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.  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.

Condominium:  The owner has title to a single unit, as well as a share in the common elements such as elevators or surrounding land.

Condominium Fee:  A common payment among owners that is allocated to pay expenses.

Conventional Mortgage:  A mortgage loan issued for up to 75% of the property’s appraised value or 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 homes selling value and 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 Price:  A fee paid to the municipal and/or provincial government for the transferring of the property from seller to buyer.

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

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

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 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 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 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 to the lender.

Title:  Legal ownership in a property.

Variable Rate Mortgage:  A mortgage with fixed payments but fluctuating 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 all of the mortgage financing in order to sell their property.