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The period of time, most often 15, 20, or 25 years, required
to reduce a debt to zero when payments are made regularly
A process for estimating the market value of a particular
property. It can help the purchaser determine what price to
offer. It can also be used by the lender for mortgage purposes.
The appraised value seldom matches the actual purchase price
exactly as other factors influence price.
A lending institution authorized by the Government of Canada
through CMHC to make loans under the terms of the National
Housing Act. Only Approved Lenders can negotiate mortgages
which require mortgage loan insurance.
A Legal document signed by a home buyer that requires the
buyer to assume responsibility for the obligations of a mortgage
by the builder or the original owner.
A mortgage payment that includes principal and interest. It
is paid regularly during the term of the mortgage. The payment
total remains the same, although the principal portion increases
over time and the interest portion decreases.
A certificate that must be obtained from the municipality
by the property owner or contractor before a building can
be erected or repaired. It must be posted in a conspicuous
place until the job is completed and passed as satisfactory
by a municipal building inspector.
Costs, in addition to the purchase price of the home, such
as legal fees, transfer fees and disbursements, that are payable
on the closing date. Closing costs typically range from 1.5%-4%
of a homes selling price.
The date on which the sale of a property becomes final and
the new owner takes possession.
Canada Mortgage and Housing Corporation. 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.
also creates and sells mortgage loan insurance products.
Offer / Conditions of Sale
An offer to Purchase that is subject to specified conditions,
for example, the arranging of a mortgage. There is usually
a stipulated time limit within which the specified conditions
must be met.
A mortgage which secures a loan by way of a promissory note.
The money which is borrowed can be used to buy a property
or for another purpose such as home renovation or for a vacation.
Letter / Mortgage Approval
A notification from the mortgage lender to the borrower that
approves the advancement of a specified amount of mortgage
funds under specified conditions.
A mortgage loan up to a maximum of 75% of the lending value
of the property. Mortgage loan insurance is not required for
this type of mortgage.
A clause in a legal document which, in the case of a mortgage,
gives the parties to the mortgage a right or an obligation.
example, a covenant can impose the obligation on a borrower
to make mortgage payments in certain amounts on certain dates.
A mortgage document consists of covenants agreed to by the
borrower and the lender.
A legal document which is signed by both the vendor and purchaser,
transferring ownership. This document is registered as evidence
Failure to abide by the terms of a mortgage loan agreement.
A failure to make mortgage payments (defaulting on the loan)
may give cause to the mortgage holder to take legal action
to possess (foreclose) the mortgaged property.
Money placed in trust by the purchaser when an Offer to Purchase
is made. The sum is held by the real estate representative
or lawyer until the sale is closed, and then paid to the vendor.
A document signed by the lender and given to the borrower
when a mortgage loan has been repaid in full.
The portion of the house price the buyer must pay up front
from personal resources, before securing a mortgage. It generally
ranges from 5%-25% of the purchase price.
A right acquired for access to or over, or for use of, another
person's land for a specific purpose, such as a driveway or
A registered claim for debt against a property, such as a
The difference between the price for which a home could be
sold and the total debts registered against it.
Equity usually increases as the outstanding principal of the
mortgage is reduced through regular payments. Market values
and improvements to the property also affect equity.
A legal procedure in which the lender gets ownership of the
property if the borrower defaults on the mortgage loan.
Debt Service Ration (GDS)
The percentage of the borrower's gross monthly income that
will be used for monthly payments of principal, interest,
taxes, heating costs and half of any condominium maintenance
A mortgage loan in excess of 75% of the lending value of the
property. This type of mortgage must be insured - for example,
by CMHC - against payment default.
An amount of money withheld by the lender during the progress
of construction of a house to ensure that construction is
satisfactory at every stage. A standard holdback amount is
10% of the total cost of the building project.
