the mortgaged property because the borrower has defaulted on his or her mortgage loan.

GDSR (GROSS DEBT SERVICE RATIO)

This is the ratio expressed as a percentage of basic housing costs of homeownership to the gross income of the borrower. Basic homeownership costs including mortgage payments (principal + interest), HELOC payments, property taxes, and heat payments (if there are rental properties these costs must also be included in the calculation). If the property is a condominium, condo (strata/maintenance) fees will also have to be included into the costs. The gross income is typically the before tax income that is reported on line 15000 of your T1-General income tax return and your CRA Notice of Assessment. The formula is GDSR = combined annual home ownership costs / total income X 100%. (Related item is the TDSR, see definition in this glossary)

GIFT LETTER

This is a letter stating that the monetary gift giver (must be an immediate family member) in making a gift of a certain amount to the gift receiver for the down payment of a home. It also states that the gift is genuine and that the gift receiver (or home buyer) is not required to pay back the gift at any time.

HELOC

A HELOC is an acronym for Home Equity Line of Credit and is a revolving credit line to allow access to a portion of the available equity in the home. A HELOC can be the only mortgage on a property but is usually a second mortgage/portion attached to or behind a standard mortgage that has a regular principal and interest payment. A HELOC can also increase in size if it is attached to the standard first mortgage and grows by the amount of the principal paid down on each regular mortgage payment.

HIGH-RATIO MORTGAGE

A mortgage that is more than 80% of the home’s appraised value or purchase price (whichever is less), this is known as the loan-to-value ratio. High-Ratio is a legacy term that is now known by the name Insured Mortgage. Insured Mortgages (High-Ratio mortgages) must be insured to protect the lender against default with one of the three (3) mortgage insurance providers in Canada, Canadian Mortgage and Housing Corporation (CMHC), Canada Guaranty and SAGEN (formally known as Genworth).

HOME (HOMEOWNERS) INSURANCE

Homeowners insurance is a form of property insurance that covers losses and damages to your home due to events like fire, theft, and/or optional insurance riders that cause damage through certain natural elements such as hail, tornado, lightning and flooding. There is typically a liability included in these policies to cover damages to third parties injured or suffering loss on a homeowner’s property.

HOME (HOMEOWNERS) INSURANCE POLICY

A homeowners insurance policy refers to the actual written outline of the coverage of homeowner’s insurance coverage of a property.

HIGH YIELD MORTGAGE

A high yield mortgage is a mortgage with a higher interest rate when speaking in terms to an investment or investor. The yield refers to the return on investment (ROI) for the mortgage investment; this term does not apply from a borrower’s perspective.

INSURABLE MORTGAGE

A mortgage that is up to 65% of the home’s appraised value or purchase price (whichever is less), this is known as the loan-to-value ratio. Insurable Mortgage is the new term for what was traditionally called a conventionally insured mortgage. Insurable Mortgages are insured under a bulk insurance policy of the mortgagee (lender) that protects the lender against default when the borrower is putting 35% or more down payment for the purchase price and financing the rest. There are three (3) mortgage insurance providers in Canada, Canadian Mortgage and Housing Corporation (CMHC), Canada Guaranty and SAGEN (formally known as Genworth).

INSURED MORTGAGE

A mortgage that is more than 80% of the home’s appraised value or purchase price (whichever is less), this is known as the loan-to-value ratio. Insured Mortgage is the new term for what was traditionally call a High-Ratio Mortgage. Insured Mortgages must be insured to protect the lender against default when the borrower is putting less than 20% down payment of the purchase price and financing the rest. There are three (3) mortgage insurance providers in Canada, Canadian Mortgage and Housing Corporation (CMHC), Canada Guaranty and SAGEN (formally known as Genworth).

INTER-ALIA MORTGAGE

An inter-alia mortgage is secured by more than one property. A single financing agreement (charge) is registered on the title of each property that is used as security. This type of loan is sometimes called a Blanket Mortgage.

INTEREST RATE

The interest percentage of the mortgage loan charged by the lender for borrowing the lender’s money. In Canada, this mortgage rate is compounded semi-annually (twice per year for standard mortgages) and typically monthly on lines of credit and private mortgages.

