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MortgageTree Glossary of Terms

Mortgage Terms Explained

Search through our Canadian mortgage glossary below.


    A

  • Agreement of Purchase and Sales

    The legal contract a purchaser and a seller go into. We recommend that you have your offer prepared by a professional realtor that has the knowledge and experience to satisfactorily protect you with the most suitable clauses and conditions.

  • Amortization Period

    The number of years it takes to repay the entire amount of the financing based on a set of fixed payments.

  • Appraisal

    The process of determining the market value of a property.

  • Appraiser

    An appraiser determines the market value of a house based on its condition, and the selling price of comparable houses recently sold in the area.

  • Assets

    What you own or can call upon. Often used in determining net worth or in securing financing.


    B


    C

  • Canada Mortgage And Housing Corporation (CMHC)

    A Crown corporation that was initially created to administer the National Housing Act and is Canada’s only public sector mortgage insurer. CMHC is charged with administering government housing initiatives and works with community organizations, the private sector, non-profit agencies and all levels of government to help create innovative solutions to today’s housing challenges. As Canada’s authority on housing, CMHC contributes to the stability of the housing market and financial system, and provides support for Canadians in housing need, by offering objective housing research and advice to Canadian governments, consumers and the housing industry. Prudent risk management, strong corporate governance and transparency are cornerstones of CMHC’s operations.

  • Closing Date

    The date on which a sale becomes final, funds are transferred from the purchaser to the vendor and the new owner takes possession of a property.

  • Commitment

    A letter / document is issued by a lender reciting the basic terms of a loan which, when accepted by the borrower, forms a binding contract. The commitment may have conditions attached to it that must be met before the contract can be finalized.

  • Conveyance

    The transfer of an interest in property from one person to another.


    D

  • Debt Service Ratios

    Ratios that are used to compare borrowers’ debts to their incomes to determine if they can afford loans. With a Mortgage loan, we review Gross Debt Service Ratio and Total Debt Service Ratio.


    E


    F


    G


    H

  • Home Equity Line of Credit (HELOC)

    A home equity line of credit which is secured by property collateral- a type of loan in which the lender agrees to lend a maximum amount within an agreed period (called a term). This might also be referred to as a “second mortgage.”

  • Home Inspection

    A limited, non-invasive examination of the condition of a home. Home inspections are usually conducted by a home inspector who has the training and certifications to perform such inspections. It will cover the present condition of the home’s major systems, based on a visual inspection of accessible features. It focuses on the performance of the home, rather than cosmetic, code or design issues.


    I

  • Interest Adjustment Date

    The date from which interest is calculated at the rate, and compounded at the frequency, set out in the mortgage contract. It is normally the first day of the month following the closing of the mortgage transaction.

  • Interim Financing (Bridge Loans)

    Interim loans are used to provide means of a down payment until the sale of your existing house is complete. In order to obtain interim financing, a firm sale must be in place prior to possession of your new home.


    J


    K


    L


    M

  • Maturity Date

    The final day of the term of the mortgage, on which the balance of the mortgage owing becomes due.

  • Mortgage Default Insurance

    A type of insurance that protects the mortgage lender in case the borrower defaults on the mortgage payments.

  • Mortgage Term

    The length of time the interest rate is guaranteed for a mortgage. In a mortgage, the term is the actual length of time for which the money is loaned. The term is usually shorter than the amortization period. Mortgage terms normally range from 6 months to 5 years or more, after which time the borrower can either repay the balance of the principal owing or re-negotiate the mortgage at current rates.

  • Mortgage – Adjustable Rate (Arm) Or Variable Rate

    A mortgage for which the interest rate fluctuates based on changes in the prime rate.

  • Mortgage – Fixed Rate

    A mortgage for which the interest rate is fixed for the term.

  • Mortgage – Open

    A mortgage with no interest penalty for pre-payments.

  • Mortgagee

    A mortgage with no interest penalty for pre-payments.

  • Mortgagor

    The borrower.


    N


    O


    P

  • Prepayment Clause

    A loan provision allowing the borrower to pay the loan in full before the maturity date without penalty, or to make principal reductions faster than originally envisioned by the parties. Consumer mortgages all have prepayment clauses. Large, commercial loans typically prohibit prepayment.

  • Prepayment Penalty

    A prepayment penalty is an agreement between a borrower and a bank or mortgage lender that regulates what the borrower is allowed to pay off and when. Most mortgage lenders allow borrowers to pay off up to 20 percent of the loan balance each year. The sum is usually equal to an amount of interest and a lender may require from a borrower to repay all or part of any outstanding principal in advance.

  • Prime Rate

    The rate at which financial institutions lend to their customers.

  • Progress Draw (Advance) Mortgage

    A mortgage loan occurs when the funds are advanced in intervals as the house is being built.


    Q


    R

  • Real Property Report (RPR) Or Surveyor’s Certificate

    A formal statement signed, certified and dated by a surveyor, giving the pertinent facts about a particular property and any easements or encroachments affecting it. Such certificates are no longer available in certain provinces (ie. Ontario).


    S

  • Second Mortgage

    A mortgage placed on real property that is already encumbered with one mortgage. Determination of first, second or third mortgage is by priority or registration (time and date).


    T

  • Title

    The legal evidence that shows the rightful owner of land.

  • Title Insurance Policy

    A contract by which the insurer, usually a title insurance company, agrees to pay the insured a specific amount for any loss caused by defects of title to real estate, wherein the insured has an interest as purchaser, mortgagee (lender) or otherwise.


    U


    V


    W


    X


    Y


    Z


Our Mortgage Glossary

If you have any questions or comments related to our mortgage glossary, or if you feel like we missed explaining any terms, please contact us at info@mortgagetree.ca and let us know! We’re always looking to expand our mortgage glossary to help our clients and any visitors online find information that can save them time and money on their next mortgage.