Below you will find a listing of common (although sometimes confusing) terms used in regards to Canadian mortgages. A brief description is shown below, click the term to read the full definition.
Adjustable Rate Mortgage - A mortgage rate that fluctuates or floats with the Bank of Canada’s prime lending rate.
Amortization - Number of years it takes to repay the entire amount of the mortgage, most often twenty-five years.
Appraisal - An independent assessment of the value of a property, which may or may not equal the purchase price.
Closed Mortgage - A mortgage that cannot be prepaid renegotiated or refinanced prior to the end of the term without incurring a prepayment penalty.
Closing Date - The date on which legal ownership of a property is transferred from seller (vendor) to buyer (purchaser).
CMHC - Canada Mortgage and Housing Corporation a federal crown corporation provides mortgage default insurance to financial institutions so Canadians can buy a home with as little ... [full definition]
Conventional Mortgage - A conventional mortgage requires a down payment of at least of the purchase price Conventional mortgages have the lowest carrying costs because they do not ... [full definition]
Details - The little things that matter.
Down Payment - The portion of the purchase price that the buyer must pay up front from their own resources (not borrowed funds).
Equity - The difference between the price for which a home could be reasonably sold and the debts registered against it.
Fire Insurance - The purchaser must have fire insurance in place prior to receiving any mortgage funds.
Fixed Mortgage - The interest rate and payment are fixed and won’t change for the duration of the term.
Gross Debt Service Ratio (GDS) - The percentage of the borrower’s gross monthly income that will be used for monthly payments of principal, interest, taxes, heating and condominium fees.
Gross Income - The amount you make before taxes. This is usually substantially more that your Net Income.
Inspection - The examination of the house for structural and other defects by an expert chosen by the buyer.
Interest - The cost of borrowing money, usually expressed as an annual percentage rate.
Interest Rate - This is the amount of interest you will be charged. This is generally a percentage of the total amount borrowed.
Mortgage Broker - An individual who works for a financial institution or brokerage who specializes in commercial or residential mortgages Mortgage professionals act as a mediator between the ... [full definition]
Mortgage Default Insurance - Insurance to protect a lender in the case of default which allows borrowers to purchase a home with as little as 5% down.
Mortgage Professional - An individual who works for a financial institution or brokerage who specializes in commercial or residential mortgages Mortgage professionals act as a mediator between the ... [full definition]
Mortgagee - A lender who advances mortgage funds to a borrower and uses the property as collateral for the loan.
Mortgagor - A borrower who receives mortgage funds in return for a personal guarantee to repay the monies and pledges the property as collateral for the loan.
Net Income - The amount of money you take home after taxes.
Notice of Assessment - Notice of Assessments are issued by the CRA when they have received your filed income taxes
Open Mortgage - A mortgage that can be repaid at any time without penalty.
Pre-payment Options - The right to pay extra or prepay certain amounts of the principal prior to maturity of the term without penalty.
Principal - The amount of money actually borrowed.
Realtor - A licensed agent who negotiates the purchase and sale transaction between the buyer and the seller.
Survey - A document that illustrates the property boundaries and measurements, specifies the locations of buildings on the property, and indicates any easements or encroachments.
T1 generals - T1's are your personal tax returns that are filed with CRA
Total Debt Service Ratio (TDS) - The percentage of the borrower s gross monthly income that will be used for monthly payments of principal interest taxes heating and other outstanding loans ... [full definition]
Variable Rate - An interest rate that fluctuates or floats with the Bank of Canada’s prime lending rate.