INTERIM FINANCING

Interim financing is when a short-term financing is required and can be obtained through a Bridge Mortgage, Private Mortgage or Deposit Financing. Interim financing can be a first, second or third mortgage that is typically paid off in less than two years, usually less than 1 year for Private Mortgages, less than 90 days for Bridge Mortgages and less than 60 days for Deposit Financing. Interim financing is typically used when the sale of the buyer’s current home closes after the purchase of his or her new home closes.

JOB LETTER

A letter from your employer stating your length of employment, guaranteed number of hours worked per week, and income amount.

LENDER

A lender is an individual, corporation or financial institution that makes money available to borrow by other individuals or corporations with the expectation that the funds will be repaid plus interest and fees under agreed to terms between the parties. In the mortgage world, a lender is often referred to as the mortgagee.

LIABILITY

A financial obligation of an individual, money that is owed, such as credit card debt, car payments, mortgage payments, etc. For the purposes of a mortgage application the debt payments will be used to calculate the Total Debt Servicing Ratio (TDSR) of the borrowers for qualifying purposes.

LICENSED MORTGAGE ASSOCIATE

A Licensed Mortgage Associate is a person within a mortgage brokerage to deal with clients with respect to mortgage discussions, applications and walk them through the mortgage process. Also commonly referred to as a Mortgage Broker, Submortgage Broker, Mortgage Agent.

LIEN

A lien is a form of security interest granted to a lender on an item or property to secure the repayment of a loan or debt owed by the borrower.

LOAN

An amount of money that is borrowed under agreed to repayment terms and generally repaid in full plus a certain amount of interest.

LOAN TO VALUE RATIO (LTV)

The ratio of the value of the mortgage loan to the appraised value or purchase price of the property (whichever is less). Example, a home purchased for $1,000,000 with a $400,000 downpayment would require a mortgage of $600,000 at a 60% Loan-to-Value.

MARKET VALUE

The market value is the actual price that a property is likely to or will sell for in an open real estate market without mitigating factors like a “fire sale” in a normal market listing time frame for the time of the sale.

MATURITY DATE

The date that your mortgage term ends. At this point, you can either pay off your mortgage or you may be able to renew it or even refinance it.

MORTGAGE

A mortgage is a loan agreement between a lender (mortgagee) and a borrower (mortgagor) where the lender agrees to provide money to a borrower to purchase or finance an item of high value such as a house, condominium, townhouse, property, land, recreational vehicle or a boat. The mortgage will be registered as a lien charge on the title of a property as security ensuring repayment of the loan.

MORTGAGE AFFORDABILITY

Mortgage affordability refers to the amount of money a mortgage borrower can afford to make on a regular basis towards the repayment of a mortgage. It is based upon their income, expenses, and the proposed monthly payment using the Gross Debt Servicing and Total Debt Servicing Ratio’s to determine the maximum available mortgage.

MORTGAGE AMORTIZATION

Mortgage amortization is the practice of spreading the repayment of mortgage loan over the asset’s useful life. The most common amortization period for insured mortgages is 25 years and for uninsured mortgages it is 30 years.

MORTGAGE APPLICATION

The mortgage application is the document an applicant completes, certifies and submits to a lender for the purpose of obtaining mortgage financing for a property.

MORTGAGE BALANCE

A mortgage balance is the full amount owed at any period during the duration of the mortgage loan and is the sum of the remaining outstanding principal owing, accrued interest and any charges and fees owing.

MORTGAGE BROKER

A mortgage broker is an intermediary who arranges and facilities mortgages between borrowers and lenders. A mortgage broker must be licensed in the province where they are conducting business and are generally responsible for the management role within a mortgage brokerage. They are also responsible for ensuring that the brokerage complies with the Real Estate Act.

MORTGAGE BROKERAGE

A mortgage brokerage is a legal identity licensed to trade (discuss, arrange and facilitate) in mortgages. Mortgage Brokers and Licensed Mortgage Associates must be licensed under a mortgage brokerage.

MORTGAGE COMPANY

A mortgage company is a business with the principal activity of providing or servicing mortgage loans. A mortgage company may be a chartered bank, a credit union, a trust company or other financial institution providing mortgage loans.

MORTGAGE DEED

A mortgage deed is a document in which the mortgagor (borrower) transfers an interest (security) in real estate to a mortgagee (lender) for the purpose of providing a mortgage loan.

MORTGAGE HOLDER

A mortgage holder is an individual or entity who owns the mortgage loan that was extended to a homeowner, and is the party entitled to enforce the terms of the mortgage. The mortgage holder is often referred to as the mortgagee or lender.