The cost of borrowing money. Interest is usually paid to the
lender in instalments along with repayment of the principal
Adjustment Date (IAD)
A date from which interest on the mortgage advanced is calculated
for your regular payments. This date is usually one payment
period before regular mortgage payments begin. Interest due
from the date your mortgage is advanced to the IAD is due
The purchase price or market value of a property, whichever
A claim against a property for money owing. A lien may be
filed by a suplier or a subcontractor who has provided labour
or materials but has not been paid. A lien must be properly
filed by a claimant. It has a limited life, prescribed by
statute that varies from province to province.
If the lienholder takes action within the prescribed time,
the homeowner may be oblige to pay the amount claimed by the
the lienholder may force a sale of the property to pay off
The ratio of the loan to the lending value of a property expressed
as a percentage. For example, the loan-to-value ratio of a
loan for $90,000 on a home which costs $100,000 is 90%
The last day of the term of the mortgage agreement. On this
day the mortgage loan must be either paid in full or the agreement
A mortgage is security for a loan on the property that you
own. It is your personal guarantee to repay the loan as well
as a pledge of the property as security for the loan.
If you have a high-ratio mortgage (more that 75% of the purchase
price), your lender will require mortgage loan insurance -
available from CMHC or a private insurer. The insurance premium
will cost between 0.5% and 3.75% of the amount of the mortgage
(additional charges may apply.)
This insurance guarantees that if you die your mortgage will
be paid in full. This insurance can be conveniently purchased
through your lender and the premium added to your mortgage
payments. However, you may want to compare rates for equivalent
products from an insurance broker.
A regularly scheduled payment that is blended to include both
principal and interest.
The lender who provides the mortgage loan
The borrower who pledges the property as security for the
Your total financial worth, calculated by subtracting your
total liabilities from your total assets.
A written contract setting out the terms under which the buyer
agrees to buy. If accepted by the seller, it forms a legally
binding contract subject to the terms and conditions stated
in the document.
A document stipulating that, in exchange for a deposit, a
specified individual is to be given the first chance of buying
a property at or within a specified period of time.
option holder who does not buy at or within the specified
period loses the deposit and the agreement is cancelled.
Principal, interest and taxes - payments due on a regular
basis under the terms of the mortgage agreement.
Generally, payments are made monthly and include one-twelfth
of the estimated annual municipal and school taxes. Since
these taxes change form year to year, this section of the
mortgage will change accordingly.
Principal, interest, taxes and heating - costs used to calculate
the Gross Debt Service ratio (GDS).
The amount of money actually borrowed.
A real estate representative who is a member of an organization
of persons engaged in the business of buying and selling real
estate, such as the Canadian Real Estate Association.
To pay off a mortgage or other registered encumbrance and
arrange for a new mortgage, sometimes with a different lender.
An additional mortgage on a property that already has a mortgage.
A balance sheet statement that indicates credits to the vendor,
such as the purchase price and any prepaid taxes, and credits
to the buyer, such as the deposit and the balance due on closing.
A document that illustrates the property boundaries and measurements,
specifies the location of buildings on the property, and indicates
any easements or encroachments.
The length of time during which a mortgagor pays a specific
interest rate on the mortgage loan.
The entire mortgage principal is usually not paid off at the
end of the term because the amortization period is normally
longer than the term.
A freehold title gives the holder full and exclusive ownership
of land and buildings for an indefinite period of time.
condominium ownership, land and common elements of buildings
are owned collectively by all unit owners, while the residential
units belong exclusively to the individual owners.
leasehold title gives the holder a right to use and occupy
land and buildings for a defined period of time.
Debt Service Ratio (TDS)
The percentage of gross monthly income required to cover all
monthly payments for housing and all other debts, such as
Take Back Mortgage
Mortgage financing arranged between the seller of the property
and the buyer. The title is transferred to the buyer.
this type of loan is a second mortgage which the seller is
willing to arrange at below market rates to ensure the buyer
can purchase the house. Most of these arrangements are not
renewable or transferable to the next owner of the house.
Municipal or regional laws that specify or restrict land use.