is a variable rate product where the payment fluctuates as the prime rate changes. The principal pay down portion remains the same however the interest portion will increase or decrease as the rates do. This means your amortization will not change but your mortgage payment will change.

is the length of time to pay off the mortgage loan in full. It is made up of pre-scheduled payments that include principal and interest amounts.

is the estimated value of a property based on the market value.  An appraisal may be needed by lenders for financing purposes. Refinances will require an appraisal.

are anything you own that has a monetary value. They are used in determining net worth or to secure financing.

is a combined payment of both principal and interest that does not change, however the principal portion increases as the interest portion decreases.

is a very restrictive mortgage condition where you are not allowed to pay off your mortgage during your term unless you sell your property. Lenders will offer a lower interest rate to compensate for this restriction.  

is a mortgage default insurance company. They provide insurance for lenders allowing them to fund a mortgage up to 95% loan to value. The insurer charges a premium to the borrower when they have less than 20% down payment.

is one of the mortgage default insurers in Canada they are a federal government corporation that administers the National Housing Act. They insure mortgages for lenders when a borrower has less than a 20% down payment of the purchase price or value of the property.

is a mortgage that cannot be repaid, renegotiated or refinanced over a set period (term) without paying penalties and fees.

are expenses that need to be paid at the closing of the property sale. Closing costs typically include Land Transfer Tax, property taxes, legal fees and disbursements.

is the date on which the sale becomes final and the new owner takes possession of the property.

is a re-advanceable mortgage product that gives you the flexibility to borrow equity from your home without refinancing. It involves a collateral charge which makes it difficult to transfer to other lenders if you decide that you want a better rate or product. Additionally, collateral mortgages can make it harder for you to get a second mortgage as the mortgage is registered for the value of the home not the loan amount.

is an agreement to purchase a property once specific conditions are met. These conditions may include inspection, selling of an existing property, and financing. Most conditions have a deadline that they must be met by.

is a mortgage that does not exceed 80% of the appraised or purchase price, whichever is lower. Conventional mortgages are not insured by the mortgage default insurers.

is someone who agrees to take on the responsibility of a loan or financial obligation along with the primary borrower. They are equally responsible to repay the debt if the borrower fails to do so.

points assigned to a borrower that determine their credit worthiness. Credit scores range from the lowest of 300 to the highest of 900. The higher the score the better. Equifax and TransUnion are the two credit scoring companies in Canada.

the amount of money paid by the buyer when a signed agreement of an offer to purchase is made. The deposit is usually held in trust by the real estate agent or lawyer until the sale closes, at which time the deposit goes toward part of the purchase price. If the buyer fails to comply with the terms in the offer, the deposit is given to the seller as compensation for breaking of the purchase agreement.

the amount of money, including deposit, that is paid by the buyer toward the purchase price of the property. It represents the difference between the mortgage loan amount and the purchase price. The size of down payment can affect the type of mortgage loan you qualify for as well as the mortgage rate.

the difference between the market value of the property and any outstanding mortgages registered against it.

are mortgages where the loan qualification is based on the equity of a property and its potential marketability not income and credit. These types of mortgages have higher interest rates and are usually for those who have credit challenges or are unable to provide traditional income documents.

is a document that provides information on a condominium corporation, including the development’s finances and insurance. The certificate provides an overview of the condominium corporation’s affairs. It is a “status report” which must certify the current condominium fees, condominium fee payment schedule, whether the condo fees are unpaid and in arrears, If there is any interest due on unpaid fees and any pending or unpaid special assessments

is when you increase the length of time to pay off your mortgage. For insured mortgages the maximum amortization you can have is 25 years. To extend your amortization to 30 years you need at least 20% down payment and it will become uninsurable, which will increase your interest rate.

covers property damage or loss caused by fire, theft, floods, etc. The lender will require proof of fire and property insurance before the funds are advanced, prior to closing.

is someone who, as per federal guidelines, has not owned a property for a certain length of time. These types of buyers may be able to qualify for certain federal programs, rebates or credits designed to support their journey into real estate. 

is offered by the Canadian government which allows buyers to receive an additional 5-10% of funds towards their down payment. This incentive can help lower mortgage carrying costs however it does come with conditions as it is a shared equity program. The incentive has to be repaid after 25 years or when the home sells. Additionally, repayment of the incentive can be triggered by changing or removing a co-borrower, porting or refinancing.

is when the mortgage interest rate is set for a predetermined period of time and cannot be renegotiated without penalty. It also has a known amount of principal pay down. 

is the proportion of a borrower’s housing-related debt to their income. This ratio is calculated by taking the mortgage principal and interest payment, the property taxes and heat and dividing that by the annual income.

is someone who qualifies and agrees to pay the loan if the borrower defaults. A guarantor is not on the mortgage title whereas a co-signer is on title. A bank is more likely to request a co-signer as they are on title.

is a mortgage where the appraised value or purchase price is greater than 80%, they are also called insured mortgages. When you put less than 20% down payment the mortgage must be insured by one of the mortgage insurers of Canada.

allows buyers to withdraw a certain amount of funds from their RRSP tax free and put towards their down payment. The amount drawn from the RRSP is allowed to be repaid within 15 years.