MORTGAGE INSURANCE

This is insurance that is required for insurable mortgages (high-ratio mortgages) and insurable mortgages (conventional insured). It protects the lenders interest if a borrower defaults on a mortgage. The three mortgage insurers in Canada are Canadian Mortgage and Housing Corporation (CMHC), Canada Guaranty, and SAGEN (formerly known as Genworth). Without mortgage insurance, Canadians need a 20% down payment to obtain a mortgage for a home purchase.

MORTGAGE LENDER

A mortgage lender is an individual, corporation or financial institution that makes money available to borrow by other individuals or corporations with the expectation where the funds will be repaid plus interest, fees and/or charges under agreed to terms between the parties. In the mortgage world, a mortgage lender is often referred to as the mortgagee or lender.

MORTGAGE LIFE, CRITICAL ILLNESS & DISABILITY INSURANCE

This is optional insurance available to the borrower (mortgagor) that pays off the mortgage in the event of their death, critical illness or disability. To learn more about mortgage life, critical illness and disability insurance, please click here.

MORTGAGE LOAN

A mortgage loan is a loan provided by a lender secured by real estate owned by the borrower.

MORTGAGE PAYMENT

A mortgage payment is a periodic regular amount paid to a mortgage holder (lender) for repayment of a mortgage loan. Example: a monthly mortgage payment of $2,500 on a $425,000 mortgage loan.

MORTGAGE PRINCIPAL

Mortgage principal is the outstanding balance of your mortgage at any given point in time.

MORTGAGE QUALIFICATION

Mortgage qualification is the process of applying for a mortgage, having a mortgage application underwritten and submitting mortgage documents to a mortgage lender or mortgage broker for review. The qualification is the standard by which the lender will lend money on a mortgage loan.

MORTGAGE RATE

Mortgage rate is the interest that a mortgage borrower will pay for money borrowed against a mortgage. All mortgage rates are stated with semi-annual compounding in Canada by regulation.

MORTGAGE REFINANCING

Mortgage refinancing is the process of replacing your current mortgage or mortgages on your property with a new mortgage or mortgages and can have new money taken out of the equity of the home or not.

MORTGAGE RENEWAL

A mortgage renewal is a new mortgage term agreement to extend or renew mortgage terms with your mortgage holder (lender). A lender does not have an obligation to renew or extend a mortgage, so it is important to start the renewal process early.

MORTGAGE STATEMENT

A statement received from your mortgage lender that includes such information as property address, outstanding principal balance, monthly payment, interest rate, mortgage term, etc. They are usually sent out once per year.

MORTGAGE TERM

A mortgage term is the length of time, usually in years, in which the parameters of a mortgage have legal effect and is connected to the interest rate on the mortgage.

MORTGAGEE

The party that advances or lends the funds for a mortgage loan, commonly called the lender.

MORTGAGOR

The party that uses their home as a security for a mortgage loan, commonly called the borrower.

NOTICE OF ASSESSMENT

The Notice of Assessment is issued by the Canada Revenue Agency after your income tax return has been filed and reviewed. It specifies what you claimed on your taxes last year, as well as the amount of taxes you owe, or the amount of money that you will be received as a tax refund and is used by lender to verify your gross income.

OPEN MORTGAGE

This is a mortgage that can be repaid to the lender either fully or partially at any time with no penalty. Open mortgage rates are usually higher than closed mortgage rates.

OVERNIGHT RATE

The overnight rate is the interest rate set by the Bank of Canada and is the benchmark cost of borrowing for Financial Institutions in Canada. It is often referred to as the policy interest rate or the key interest rate.

PARI PASSU MORTGAGE

A Pari Passu mortgage where two lenders participate in a co-financing agreement to provide the money a borrower needs in a side-by-side or equal claim of ranking priority in the mortgage charge. Each lender does not have to have an equal amount of money, but both agree to have a pro rata equal claim of equal rank.

PAY STUB

The document from an employer summarizing an employee’s gross pay, taxes, deductions and net pay. Your pay stub should also state the year-to-date earnings.

PORTABLE MORTGAGE

A portable mortgage is a mortgage that permits the mortgage borrower to transfer their mortgage to a new property and with the same lender without penalties. There is no guarantee that a mortgage can be ported, the new property must be approved by the lender.

