MORTGAGE GLOSSARY.

The number of years it takes to fully pay back the loan through regular payments, which include both interest and principal. The current standard amortization is 25 years, and having more time to pay off your mortgage is an extended amortization.

Assessing a property's market value is the procedure used to determine its worth. Lenders typically request an appraisal to verify the property's market value when considering a purchase or refinancing.

Resources of value that you own or can access. Often used in determining net worth or in securing financing.

Regular payments, including both interest and principal, remain constant over time. Typically, although the total payment remains the same, more of it goes toward reducing the loan amount (principal), while less is allocated to interest as time goes on.

Bridge financing, also referred to as interim or gap financing, is a brief-term loan with a higher interest rate (typically prime + 3% or 4%). This loan is designed to help bridge the time gap between buying a new home and selling your current one, especially when there's an overlap in closing dates. It is secured against the equity in your existing home, allowing you to borrow the down payment for the new home. This way, your mortgage can temporarily cover both properties until both transactions are successfully completed.

A mortgage that cannot be prepaid or renegotiated for a set period of time without penalties and fees.

The fees and taxes due at the closing of a mortgage agreement, which can include Land Transfer Tax (LTT) or title transfer tax, legal fees, and outstanding utilities and property taxes.

A conditional sale is a transaction where the seller and buyer have agreed upon a number of conditions that must be satisfied or fulfilled by one or both parties prior to the offer being “firm” or an offer with “conditions satisfied”.

A home loan with a Loan-to-Value (LTV) ratio of 80% or lower, meaning a down payment of 20% or more, is considered a standard mortgage. If the LTV exceeds 80%, it is termed a 'high-ratio' mortgage, and it is mandatory to have insurance according to legal requirements.

The amount of cash you put towards your home or property purchase that indicates to lenders your financial commitment in securing a mortgage loan. The size of down payment can affect the type of mortgage loan for which you'll qualify: * A down payment of less than 20% of the property's value (often referred to as a high-ratio mortgage) requires mortgage default insurance, which comes with added premiums. * A down payment of 20% or more of the property's value is called a conventional mortgage which doesn't require insurance, but may come with higher interest rates.

A property deed is a formal legal paper that shifts the ownership of real estate from one individual to another. It should include the names of the buyer and seller, a detailed property description, and the signature of the transferring party. Meanwhile, a mortgage deed is a legally binding contract permitting the lender to place a lien on the property until the loan is fully repaid.

An amortization period that is longer than what is considered to be industry standard (currently 25 years). In certain situations, it may be possible to extend the period to a maximum of 30 years.

The difference between the market value of the property and any outstanding mortgages registered against the property. This difference belongs to the owner of that property.

An equity-based mortgage involves qualifying for a loan by considering the property's value and marketability rather than relying on conventional factors like income and credit. This type of mortgage is commonly sought by individuals facing credit issues or those who cannot furnish a traditional income source.

A first-time homebuyer is an individual purchasing a property for the first time or someone who hasn't owned a property for a specified period according to federal regulations. This category of buyers may qualify for federal programs, credits, and rebates intended to assist them in entering the real estate market.

A mortgage for which the interest is set for the term of the mortgage, which also provides set payments and a known amount that will be paid off of principal for the mortgage term selected.

A person with an established credit rating and sufficient earnings who guarantees to repay the loan for the borrower if the borrower does not.

An equity gift is when you buy a property from a family member at a discounted price and the difference between the actual market value and the agreed sale price acts as a gift in the form of equity.

A monetary gift on the other hand is actual money being donated by a family member towards the purchase of a property. Most often the funds are being used for the downpayment but can also be used for closing costs.

A mortgage loan that is more than 80% of the lower of either the property's appraised value or purchase price. This mortgage requires insurance, and borrowers need to pay an application fee along with the insurance premium, which can be included in the mortgage amount.

A home equity line of credit (HELOC) is a flexible financial arrangement that lets you borrow money using the equity in your home. It typically offers a lower interest rate compared to traditional lines of credit or credit cards.

You can borrow up to 80% of the property's purchase price or appraised market value if combined with your existing mortgage, or up to 65% if it's a standalone line of credit. Monthly interest payments are made on the withdrawn amount, and you have the freedom to repay the borrowed amount at your own pace, in addition to your regular mortgage payments.

The date on which the mortgage term will begin. This date is usually the first day of the month following the closing. The interest cost for the days from the closing date to the first of the month are usually paid as part of your mortgage closing costs. Closing a mortgage agreement towards the end of the month will reduce the amount of this particular cost.

An insured mortgage, also known as a high-ratio mortgage, is when the buyer pays less than 20% of the property's purchase price as a down payment, resulting in a Loan-to-Value (LTV) ratio exceeding 80%. Due to the small down payment, the mortgage is required to have mortgage default insurance. This insurance safeguards the lender in case the borrower fails to repay the mortgage, and it involves premiums. Nevertheless, it enables lenders to provide mortgages to buyers with smaller down payments, mitigating their risk.

The Loan-to-Value ratio (LTV) is determined by dividing the mortgage balance by the home's value, typically the purchase price unless there is a recent appraisal. Lenders use LTV to evaluate the risk of a mortgage, assess the borrower's home equity for default insurance, and consider factors for Home Equity Line of Credit (HELOC) applications or when exploring refinance or renewal options.

