The number of years it takes to fully pay off your mortgage. As each mortgage term comes to an end and a new interest rate and term is contracted, the payment amount will be reset to maintain the original amortization. Amortization periods in Canada are often 25 or 30 years long.
The process of determining the lending value of a property. There is usually a fee to have a property appraised.
Assuming a mortgage
Taking over the obligations of the previous owner’s or builder’s mortgage when you buy a property.
Canada Mortgage and Housing Corporation (CMHC)
A Crown corporation that administers the National Housing Act for the federal government and encourages the improvement of housing and living conditions for all Canadians. It is one potential source of mortgage loan insurance for high-ratio mortgages.
A mortgage which has a set, unchangeable term. Prepayment privileges will be specified in the mortgage agreement and will vary from lender to lender. Any prepayments above that specifically allowed will be subject to a financial penalty.
Costs that are in addition to the purchase price of a property and which are payable on the closing date. Closing costs include legal fees, property transfer taxes and disbursements.
The date on which the sale of a property becomes final and the buyer takes possession of the property.
A mortgage that you can change from short-term to long-term, depending on your financial needs.
The money that you pay up front for a house. Down payments typically range from 5%-20% of the total value of the home.
Genworth Financial Mortgage Insurance Company Canada (formerly GE Capital Mortgage Insurance Company)
A private mortgage insurance company. It is another potential source of mortgage loan insurance for high-ratio mortgages.
The mortgage you obtain when you have less than 20% of the total purchase price to put down as your down payment. This type of mortgage must be insured (through sources such as CMHC or Genworth).
Insurance to cover both your home and its contents against perils such as fire and theft. It is also referred to as property insurance.
The process of having a qualified home inspector identify any defects a property may have. Some home inspectors will provide an estimated cost of repairs to the defects identified.
If a buyer chooses to have payments start at a time other than on the regular payment cycle (one month after closing if monthly payments are chosen, two weeks after closing if bi-weekly etc.), then a payment is made to cover the period otherwise missed.
Example: the closing date on your new house is August 10th and you request payment on the 15th of each month to match your payroll cycle. Your first regular payment will be calculated from August 15th and paid on September 15th. That leaves four days of interest, August 10th to 14th, that are not accounted for in your first mortgage payment. On August 15th, the lender will take an interest adjustment payment equal to the interest from August 10th to the 14th.
Land transfer tax
A tax that is levied in some provinces on any property that changes hands. In British Columbia, this is known as the property transfer tax and is levied when you purchase or acquire an interest in real property.
Legal fees and disbursements
The cost to retain a solicitor or notary to complete your property transaction. Amongst other duties, the solicitor or notary will handle the transfer of ownership from seller to buyer and register the mortgage, if any, on title. Disbursements represent the out-of-pocket expenses a solicitor or notary incurs on your behalf that you will have to pay. These expenses can include: title and tax searches, courier costs and filing fees.
Lump sum payment
An extra payment that you make to reduce the amount of your mortgage. It is applied directly to the principal outstanding.
A loan that you obtain in order to buy property. The collateral is the property itself.
Mortgage life insurance
This form of insurance pays the outstanding balance of the mortgage in full if the policy holder were to die while the mortgage life insurance policy was in force.
Mortgage loan insurance
Mortgage loan insurance is generally required by lenders when your down payment is less than 20% of the purchase price. It helps to protect lenders against mortgage default, and enables consumers to purchase homes with as little as 5% down payment and to obtain mortgages with interest rates comparable to those with a 20% down payment.
Mortgage interest rate
The rate at which the lender lends out funds for your mortgage.
The cost of hiring packers and movers or renting a van.
Multiple Listing Service (MLS)
A computerized listing of the properties available in your area, including information and pictures of each property.
Offer to Purchase
A legally binding agreement between you and the person who owns the house you want to buy. It includes the price you are offering, what you expect to be included with the house, and the financial conditions of sale: your financing arrangements, the closing date, etc.
A mortgage which you can pay off, renew or refinance at any time without financial penalty. The interest rate for an open mortgage is usually higher than a closed mortgage rate.
Transferring an existing mortgage, with the existing interest rate and terms and conditions, from your current home to a new home. This is known as a “portable” mortgage. When porting a mortgage, prepayment charges for breaking your current mortgage may be avoided.
The interest rate(s) as announced by mortgage lenders at which they will lend out funds.
Pre-approved mortgage certificate
A written agreement that you will get a mortgage for a set amount of money at a set interest rate. Often lenders do not verify any information for pre-approvals, so it is important to provide accurate information to ensure the amount of mortgage outlined in your pre-approval is accurate.
Prepaid property tax and utility adjustments
The amount you will owe if the person selling you the home has prepaid any property taxes or utility bills. The amount to reimburse the seller is calculated based on the closing date.
Repaying part or all of your mortgage principal ahead of schedule. Depending on the terms of your mortgage agreement, there may be a cost or interest penalty for pre-paying.
A legal description of your property and its location and dimensions. An up-to-date survey is usually required by your mortgage lender. If it is not available from the vendor, your lawyer can obtain the property survey for a fee.
Typically involves breaking the term of your existing mortgage, paying appropriate penalties and fees and entering into a new mortgage with the same or a different lender for a new term and interest rate..
Renewal of a mortgage
Once the existing term of your mortgage expires, you have the option of choosing a new interest rate and term with either the original lender or a new lender. You may also pay in full the principal balance outstanding without any financial penalty.
Taxes applied to the purchase cost of a property. Some properties are sales tax exempt (GST and/or PST), and some are not. For instance, residential resale properties are usually GST exempt, while GST is charged on new properties. Always ask before signing an offer.
The length of time during which you pay a specific rate on the mortgage loan (i.e., the number of years in your mortgage contract). This is different than the amortization period. A mortgage is usually amortized over 25-30 years, with a shorter term (typically 6 months to 5 years). After the term expires, the interest rate is usually renegotiated with the lender (your bank, for example).
Variable rate mortgage
A variable rate is usually based on a benchmark rate, such as the prime rate, which is a reference rate set by banks, and will change when the benchmark rate changes. The variable rate is usually set at a premium (+) or discount (-) to prime. For example, if prime = 3.00%, and you have a variable rate of prime+1(%), then your rate is 4.00%. If prime increases to 3.50%, then your new rate is 4.50%.