Spire’s Mortgage Term Glossary
Agreement of purchase
The agreement is a legal document between the buyer and seller of real-estate property, filled out by a licensed real estate professional.
Amortization
The number of years that you take to fully pay off your mortgage (not the same as your mortgage term). Amortization periods are often 15, 20, or 25 years long.
Appraisal
The process of determining the lending value of a property. There is usually a fee to have an appraisal done.
Assuming a Mortgage
When you assume a mortgage you are taking over the obligations of the previous owner's (or builder's) mortgage when you buy a property.
Bridge Loan
Bridge loans are short term loans that provides funds to individuals who need funds from the current value of their currently owned and existing properties, and are close to a firm deal on another property. Typically these loans are only available when your present home has an accepted unconditional offer.
Cash Back Mortgage
A cash back mortgage obtains the principal amount of the mortgage, and a percentage of the mortgage’s amount itself in cash as well. You’ll find interest rates on these mortgages to be higher. These mortgages are usually effective when you’re in need of cash for specific high ticket items like furniture or loan repayment.
Caveat
A caveat is a legal notice that informs a legal claim, or an interest has been made against the property.
Chattels
Chattels are the movable items that are not securely attached to the land or property. (Also known as personal property)
Closed Mortgage
This type of mortgage must usually remain unchanged for whatever term you agree to. Prepayment costs will apply if you payout, renegotiate, or refinance before the end of term.
Closing Costs
These are costs in addition to the purchase price of a property and which are payable on the closing date. Examples include legal fees, land transfer taxes, and disbursements.
Closing Date
The closing date is the date on which the sale of a property becomes final and the buyer takes possession of the property.
CMHC
CMHC is 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. One potential source of mortgage insurance for high-ratio mortgages.
Co-Borrower
When there are two or more people that are borrowing on a specific mortgage, they are considered to be co-borrowers.
Collateral
Collateral is something you own of value, which you offer to secure against a loan.
Collateral Charge
A collateral charge essentially may secure more than one line of credit or loan. A charge (mortgage) is the registered document on title to secure your loan.
Conditional Offer
An offer that is conditional is set to purchase a property once conditions detailed within the contract are met. These conditions for a deal can vary but include items such as a satisfactory home inspection or the condition of the buyers property being listed and selling by a specified date.
Construction Mortgage
A construction mortgage is also known as a draw mortgage. While the property is being built, the lender will then incrementally lend money to provide support to compete the project.
Conventional Mortgage
You’ll find that a conventional mortgage is one that is not insured by the CMHC or any other backed mortgage default insurer. These would typically fall under your 20+% down payments.
Convertible Mortgage
This is a mortgage which offers the same security as a closed mortgage, but which can be converted to a longer, closed mortgage at any time without prepayment costs. Typically associated with fixed rate mortgages.
Credit Report
Your credit report or credit score is a history of your past credit. This data includes past financial debts and current debts as well, for up to 7 years! This score allows lenders and insurers to gauge your current scores as part of the determination whether they will allow or deny your application for a mortgage.
Credit Score
A credit score represents the information gathered in your credit report. it represents how you manage credit, and gives an indication of how risky it would be for a lender to lend you money.
Debt Ratios
A debt ratio is the measurement of your ability to repay your mortgage by ensuring that your total debts and liabilities don’t exceed a specific percentage of your total income.
Default Mortgage Insurance
Default mortgage insurance is available to those looking to put less than 20% down.
Deposit
Your deposit is the total amount of money that you provide to a seller when you put together an offer to purchase (OTP). Deposits are decided upon between you and your REALTOR® and it forms part of your position in the negotiation. Most sellers will favor the buyer who comes in with a stronger offer and larger deposit. If the sale were to fall through, they’d secure the deposit and cover any losses they may have seen from the deposit forfeiture.
Down Payment
A down payment is the money that you pay up front for a house. Down payments typically range from 5%-20% of the total value of the home.
Equity
Your equity is when you calculate the total value of your home/property and subtract the total debt that’s outstanding. This includes liens, mortgages, and anything that is registered and on title.
Foreclosure
When borrowers are unable to make payments on their mortgage, and they default on their mortgage, the lender will take legal steps where they have the right to sell your home. You will receive proper legal notice and will have the ability to bring your mortgage back into better standing, however if you are unable to, the lender will have the right to sell your home to recover the money that is owed to them, this includes the principal, legal fees, charges, and interest.
Gross Debt Servicing Ratio
The gross debt service ration is when you calculate the proportion or ratio of the total housing related debt of a borrower and measure it against their income. This is a calculation that lenders will perform when reviewing and considering the approval or an application for a mortgage.
Gross Household Income
Your gross household total income is when you calculate the total household income, before any deductions, for all those living at the home who will be applicants on the mortgage, this includes co-borrowers.
Guarantor
A guarantor is a co signor on the mortgage documents, but is not included on the title of the home.
High Ratio Mortgage
The mortgage you obtain when you have less than 20% of the total purchase price to put down as your downpayment. This type of mortgage must be insured (through sources such as CMHC or Genworth Financial Canada).