A mortgage is a legal agreement by which a bank or other creditor lends money at interest to allow someone to buy a home or property. This loan agreement is secured by the title of the borrower's property, which is transferred to the purchaser once the loan is paid in full. At that point, the lender provides a discharge for the mortgage.

The financial institution (lender) who is lending the money in the form of a mortgage agreement.

The person borrowing money through a mortgage agreement.

The interest rate at which a mortgage term is charged. Each month, an interest cost is added to the principal for regular payments. A fixed-rate mortgage has a constant interest rate throughout the specified term. On the other hand, a variable rate is linked to the Prime rate and can fluctuate, impacting the monthly mortgage payment.

Also referred to as a "clean" offer, this is a proposal for purchasing a home on the market without the usual conditions meant to safeguard a buyer from specific risks, such as financial and legal concerns.

When your mortgage principal balance increases due to failure to cover the interest portion due for your payment. For example, if your mortgage interest due is $500, and only $400 is paid then the difference of $100 would be added to your loan's principal balance.

A variable-rate mortgage product that can be repaid at any time during the term, typically without restrictions or penalties (other admin fees may apply). For this convenience, it's usually industry-standard to charge a higher interest rate compared to a closed product. This type of mortgage can be a good option if you're planning to sell your property or pay off the entire mortgage amount in the near future.

A formal and legal contract between a buyer and a seller outlines a specific price for a designated piece of real estate. The offer can either be unconditional, with no attached conditions, or conditional, where specific conditions must be fulfilled.

The original (and outstanding) amount of a mortgage loan, before interest.

The frequency of payments to settle your mortgage loan varies. The typical choice is monthly payments, but there are alternatives like Semi-Monthly, Biweekly, Biweekly Accelerated, Weekly, and Weekly Accelerated. Opting for an accelerated schedule, among other options, can notably decrease interest expenses and expedite mortgage amortization.

Principal, Interest, and Property Tax due on a mortgage.

A prepayment fee is an amount imposed by the lender on the borrower for paying off a mortgage earlier or making extra payments beyond the agreed-upon amount. While there's no specific legal framework for how this penalty should be calculated, it typically involves either the Interest Rate Differential (IRD) or an equivalent of three months' worth of interest, with the higher of the two being charged.

The lowest rate a financial institution charges its most creditworthy customers. The federal funds overnight rate serves as the basis for the prime rate that lenders set, and serves as a starting point for many other interest rates.

A mortgage refinance is when you break your current mortgage and start a new one, either with the same lender or a new one. You might refinance your mortgage to take advantage of a lower mortgage rate, access the equity in your home through a line of credit, or to consolidate other high-interest debts into one mortgage payment.

About 120 days (4 months) before your current mortgage term expires, your mortgage is considered 'up for renewal.' You may receive a renewal offer early, or at most, lenders are legally required to provide your renewal offer 21 days before your term expiration date.

At renewal, your mortgage will need to be either paid out entirely, or renewed (re-signed) again for another term. Before re-signing, your mortgage may be open for pre-payment in part or in full, and may be renewed with your current lender or your mortgage can be transferred to another lender.

A mortgage that does not allow pre-payment privileges, or that has restrictive conditions that make it more expensive or difficult to discharge the mortgage before maturity. Because of a lender's lower costs in offering this type of mortgage, it often comes with lower rates.

A debt registered against a property that is secured by a second charge on the property.

To transfer an existing mortgage from one financial institution to another. Depending on your current mortgage contract, we may be able to arrange this switch at no cost to you. If a transfer occurs before the end of your current mortgage term, there may be pre-payment penalties involved.

A mortgage stress-test is a rate set by the federal government that determines how much you can borrow and still make your mortgage payments if rates go up.

The period of time over which the interest rate, payment and other mortgage conditions are set. At the end of the term the mortgage is due and payable unless renewed.

For your static-payment Variable-Rate Mortgage (VRM) versus a floating payment product (ARM), the trigger rate is the rate at which your payment amount no longer covers the interest cost. You'll likely be asked by the lender (or you should ask) to increase your payment, pay a lump sum or switch to a fixed rate. With no action, your amortization will continue to lengthen (no amount is going to your principal), and any unpaid interest costs are added to your mortgage balance.

The trigger rate is different for every mortgage and depends on the loan balance and interest rate, and it can frequently change during your term.

The final stage of your mortgage approval process, 'unconditional approval' is provided by the lender once it has reviewed all documentation and details to allow your loan to proceed. At this stage, the financing condition on your purchase offer can be waived.

A VRM is a type of variable interest rate product where the payment amount is fixed during the term, even though the interest portion of the payment will increase or decrease along with fluctuations in the lender's prime rate. This variable product is offered by Big Banks, and differs in payment structure from an Adjustable Rate Mortgage (ARM).

The VRM often has a trigger rate or trigger point (depending on lender or product features) in case the prime rate increases to a point where the mortgage payment doesn't cover the interest or if the amortization extends beyond its original length. If this trigger is reached during your term, the lender will set out options to increase your payments or add interest amounts to your principal (see your lender for specific details).