PORTABILITY

A feature of a mortgage that allows the borrower to “port” their mortgage to a new property if they move before his or her mortgage term is up (with no penalty). There is no guarantee that a mortgage can be ported, the new property must be approved by the lender.

PRE-APPROVED MORTGAGE

A pre-approved mortgage reviews very basic information on your mortgage application for a loan amount before you start looking for home to purchase. It primarily acts as a rate hold, guaranteeing you today’s interest rates until up to 120 days in the future, it does not guarantee that you will get approved. Your income, credit history, qualifying ratios and the property will have to be approved by the lender so make sure you have a subject to condition of financing on your purchase agreement offer.

PRE-AUTHORIZED DEBIT

A pre-authorized debit allows a lender to withdraw regular payments from your bank account when a payment is due.

PRE-AUTHORIZED DEPOSIT

A pre-authorized deposit allows a lender to deposit funds to your bank account when there are proceeds of a mortgage or a refund that belong to the borrower.

PREPAYMENT PENALTIES

If you “break” (or pay down or pay off) your mortgage before your term is up, you’ll have to pay a prepayment penalty or early payment charge. The penalty can be calculated using an Interest Rate Differential or a three months’ interest penalty, it is important to check the mortgage loan conditions to determine what are your prepayment privileges.

PREPAYMENT PRIVILEGE

Some mortgage loans have prepayment privileges where monthly payments can be increased and/or lump sum payments can be made each year to pay down the mortgage balance. It is important to check the mortgage loan conditions to determine what are your prepayment privileges.

PRINCIPAL BALANCE

The amount of money borrowed or still owing on a mortgage loan at a given point of time.

PRIME RATE

Prime rate is the interest rate that Banks, Credit Unions, and other Financial Institutions use to determine interest rates for mortgage loans (specifically variable and adjustable-rate mortgages), car loans, credit cards a other types of loans.

PRIVATE LENDER

A private lender is an individual, corporation, private investor or mortgage investment corporation who lends money secured by a property as collateral. 

PRIVATE MORTGAGE

A private mortgage is loan arranged for the financing of a property obtained from a private lender and is typically obtained through licensed mortgage brokers.

PROPERTY TAX ASSESSMENT

A property tax assessment is a method of placing value on real estate for the purpose of calculating city, town, district or municipal taxation.

PURCHASE CONTRACT

A legally binding document stating the buyer’s intention to purchase a home from the seller provided that certain conditions be met (such as condition of financing, condition of a home inspection, etc.) at an agreed to price. Often referred to as the Purchase & Sale Agreement.

RATE HOLD

A rate hold refers to an agreement between a mortgage lender and an applicant to secure a certain interest rate for a specified number of days between the issuance of a mortgage approval and closing of the real estate purchase and mortgage loan.

RATE LOCK

A rate lock refers to an agreement between a mortgage lender and an applicant to secure a certain interest rate for a specified number of days between the issuance of a mortgage approval and closing of the real estate purchase and mortgage loan. Commonly referred to as a Rate Hold.

READVANCEABLE MORTGAGE

A re-advanceable mortgage is a feature of some mortgage lines of credit, including home equity lines of credit (HELOC) where the repayment of any principal balance becomes available for re-advancement by the borrower in again in the future.

REAL ESTATE AGENT

A person who is licensed and authorized to act as an agent for the purchase and sale of real estate on behalf of the property owner. They are usually paid on commission.

REAL ESTATE APPRAISAL

An unbiased report produced by a recognized appraiser to estimate of the value of a property for a specified purpose such as mortgage lending. Lenders generally require appraisals to verify that the buyer has purchased the home for a fair market price.

REALTOR^®

A real estate agent who is a member of a local real estate board, the Canadian Real Estate Association and a provincial association.

REFINANCING

Paying off the existing mortgage and arranging a new one with either a different lender, or re-negotiating a new term, interest rate, etc. of an existing mortgage.

RENEWAL

The renegotiation of the terms, interest rates, etc. of a mortgage at the end of the term with the existing lender, no new funds can be added.

RESIDENTIAL MORTGAGE

A residential mortgage is a mortgage loan secured against a residential property such as a house with up to 4 units (fourplex), townhouse or condominium.

REVERSE MORTGAGE

A reverse mortgage is a type of mortgage loan available in Canada that is designed for homeowners 55 years and older that allows them to unlock the equity in the home and to not make any regular payments. The owner can live in the home for the rest of their life without making any regular monthly payments.