is a revolving line of credit that allows you to borrow the equity in your home. They usually have lower interest rates than other forms of credit and interest is only paid on the amount withdrawn. If it’s combined with your mortgage you will also have a fixed rate portion with principal and interest payments.

is the date when your interest starts to accrue. This date usually falls 1 month after the day of funding. The interest accrues from closing day until your first mortgage payment. It is important to start your payments as close to the IAD as possible to avoid the accrued interest cost.

is the fee charged to a borrower for a specific time, calculated as a percentage on the loan amount borrowed.

is a type of prepayment penalty which occurs with fixed rate mortgages. When you pay off your mortgage prior to your maturity date or pay more than you are allowed with your prepayment privileges, this penalty comes into effect. It is the difference between the current interest rate you are being offered and your original mortgage interest rate in relation to the months remaining in your term.

is when the borrower puts a down payment of less that 20%, this is also referred to as a High-Ratio Mortgage. Since the Loan to Value is greater than 80% it means that mortgage default insurance is required. When borrowers put less than 20% down payment the lenders are exposed to higher risk and that’s when the mortgage default insurance comes in to protect the lenders from borrower default. Since the lenders are protected they offer lower interest rates on the insured mortgages.

is a term used to compare the mortgage loan amount to the appraised value of a property. Lenders use the loan to value ratio to help determine their risk exposure.

is the day when your mortgage term comes to an end. At this point you can choose to renew your mortgage for a new term or pay it off completely.

is a type of insurance that protects the lender from potential default from the borrower. Mortgage insurance is provided by either CMHC, Sagen or Canada Guaranty, and may be required for some borrowers. The premium is added to the mortgage and paid by the borrower over the life of the mortgage.

also known as mortgage protection insurance, is a type of insurance offered by a lender or broker to cover all or some of your mortgage in the event of your death.

also known as an Agreement of  Purchase and Sale, is an agreement that outlines the terms and conditions to purchase a property from a seller. It is a legally binding contract that states the obligations of both the seller and the buyer. The contract includes the purchase price, the closing date, terms of payment and specific items that are to be included or excluded from the sale.

is a type of variable rate mortgage that can be prepaid at any time prior to maturity, without penalty.

refers to how often you make your mortgage payment. Most lenders provide several options: monthly, semi-monthly, biweekly and weekly payments. Additionally, if you decide that you want to pay off your mortgage earlier. You can choose an accelerated biweekly or accelerated weekly payment.

is when you have the ability to port/transfer your existing mortgage to a new property. This usually requires you to sell and buy a new property within 90 days.

is when you have the ability to port/transfer your existing mortgage to a new property. This usually requires you to sell and buy a new property within 90 days.

also referred to as Prepayment options, are set out in the mortgage agreement and may include certain lump sum payments or specified payment increases. Borrowers may have the option to pay specified amounts of the principal prior to the maturity date of the mortgage.

also known as prime lending rate is the lowest rate set by Canadian financial institutions. The prime rate is used to set interest rates for variable loans and lines of credit, including variable-rate mortgages. When the Bank of Canada changes their overnight rate it impacts the prime rate that financial institutions set.

is the amount of money borrowed from a lender, not including interest.

The length of time a lender will guarantee your mortgage rate on a mortgage approval, for a purchase, refinance or renewal. Most lenders will allow a rate hold anywhere from 30 to 120 days.

is a transaction that occurs when you break your existing mortgage to start a new mortgage with your existing lender or a new lender.

is when a mortgage term ends, this is when you can re-sign a mortgage agreement with your existing lender for another term or you can transfer to a new lender. The terms and conditions may change when your mortgage is renewed

is an additional loan registered in second position after a first mortgage. Which means that if you ever defaulted, it would be paid out after the first mortgage registered on title. This makes it riskier for second mortgages to be paid out in full which is why they have higher interest rates.

is used to determine if a borrower can still afford to pay their mortgage if interest rates increase. The current stress test is 5.25% or two percent above your contract rate, whichever is higher.

is when you transfer your existing mortgage from one lender to another.

is the length of time during which the financing agreement is effective. This is not the same as amortization, which covers the total length of time to pay off the mortgage.

is the proof of ownership on a property. It can also be referred to as a deed.

the proportion of a borrower’s total debt to their income. This ratio is calculated by taking the mortgage principal and interest payment, property taxes, heat, 50% of condo fees, and all other debt obligations(e.g. personal loans, car payments, lines of credit, credit card debts, or other mortgages), and then dividing that by the annual income.

Trigger point is when your outstanding principal balance exceeds your original principal balance. Which occurs after you reach your trigger rate. This is when your regular mortgage payment no longer covers the interest. At this point lenders may want you to increase your mortgage payment, pay a lump-sum payment or switch you into a fixed rate mortgage.

the proportion of a borrower’s total debt to their income. This ratio is calculated by taking the mortgage principal and interest payment, property taxes, heat, 50% of condo fees, and all other debt obligations(e.g. personal loans, car payments, lines of credit, credit card debts, or other mortgages), and then dividing that by the annual income.