Mortgage Glossary

Amortization
Reducing a debt by making regular payments. These payments are a paying off a combination of the interest and the original principal.

Appraisal
An independent assessment of a property's value that is required before financing.

Assessed Value
The taxable value of the property and/or structures.

Assessment
A type of tax placed on property that helps cover improvements like road work and waste disposal systems.

Assets
Property, cash and other things of value (such as stocks and bonds) that a borrower owns.

Assumption (of mortgage)
When one buyer takes over the responsibility of a pre-existing mortgage at the current terms.

Blended Mortgage
A specific type of mortgage that includes previously owed amounts as well as additional funds. Determining the interest rate for a blended mortgage involves combining both rates.

Bridge Financing
Financing that covers the time between when a new home closes and the buyer's old home sells.

Building Codes
Regulations that determine what type of designs, construction elements and repairs may be done to a structure.

Chattel
Personal property and household goods that aren't permanently attached to a home.

Closed Mortgage
The restriction or denial of repayment rights until the end of the mortgage term.

Closing
The official meeting where the title of a property is transferred from the previous owner.

Closing Costs
The costs associated with closing a property including title search, insurance, lawyer's fees, etc.

C.H.M.C.
Canada Mortgage and Housing Corporation

C.H.M.C. Insurance
Insurance that must be purchased when a buyer puts down less than 20% of the home's value as a down payment.

Commission
A payment that a real estate agent earns for his or her services. It is normally based on the selling price and paid by the seller.

Commitment Letter
The letter that shows the terms, amount and other information about what a lender offers for a mortgage.

Common Areas
Parts of a property that are for the use of all occupants. This includes hallways, pools, lobbies, etc.

Common Tenancy
A type of joint ownership that transfers the share to the owner's estate upon his or her death.

Compound Interest
Interest that is charged on both the principal and previously accrued interest.

Contract of Purchase and Sale
A legal document where the buyer and seller both agree to the sale.

Conventional Mortgage
A first mortgage on a property that is no more than 80% of the property's value.

Convertible Mortgage
A short-term mortgage that can be converted to a longer term with no penalty.

Conveyance
When a piece of real estate is transferred from one person to another.

Credit Bureau Report
A document issued by a credit reporting firm that shows information about the borrower's history of debt and repayment.

Default
Failing to meet the terms of a loan or debt.

Deposit
A certain amount of money that must be paid when an offer is put in on a home, to insure the purchaser is committed.

Double-Up
The opportunity to make twice the normal mortgage payment with no pentalty.

Down Payment
Money put down towards purchasing a property.

Equity
The difference in the amount owed on a property and its value.

Fixed Rate Mortgage
A mortgage with a rate that remains the same over time.

Foreclosure
An action taken when a borrower defaults on a loan.

Gross Debt Service Ratio (GDS)
The amount of income a person needs to meet mortgage, insurances and other expenses.

High Ratio Mortgage
A type of mortgage that occurs when the buyer finances more than 80% of the property's value.

Inter Alia Mortgage
A mortgage secured by two or more properties.

Interest
The fee paid for the convenience of borrowing money, normally expressed in a percent.

Interest Adjustment Date
The date that the mortgage actually starts, normally on the first of a month.

Joint Tenancy
Property owned by two or more people; when one owner dies, the property passes to other owners.

Lease to Purchase Option
Renting property for a certain amount of time with a purchase provision at the end of the term.

Liabilities
All debts of a certain person.

Lien
A debt taken out against a piece of property.

Loan to Value (LTV)
The ratio between the amount borrowed and the actual value, normally shown as a percentage.

Market Value
The value of a property based on what the market will bear. Determined by a comparison of the subject property to others in a similar area that have sold recently.

Mortgage
A debt incurred for a piece of property, where the property secures the debt.

Mortgage Broker
Professionals that have the knowledge and experience to find the best interest rate for a mortgage, working for the buyer, not the lender.

Mortgagee
Those that lend funds for a mortgage.

Mortgagor
The person that borrows funds for a mortgage.

Net Worth
An individual's assets with the liabilities subtracted.

Open Mortgage
A mortgage that the borrower can make additional payments or pay it off in full without penalties.

Portability
A feature that allows you to transfer a mortgage from one property to another keeping the same terms.

Prepayment Clause
A feature of a mortgage that lets a person pay off part before a certain date with no penalty.

Prepayment Penalty
A penalty incurred when a borrower prepays part of the mortgage, when there is not a clause allowing for this.

Principal
The initial sum borrowed.

Refinance
Obtaining a new mortgage with different rates or terms and using it to pay off the previous mortgage.

Second Mortgage
When a person obtains two mortgages on the same property.

Tax Hold Back
Some mortgage payments have taxes included. This hold back is when the lender withholds funds from your payment to pay the taxes.

Term
The amount of time of a mortgage commitment.

Total Debt Service Ratio (TDS)
Percent of a person's annual income that is needed to pay the mortgage, taxes and other specific payments.

Underwriting
When a lender assesses the loan application based on credit worthiness, value and ability to pay obligations.

Variable Rate Mortgage
A mortgage where the rate can vary over the course of the mortgage.