Mortgage glossary

amortization period

Number of years over which the repayment of your mortgage is calculated. Usually from 25 to 30 years.

appraised value

Estimated market value of the property being held as security for the mortgage.

assets

Value of property, investments, and items you own

assumable term

If you sell your home, the buyer may assume the remainder of your mortgage making the payments from then on. This will be an advantage for the buyer if the rate on your mortgage is lower than current market rates. The buyer would need to qualify with Vancity to take over the mortgage.

blended rate mortgage

A mortgage that combines the amount the borrower owes under an existing mortgage with additional mortgage money required by the borrower. The interest rate for the new amount borrowed is a "blend" – or combination – of the interest rate of the old mortgage and the interest rate for the additional amount to be borrowed.  

closing date

Date on which the sale of the property becomes final and the new owner takes possession. All costs and charges to close the deal are now payable.

CMHC

Canada Mortgage and Housing Corporation provides insurance on mortgage loans for lenders. It's the Federal Crown Corporation that administers the National Housing Act.

conventional mortgage

Option for buyers with a down payment of at least 20% of the appraised value of the property. Available from most lending institutions.

down payment

The amount of money put forward by the buyer toward the purchase price of a home.

equity

Monetary value or interest in a property in excess of claims or liens against it.

foreclosure

Court action taken by the lender to take possession of a property when the owner has failed to make payment. This action could start with missing as little as one payment. Once foreclosure is final, the lender then has the right to resell the property and recover the balance of the mortgage. The owner stands to lose any equity in the property.

Genworth Financial Canada

A private sector supplier of mortgage default insurance.

high ratio mortgage

Buyers who have a down payment of less than 20% of the appraised value of the property must get a high-ratio mortgage. It is insured so the lender will still receive payment if the borrower defaults.

maturity date

Maturity date is the last date of the mortgage term where the balance of the mortgage comes due. The mortgage must be either paid out in full or renewed for another term.

mortgage

A registered charge on your property held as security for a loan. It will be removed once the loan has been completely repaid to the lender.

mortgage term

The term of a mortgage is the length of time covered by the mortgage agreement. The agreement can last anywhere from 6 months to 10 years. During that time, you will make payments according to the terms and conditions of that agreement. The terms can include the interest you pay, the payment frequency, and the amortization (total debt repayment period).

open mortgage

Borrower has the option of paying any or all of the balance owing on the mortgage at any time, without penalty. A higher rate is charged for this privilege.

fixed mortgage

Borrower has the option of paying off any or all of the balance owing on the mortgage at any time, but with an interest penalty. Generally offered at a lower rate than an open mortgage.

offer to purchase and interim agreement

Initial document binding the buyer and seller until formal documents can be completed by a lawyer.

portability

A mortgage product feature that effectively permits the mortgagor to transfer his or her mortgage to another property if he or she sells the mortgaged property. The new mortgage is registered on the new property with the same terms and conditions (i.e. interest rate, terms, maturity date, principal amount, and remaining amortization).

pre-approved mortgage

A mortgage for a set maximum amount and interest rate that is arranged prior to the purchaser finding a house. Often arranged prior to shopping for a home, this option can help the purchaser establish an affordable price range.

prepayment penalty

A penalty on an amount paid during the term of a mortgage, which is more than what was in the original mortgage agreement.

P.I.T.

Principal, interest and taxes.

principal

Amount of money borrowed under the mortgage, not including the interest.

refinancing

An increase to the outstanding mortgage balance or extension of the original mortgage amortization.

term

Period of time, a few months to several years, over which the mortgage agreement has been written. Mortgage terms are renewed or extended at the end of each term over the course of the amortization period.

title

The legal evidence of ownership to a property.

total debt service (TDS) ratio

The percentage of a borrower's gross (before tax) monthly income needed to cover payments for housing costs, including principal, interest, taxes, heating costs and condominium fees (if applicable), and all other debts and obligations, such as loans, credit cards and car payments. The total should not be more than 40% of gross monthly income.