Glossary of mortgage terms

Throughout the mortgage process, there are several specialized words and phrases you may not have come across before. Let’s explore common mortgage terms below.

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Common Mortgage Terms

Blended payments are a way of repaying a mortgage where payments remain consistent over an agreed upon amortization period and consist of both a principal and interest component. Over the course of the term, the principal portion will increase while the interest portion will decrease.

Closing costs are expenses that must be paid upon the closing of the property sale. As a buyer, closing costs typically include Land Transfer Tax, legal fees, and any costs the lawyer pays on your behalf, such as title insurance, survey costs, courier charges, among others. The seller's closing costs include real estate commission (if applicable), legal fees and any costs their lawyer pays on the seller's behalf.

An offer to buy a property only if specific conditions are met. Conditions could include arranging financing (i.e. a mortgage), passing a home inspection, or the buyer selling their current residence by a certain date. There is usually a deadline by which each condition must be met.

The amount of money paid by the buyer when a signed agreement of purchase and sale is submitted to buy the property. The deposit is usually held in trust by the real estate broker or solicitor until the sale closes, at which time the deposit goes toward part of the total purchase price.

A type of insurance that protects the mortgage lender in case the borrower defaults on their mortgage payments. Mortgage insurance is provided by a number of insurers and may be mandatory for some borrowers. The premium is added to the mortgage and paid by the borrower over the life of the mortgage.

The Offer to Purchase is a formal, legal agreement offering a certain price for a specified property. The offer may be firm (condition free) or conditional (where certain conditions must be fulfilled). Upon acceptance, the Offer to Purchase forms a contract that determines the rights and obligations of both the buyer and the seller. This includes the purchase price, closing date, mortgage information and terms of repayment, and lists specific items to be included and/or excluded from the sale of the property.

Borrowers may have the option to pay specified amounts of the principal prior to the maturity date of the mortgage. Prepayment options, also referred to as privilege payment options, are set out in the mortgage agreement and may include certain lump sum payments or specified payment increases.

Have Questions?

For any questions you may have or if you are looking to start a mortgage application, professional mortgage brokers are available to help.