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Home > Residential Mortgages > Tools > Glossary
Glossary
MCAP knows that real estate lending and investing
comes with some specialized terminology Here are some common terms and
their definitions for residential mortgages, categorized alphabetically.
AMORTIZATION
The number of years it takes to repay
the mortgage.
APPRAISAL
The estimate of the value of the property
offered as security for a mortgage. This is completed by an independent
appraiser and may or may not match the purchase price.
BLENDED PAYMENTS
Equal payments consisting of a principal
and an interest component, paid each month during the term of the
mortgage. Principal portion increases while the interest portion decreases
over the term of the mortgage but the payment remains consistent.
CERTIFICATION
OF LOCATION
A document prepared by a qualified surveyor
specifying the exact size and location of the property and describes
the type and size of building(s), including additions, and the exact
location of the building(s) on the property.
CERTIFICATION
OF SEARCH
Document stating all transactions registered
against the property - e.g. sales, mortgages, etc.
CLOSED MORTGAGE
A mortgage that cannot be prepaid, renegotiated
or refinanced prior maturity. A lender may allow pay out under certain
conditions but will levy a penalty charge for doing so if the certain
limits specified in mortgage documents are exceeded.
CLOSING COSTS
Costs payable on sale closure. Standard
charges include: adjustment for property tax prepayment, utilities
and condominium fees, if any, made by the vendor; property land transfer
tax; property insurance; and legal fees.
CLOSING DATE
Date you receive the keys and officially
take possession of your new home.
CONDITIONAL
OFFER
Offer to purchase made with specific
conditions that must be met before finalization. Conditions could
include arranging satisfactory financing (mortgage), satisfactory
inspection or selling existing residence. There is usually a time
limit in which each specified condition must be met.
CONDOMINIUM
Ownership in which owner has title to
a dwelling unit and owns a share of the common elements - e.g. elevators,
hallways and the land.
CONVENTIONAL
MORTGAGE
First mortgage loan which does not exceed
75% of the appraised or purchase price ( whichever is less).
CRITICAL
ILLNESS INSURANCE
Affordable and cost-effective insurance
that pays out your mortgage balance should you contract a disease/medical
condition covered under the policy whether you survive or not.
DEED
Certificate of Ownership is the final
document prepared by your solicitor, to be signed by the vendor transferring
ownership of dwelling to the purchaser. Document is then registered
against the title to the property as evidence of ownership.
DEPOSIT
Sum of money paid by purchaser on making
an offer. Usually held in trust by the real estate broker or solicitor
until the closing.
DOWN PAYMENT
Funds (usually cash) paid by the purchaser.
Represents the difference between the purchase price and mortgage
amount.
EQUITY
Interest the owner holds in a property
over and above all claims to the property. It is usually the difference
between any outstanding mortgages and the market value of the property.
ESTOPPEL
AGREEMENT
Provides information on a condominium
corporation, including the development's finances, insurance and gives
you an overview of the condominium corporation's affairs.
FIRE
/ PROPERTY INSURANCE
Before closing, the purchaser must have
fire and property insurance in place. The mortgagor lender requires
evidence of the insurance before funds are advanced.
FIXED RATE
MORTGAGE
Mortgage has a rate of interest that
is fixed for a predetermined term, usually 6 months to 10 years, and
cannot be renegotiated, except upon payment of penalty.
GROSS
DEBT SERVICE RATIO
Percentage of your gross income that
will be used for monthly payment of principal, interest and taxes,
heating and condominium fees, if applicable.
HIGH RATIO
MORTGAGE
Mortgage loan that exceeds 80% of the
lesser of the purchase price or appraised value. This mortgage must
be insured and borrowers must pay an application fee and insurance
premium (which may be added to the mortgage) to the insurer.
INTEREST RATE
Rate of return lender receives for permitting
borrower to use mortgage money for specified time. Interest rate is
usually expressed as an annual percentage rate, calculated semi-annually,
not in advance.
LOAN TO VALUE
Ratio of the mortgage to the appraised
value or purchase price of the dwelling, lesser of the two, expressed
as a percentage.
MATURITY DATE
Last day of the term of the mortgage
agreement.
MORTGAGE
DEFAULT INSURANCE
Insurance available in all urban centers
and is mandatory for borrowers with a down payment of less than 25%.
Premium added to mortgage and paid by the borrower over the life of
the mortgage. This insures the lender against loss in case of default
on part of the borrower. Mortgage Insurance is provided by a number
of insurers.
MORTGAGE
LIFE INSURANCE
Insurance that will pay your mortgage
in full in the event of your death.
OFFER TO PURCHASE
Formal, legal agreement offering a certain
price for a specified real property. Offer may be firm (condition
free) or conditional (certain conditions to fulfill). Upon acceptance,
it forms a contract that determines the rights/obligations of both
the buyer/seller. Includes legal and/or municipal description, purchase
price, closing date, mortgage and terms of repayment and lists specific
items included/excluded from sale
OPEN MORTGAGE
Mortgage that be prepaid at any time
prior to maturity, without penalty.
P.I.T
Principal, interest and taxes
PREPAYMENT
CHARGE
Fee charged by the lender when borrower
pays off all/portion of the mortgage quicker than stated in mortgage
documents.
PREPAYMENT
OPTION
Right to pay specified amounts of the
principal prior to the maturity date of the mortgage. Penalties may
be payable when a prepayment option is excised under a closed mortgage.
PRINCIPAL
Amount owed to lender at any specified
time, not including interest.
REFINANCE
Arrange new mortgage for increased amount.
Old mortgage is paid off and discharged from the proceeds of the new
mortgage. Also known as "EQUITY TAKE OUT."
RENEW
Extend a mortgage agreement with existing
lender for another term. The length of the terms and conditions (e.g..-
interest rate) may change.
TERM
Length of time during which the specific
mortgage agreement is effective. When term expires, the balance of
the principal is either repaid in full or mortgage is renegotiated
at current market rates/conditions.
TITLE
Right of ownership of property, and
including evidence of such ownership.
TOTAL
DEBT SERVICE RATIO
Percentage of the your gross income
that will be used for monthly payments of principal, interest, taxes,
heating and all other outstanding loans and debts.
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