Mortgage Terms Glossary

We've put together a list of common mortgage and home buying terms to help you better understanding the process of buying a home.

The length of time it takes to repay a mortgage loan in full with interest at a given interest rate.

The taking over of the mortgage debt and obligations from the owner of the mortgaged property.

An agreement is considered binding when both parties have signed and agreed to all of the terms of the contract. This would include a signed copy of the purchase and sale agreement even if all the conditions have not been waived.

A division of the Government of Canada that acts as Canada’s national housing agency. CMHC’s mandate is to help Canadians access a variety of affordable housing options by insuring mortgages against default for banks. CMHC approved buyers may purchase property with as little as 5% down payment.

A mortgage where prepayments may be restricted. Prepayments maybe subject to a prepayment charge if outside of the mortgage prepayment rules.

The security for the loan, the property being mortgaged.

A mortgage that covers up to 80% of the property value and where the bank is not insured against borrower default.

The ratios used to measure an applicant’s capacity to meet the mortgage requirements.

The cash contribution that must be made by a borrower towards the purchase of a property to qualify for a mortgage.

Renegotiation of the existing mortgage term prior to the maturity date.

The difference between the property value and the outstanding balance of mortgages and other encumbrances registered against the property.

A mortgage which represents the first charge against the property.

The interest rate remains constant until the term of the mortgage matures.

A private residential mortgage insurer that helps Canadians access a variety of affordable housing options by insuring mortgages against default for banks. Like CMHC, Genworth approved buyers may purchase property with as little as 5% down payment.

The regular blended payment of principal and interest (P&I) required to repay a mortgage over the amortization period. This payment does not include property tax or creditor insurance premiums and payments.

The date your lender first starts calculating the normal ongoing interest that you’ll pay. Interest adjustment dates commonly begin on the date of your first payment frequency.

A one-time payment made to the bank to cover the interest owed on the mortgage from the possession date, up to the interest adjustment date when buying a new home. The interest adjustment payment amount is calculated by adding up the number of days from the possession date to the interest adjustment date and multiplying that number by the daily interest owed on the mortgage.

The bank’s loss in interest earnings on the outstanding balance of a fixed rate closed term, over the remaining term of the mortgage when a mortgage contract is broken before maturity.

The amount of a loan as a percentage of the value of the mortgaged property. For example, if a bank mortgages $140,000 of a property worth $200,000, the LTV ratio is $140,000/$200,000= 70%.

A mortgage where the loan to value ratio is 80% or less.

The expiry date of the mortgage term. The balance of the loan and interest on the loan must be repaid in full or renewed for another mortgage term.

A contract by which a person borrows money to buy a house and pays back the money over an agreed time frame.

A Preliminary Mortgage Approval by the lender confirming the approval of a mortgage and where all terms and conditions of the approval have been provided to the customer in writing.

A creditor insurance plan that is underwritten by Manulife. It offers life and disability insurance to the borrowers on a residential mortgage.

A mortgage that is insured by CMHC against borrower default under the National Housing Act.

A property where the owner does not occupy any of the dwelling units in the property.

A mortgage that can be prepaid in part or in full at any time, without notice or prepayment charge. It can be converted to a fixed rate mortgage at any time for the remainder of the term remaining, at the current market rates.

A property where the owner occupies one of the dwelling units in the property.

This is a feature of residential mortgages that allows customers to transfer the interest rate, loan balance and remaining term of an existing mortgage to another property in their name. This feature in most situations will benefit the customer by avoiding or reducing a prepayment charge by blending interest rates when additional funds are required.

An interest charge applied when prepaying all or part of the mortgage balance before maturity on a closed term, or when prepayment options have been exceeded. The charge may be calculated as an IRD or three months interest penalty.

A clause in a mortgage agreement which outlines the conditions governing prepayment of principal.

Refers to the components of a mortgage payment. Principal is the money used to pay down the balance of the loan. Interest is the charge paid to the bank for borrowing the money.

The lesser of the purchase price or the appraised value of a property.

Renegotiation of the mortgage for a further term.

A mortgage registered against the title of a property which ranks behind the claims of the first mortgage lender.

Permits a customer with a mortgage at another financial institution to transfer the mortgage to a new lender.

The period ending at the maturity date of a mortgage loan.

A mortgage where the interest rate fluctuates based on changes in the Bank of Canada’s prime rate during the term.

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ContactRodney Biggar
Licensed Mortgage Associate
 
Phone (780) 960-5897
Fax (780) 960-5898
info@theBIGGARteam.ca
Hillside Centre
#204 636 King St.
Spruce Grove, AB
T7X 4K5

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