Home Equity Line of Credit
A home equity line of credit is a product offered by the large lenders in Canada.
Home Inspection
A home inspection is the process of having a qualified home inspector identify potential repairs to the property you are interested in and their estimated cost.
Home Insurance
home insurance is the process of having a qualified home inspector identify potential repairs to the property you are interested in and their estimated cost.
Insured Mortgage
This type of mortgage is applicable if you are using less than 20% down. Also known as a High Ratio Mortgage.
Interest
Interest is the fee that you pay each month to the lender for borrowing their capital.
Interest Adjustment
The amount of interest due between the date your mortgage starts and the date the first mortgage payment is calculated from. Sometimes there is a gap between the closing date of your home purchase and the first payment date of your mortgage.
Interest Only Mortgage
When you choose to only service the interest to maintain the loan amount. The loan amount will not change over time
Land Transfer Tax
A land transfer tax, is a tax that is levied (in some provinces) on any property that changes hands.
Legal Fees and Disbursements
Some of the legal costs associated with the sale or purchase of a property. It's in your best interest to engage the services of a real estate lawyer (or a notary in Quebec).
Lump Sum Payment
This is a large sum that is paid once a year to lessen the mortgage payments.
Maturity Date
The date at which your mortgage term is complete.
Mortgage
A mortgage is a legally binding contract that outlines how much money will be borrowed for how many year at a specific rate.
Mortgagee
A mortgagee is the lender who allows the borrower to secure financing.
Mortgage Life Insurance
mortgage life insurance is coverage you can purchase to protect against loss of life.
Mortgagor
The mortgagor is you, the person who is borrowing money from the lender.
Mortgage Principle
The mortgage principle is the amount of the original mortgage.
Mortgage Rate
The rate in percent at which you are lending money from the lender.
Multiple Listing Service
An online database of that lists all the properties for sale in Canada.
Offer to Purchase
The offer to purchase is a contractual agreement on which house you will buy, on which date, at a specific price.
Open Mortgage
This type of mortgage may be repaid, in part or in full, at any time during the term without any prepayment costs.
Portability
This is when you take the mortgage that was on property “A” and move it to property “B”.
Posted Rate
The public rate that is posted on the lender's website.
Pre Approval
This mean a mortgage broker have pulled all necessary documents to determine what houses you qualify for.
Pre Payment
This is usually 20% of your mortgage payment that you are allowed to pay yearly without penalty.
Pre Payment Penalty
This is either the total three months interest or the interest rate differential, depending on the type pf mortgage you have.
Prime Rate
Prime rate is based on the Government of Canada's “Overnight Lending Rate”. The prime rate will follow this, so be sure to stay updated!
Principle
This is the amount you originally borrowed.
Principle, Interest, Taxes (PIT)
This is a combination of principal, interest and taxes, which will be paid together if this option is chosen.
Property Survey
A legal description of your property and its location and dimensions. An up-to-date survey is usually required by your mortgage lender. If not available from the vendor, your lawyer can obtain the property survey for a fee.
Property Taxes
These taxes cover building roads and expenses in the municipality.
Rate Hold
This is the ability to maintain a certain rate for up to 120 days.
Refinancing
Refinancing is the process of extracting equity from the property you are currently living in.
Renewal
At the end of your mortgage term, you will need to choose a new term, which is referred to as renewing.
Restricted Mortgage
This type of mortgage has certain parameters to fulfill. These products may be used to lessen the interest rate.
Reverse Mortgage
Home owners that are over the age of 55 have access to a reverse mortgage product with some of our Calgary mortgage lenders. This option allows you to borrow up to a total of 50% of your total home value. You do not make any payments while you’re on a reverse mortgage, however, interest grows within the mortgage debts until you eventually sell the property, etc.
Sales Tax
Taxes applied to the purchase cost of a property. Some properties are sales tax exempt (GST and/or PST), and some are not. For instance, residential resale properties are usually GST exempt, while new properties require GST.
Second Mortgage
A second mortgage is a completely separate mortgage from the first.
Stress Test
A mortgage stress-test is rate set by the federal government that determines how much you can borrow and still make your mortgage payments, if rates go up.
Switch
When you chose to switch, you are moving your current mortgage from one lender to another.
Term
A term is the period of time you have secured your mortgage and interest rate for.
Title
A title is the legal document that provides verification of ownership for a specific property.
Title Insurance
Title insurance is the protection that buyers and their lenders are granted from title defects that are discovered after a property is closed on. These defects can include everything from surveyor errors, work orders, encroachments and more
Total Debt Service Ratio (TDS)
The total debt service ratio is the calculation of a percentage of your total gross annual income that is required to cover your existing debts and current loans on top of the additional cost of servicing and owning the property (taxes, utilities, interest, etc)
Variable Rate Mortgage
A variable mortgage has an interest rate that will fluctuate in accordance with the prevailing market prime rate during the mortgage term.
