A HOME BUYERS’ GLOSSARY OF TERMS

Amortization Period: The actual number of years it will take to pay back your mortgage loan.

Appraised Value: An estimate of the value of the property. Conducted for the purpose of the mortgage lending by a certified appraiser. This appraisal is not to be confused with a building inspection.

Assumability: Allows the buyer to take over the seller’s mortgage on the property.

Closed Mortgage: A mortgage that locks you into a specific payment schedule. A penalty usually applies if you repay the loan in full before the end of a closed term.

Conventional Mortgage: A mortgage loan issued for up to 75% of the property’s appraised value or the purchase price, whichever is less.

Down Payment: The buyer’s cash payment toward the property. The difference between the purchase price and the amount of the mortgage loan.

Equity: The difference between the home’s value and the debts against it.

High-Ratio Mortgage: A mortgage that exceeds 75% of the home’s appraised value. These must be insured for payment.

Land Transfer Tax: A fee paid to the municipal and/or provincial government for the transferring of property from seller to buyer.

Maturity Date: The end of the term, at which time you can pay off the balance on a mortgage or renew it.

Mortgagee: The person or financial institution that lends the money for a mortgage.

Mortgagor: The borrower.

Mortgage Insurance: Applies to high-ratio mortgages. It protects the lender against loss if the borrower is unable to repay the mortgage.

Mortgage Life Insurance: Pays off the balance on the mortgage if the borrower (or, one of the borrowers) dies.

Open Mortgage: Allows partial or full payment of the principal at any time, without penalty.

Portability: A mortgage option that enables borrowers to take their current mortgage with them to another property, without penalty.

Pre-Approved Mortgage: Qualifies you for a mortgage before you start shopping. You know exactly how much you can spend and are free to make a ‘firm’ offer to purchase when you find the right home.

Prepayment Privileges: Voluntary payments in addition to regular mortgage payments.

Principal: The amount borrowed or still owning on a mortgage loan. Interest is paid on the principal amount.

Refinancing: Paying off the existing mortgage and arranging a new one or re-negotiating the terms and conditions of an existing mortgage.

Renewal: Re-negotiation of a mortgage loan at the end of a term for a new term.

Second Mortgage: Additional financing. Usually has a shorter term and a higher interest rate than a first mortgage.

Term: The length of time the interest rate is fixed. It also indicates when the principal balance becomes due and payable to the lender.

Title: Legal ownership in a property.

Variable-Rate Mortgage: A mortgage with fixed payments but fluctuates with interest rates. The changing interest rate determines how much of the payment goes towards the principal.

Vendor Take-back Mortgage: When the seller provides some or the entire mortgage financing in order to sell, or assist in selling, their property.