SALE CONTRACT

A legally binding document stating the seller’s intention to sell a home to a buyer provided that certain conditions be met (such as condition of financing, condition of a home inspection, etc.) at an agreed to price. Often referred to as the Purchase & Sale Agreement.

SECOND MORTGAGE

A second mortgage is a subordinate lien charge to a first mortgage registered on the title of a property in “second” position. The mortgagee (lender) loans money to a mortgagor (borrower) who grants a mortgage on a property as security. There can be as many liens registered on a title as there are lenders willing to provide funds to borrowers. This is the second highest position of security in the event of default of all secured debts on the property.

SECURITY

The property that will be pledged as collateral for a mortgage loan. See Collateral.

SYNDICATED MORTGAGE

A syndicated mortgage loan is an arrangement in which more than one investor pool their money together to fund a mortgage loan offering.

TAKE-OUT MORTGAGE

A take-out, aka Equity Take-Out (ETO) mortgage is a mortgage loan used to “take out” equity from the property to use for other purposes.

TOTAL DEBT SERVICE RATION (TDSR)

This is the ratio expressed as a percentage of basic housing costs, plus the monthly payments of any other consumer debts like credit cards, personal loans and vehicle loans, of homeownership to the gross income of the borrower. Basic homeownership costs including mortgage payments (principal + interest), HELOC payments, property taxes, and heat payments (if there are rental properties these costs must also be included in the calculation). Any consumer debt payments like credit cards, personal loans and vehicle loans will be added to the amount and if the property is a condominium, condo (strata/maintenance) fees will also have to be included into the costs. The gross income is typically the before tax income that is reported on line 15000 of your T1-General income tax return and your CRA Notice of Assessment. The formula is TDSR = combined annual home ownership costs + annual consumer debt payments / total income X 100%. (Related item is the GDSR, see definition in this glossary)

TERM

The length of time the interest rate or relationship to prime rate is guaranteed for. The end of the term is also the time when the borrower must either pay the outstanding mortgage balance or renew/re-negotiate a new mortgage or mortgage term with the lender. If the borrower pays off the mortgage before the term is up, prepayment penalties may apply.

THIRD MORTGAGE

A third mortgage is a subordinate lien charge to a first and second mortgage charge registered on the title of a property in “third” position. The mortgagee (lender) loans money to a mortgagor (borrower) who grants a mortgage on a property as security. There can be as many liens registered on a title as there are lenders willing to provide funds to borrowers. This is the third highest ranking position of security in the event of default of all secured debts on the property.

TITLE

The title or State of Title Certificate lists the current registered owners of a property in the Land Titles Survey Authority registry and provides proof of Legal ownership of a property.

TITLE INSURANCE

Title insurance protects the lender (mandatory) and the owner or mortgagee (optional, must be purchased separately) of the property from any lawsuits or claims arising from a defective title.

UNDERWRITING

The process of reviewing a mortgage application and determining if a lender is willing to provide a mortgage loan to a borrower based on credit, income, assets and other factors.

UNINSURED MORTGAGE

This is the new term for a Conventional Mortgage and means a mortgage loan that is uninsured up to 80% of the home’s appraised value or purchase price (whichever is less).

VARIABLE RATE MORTGAGE

A mortgage rate that is variable means that the interest rate is calculated by a relationship to the prime lending rate. A variable rate will be quoted as Prime plus or minus an amount to arrive at the rate the interest will be calculated. Example 1: Prime minus 0.50%, if prime is 6.95% the rate will be 6.95% – 0.50% = 6.45%; 6.45% is the rate that interest will be calculated on the loan. If the prime rate changes (6.95%) up or down, then the calculation rate will also change by the same amount. Example 2: Prime changes from 6.95% to 6.70% (-0.25%) then the interest rate in Example 1 will also drop from 6.45% down by the same -0.25% to 6.20%. Variable interest rate mortgage terms will have fixed payments for the term, but the amortization can change affecting the outstanding balance of the loan in prime rate change up or down. There is a specific type of Variable rate interest term know as an Adjustable-Rate Mortgage Term where the regular payment goes up and down when prime rate changes instead of the amortization changing.

VOID CHEQUE

A personal, pre-printed cheque with “void” written across is. This is provided to the lender for the account your mortgage payments will be coming out of, as proof that the account is, indeed, yours.