Definitions of common terms
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- Amortization Period:
- The actual number of years it will take to pay back your mortgage loan.
- Appraised Value:
- An estimate of the value of the property. Conducted for the purpose of mortgage lending by a certified appraiser. This appraisal is not to be confused with a building inspection.
- Assumability:
- Allows the buyer to take over the seller's mortgage on the property.
- Closed Mortgage:
- A mortgage that locks you into a specific payment schedule. A penalty usually applies if you repay the loan in full before the end of a closed term.
- Condominium:
- The owner has title to a single unit, as well as a share in the common elements such as elevators or surrounding land.
- Condominium Fee:
- A common payment among owners that is allocated to pay expenses.
- Conventional Mortgage:
- A mortgage loan issued for up to 75% of the property's appraised value or purchase price, whichever is less.
- Down Payment:
- The buyer's cash payment toward the property. The difference between the purchase price and the amount of the mortgage loan.
- Equity:
- The difference between the home's selling value and the debts against it. High-Ratio Mortgage:
- A mortgage that exceeds 75% of the home's appraised value. These mortgages must be insured for payment.
- Interest Rate:
- The value charged by the lender for the use of the lender’s money. Expressed as a percentage.
- Land Transfer Tax, Deed Tax or Property Purchase Tax:
- A fee paid to the municipal and/or provincial government for the transferring of property from seller to buyer.
- Maturity Date:
- The end of the term, at which time you can pay off the mortgage or renew it.
- Mortgagee:
- The person or financial institution that lends the money.
- Mortgagor:
- The borrower.
- Mortgage Insurance:
- Applies to high-ratio mortgages. It protects the lender against loss if the borrower is unable to repay the mortgage.
- Mortgage Life Insurance:
- Pays off the mortgage if the borrower dies.
- Open Mortgage:
- Allows partial or full payment of the principal at any time, without penalty.
- Portability:
- A mortgage option that enables borrowers to take their current mortgage with them to another property, without penalty.
- Pre-Approved Mortgage:
- Qualifies you for a mortgage before you start shopping. You know exactly how much you can spend and are free to make a "firm" offer when you find the right home.
- Prepayment Privileges:
- Voluntary payments in addition to regular mortgage payments.
- Principal:
- The amount borrowed or still owing on a mortgage loan. Interest is paid on the principal amount.
- Refinancing:
- Paying off the existing mortgage and arranging a new one or re-negotiating the terms and conditions of an existing mortgage.
- Renewal:
- Re-negotiation of a mortgage loan at the end of a term for a new term.
- Second Mortgage:
- Additional financing. Usually has a shorter term and higher interest rate than the first mortgage.
- Term:
- The length of time the interest rate is fixed. It also indicates when the principal balance becomes due and payable to the lender.
- Title:
- Legal ownership in a property.
- Variable-Rate Mortgage:
- A mortgage with fixed payments but fluctuating with interest rates. The changing interest rate determines how much of the payment goes towards the principal.
- Vendor Take-Back Mortgage:
- When the seller provides some or all of the mortgage financing in order to sell their property.
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