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 mortgage lending by a certified appraiser. The appraisal is not to be confused with a building inspection.
- Assumability: Allows a 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.
- Condominium: The owner has title to a single unit, as well as a share in the common elements such as elevators or surrounding lands.
- Condominium Fee: A common payment among other owners which is allocated to pay expenses.
- Conventional Mortgage: A mortgage loan issued for up to 75% of the property’s appraised value or purchase price, which ever is lower.
- Down Payment: The buyer’s cash payment toward the property. The difference between the purchase price and the amount of the mortgage.
- Equity: The difference between the home’s selling value and the value of the debts against it.
- High-Ratio Mortgage: A mortgage that exceeds 75% of the home’s appraised value. These mortgages must be insured for payment.
- Interest Rate: The value charged by the lender for the use of the lender’s money. Expressed as a percentage.
- Land Transfer Tax, Deed Tax or Property Purchase Tax: A fee paid to the municipal and/or provincial government for the transferring of property from seller to buyer. Buyer has to pay.
- Maturity Date: The end of the term, at which you can pay of the mortgage or renew it.
- Mortgagee: The person or financial institution that lend the money.
- Mortgagor: The borrower.
- Mortgage Insurance: Applies to high-ratio mortgages. It protects the lender against loss if the borrower is unable to pay the mortgage.
- Mortgage Life Insurance: Pays off the mortgage if the borrower 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 when you find the right home.
- Prepayment Privileges: Voluntary payments in addition to regular mortgage payments.
- Principal: The amount borrowed or still owing 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 term and conditions of an existing mortgage.
- Renewal: Re-negotiation of a mortgage loan at the end of a term.
- Second Mortgage: Additional financing. Usually has a shorter term and a higher interest rate than the first mortgage.
- Term: The length of time the interest rate is fixed. It also indicates when the principal balance becomes due and payable.
- Title: The legal ownership of the property.
- Variable Rate Mortgage: A mortgage with fixed payment, but fluctuates with interest rates. The changing interest rate determines how much of the payment goes towards the principal.
- Vendor Take Back: When the seller provided some or all of the mortgage financing in order to sell their property.
