Glossary
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Amortization Period
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The actual number of years it will take to repay a mortgage loan in full.
This can be well in excess of the loan's term. For example, Mortgages
often have five year terms but 25 year amortization periods.
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| Closed and Open Mortgages |
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A closed mortgage agreement does not provide for payout prior to
maturity. A lender may permit payout under certain circumstances but
will levy a penalty charge for doing so if such exceeds certain limits,
if any, specified in the mortgage (i.e. 15% prepayment provision). An
open mortgage allows prepayment / repayment at any time without penalty.
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Blended Payments
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The method of repayment where periodic payments of principal and interest
are made in such a way that the payments remain constant in amount
although the portions attributed to principal and interest vary with
each payment.
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Bridge Financing
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A special short term loan needed to cover or bridge the gap in time
between completing the purchase of one property and finalizing
arrangements to pay for it. Usually this is a result of mismatched
closing dates.
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Closing Date
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The date on which the sale of the property becomes final and the new owner takes possession.
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Conventional Mortgage
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A mortgage loan which does not exceed 75% of the lesser of the appraised
value or the purchase price of the property. A mortgage that exceeds
that limit must be insured under the practices of most major financial
institutions.
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Debt Service Ratios (GDSR & TDSR)
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The Gross Debt Service Ratio (GDSR) is the percentage of gross annual
income required to cover payments associated with housing (mortgage
principal and interest, taxes, secondary financing, heating, and 50% of
condominium fees, if any). The GDSR should not exceed 32% of gross
annual income. The Total Debt Service Ratio (TDSR) is the percentage of
gross annual income required to cover payments associated with housing
(GDSR) and all other debts and obligations, such as payments on a car
loan. The TDSR ratio should not exceed 40% of gross income.
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Down Payment
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The amount of money put forward by the purchaser to buy a property. It
represents the difference between the purchase price and the amount of
the mortgage loan. There are a few acceptable forms of down payment,
talk to a global mortgage corp mortgage broker to see what works for you.
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Effective Interest Rate
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The actual interest rate on investment where a debt or loan was bought at a discount or at a premium.
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Fixed Rate
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A fixed rate mortgage is one for which the rate of interest is fixed for
a specific period of time (the term). A variable rate mortgage is one
for which the rate of interest changes as money market conditions
change, usually not more than once a month. The monthly payment stays
the same for a specified period. However, the amount applied towards
the principal changes according to the change (if any) in the rate of
interest.
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GE Capital
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General Electric Mortgage Insurance Company, a private mortgage insurer.
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Guarantor
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A third party person without interest in the property who agrees to
assume responsibility for a debt in the event of default by the
mortgagor.
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High Ratio Mortgage
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A mortgage loan which exceeds 75% of the lesser of the appraised value or
purchase price of the property. This mortgage must be insured and
borrowers must pay an application fee and the insurance premium (which
may be added to the mortgage) to the insurer.
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Joint Tenancy
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Ownership of land by two or more persons whereby, on the death of one,
the survivor or survivors take the whole property.
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Loan-to-Value Ratio
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The ratio of the loan to the appraised value or purchase price of the property,
whichever is less, expressed as a percentage.
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Maturity Date
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The last day of the term of the mortgage agreement. The mortgage agreement
must then be renewed or the mortgage balance paid in full.
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Mortgage
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A conveyance of property to a creditor, as security for payment of a
debt. Such security is redeemable or recoverable on the payment or
discharge of the debt at a specified date.
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Mortgage Insurance Premium
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A premium which is charged as a percentage of the mortgage. The mortgage
insurance insures the lender against loss in case of default by the
borrower.
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National Housing Act (NHA) Loan
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A mortgage loan which is insured by CMHC or GE Capital.
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Offer to Purchase
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A formal, legal agreement which offers a certain price for a specified
real property. The offer may be firm (no conditions attached) or
conditional (certain conditions must be fulfilled).
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P.I.T.
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Principal, Interest, and taxes.
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Portable Mortgage
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Upon the consent of the lender, the mortgagor may transfer the balance of
their existing mortgage to a new property being mortgaged at the same
rate for the remainder of the term left on the existing mortgage.
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Prepayment Penalty
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A fee charged by the lender when the borrower pays off all or a portion
of a mortgage more quickly than provided for in the mortgage agreement.
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Refinance
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To arrange a new mortgage for an increased amount on an existing property.
The old mortgage(s) is paid off (discharged) from the proceeds of the
new loan. This type of loan is also referred to as "equity take out."
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Renew
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To extend a mortgage agreement with the same lender for another term. The
length of the term and the conditions (such as the rate of interest)
maybe changed.
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Second Mortgage
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A mortgage placed in 2nd position on property which is already encumbered
with a first mortgage. Determination of first, second, third mortgages
is by priority of registration (time and date).
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Survey
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The accurate measurement of land and buildings thereon made with the aid of instruments.
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Tenancy in Common
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Ownership of land by two or more persons: unlike joint tenancy in that the
interest of the deceased does not pass to the survivor, but is treated
as an asset of the deceased’s estate.
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Term
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The length of time which a mortgage agreement covers. Payments made may not
fully repay the outstanding principal by the end of the term, because
the amortization period is longer.
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Variable Rate Mortgages
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A variable rate mortgage is one for which the rate of interest changes as
money market conditions change, usually not more than once a month. The
monthly payment may fluctuate, or may stay the same for a specified
period. However, if it stays the same the amount applied towards the
principal changes according to the change (if any) in the rate of
interest.
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Vendor Take Back Mortgage
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A mortgage which a vendor of property takes from the purchaser usually as
part payment of the purchase price for that property. A private first
or second mortgage that the vendor lends to the purchaser/borrower.
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P.T.T.
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Property Transfer Tax.
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Interest Adjustment Date (I.A.D.)
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A date, usually one month before monthly mortgage payments begin, when
interest on monies advanced before that date is calculated and must be
paid by the borrower.
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In some circumstances lender/broker fees may apply.
Rates and discounts subject to change.
Copyright 2000-2005 Global Mortgage Corp
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