Glossary

Glossary

Accelerated Payment:

An option that allows you to increase the frequency of your mortgage payments (e.g., bi-weekly or weekly) to pay off your mortgage faster.

Agreement of Purchase and Sale:

A legally binding contract that outlines the terms and conditions of the home purchase, including the sale price and any contingencies.

Amortization Period:
The total length of time it will take to pay off your mortgage loan in full, typically ranging from 15 to 30 years.
Annual Percentage Rate (APR):
The total cost of borrowing, expressed as an annual interest rate, which includes the interest rate, mortgage insurance, and other fees.
Appraisal:
An assessment of the property’s value conducted by a qualified appraiser to determine its fair market value.
Assumption:
The process by which a buyer takes over an existing mortgage from the seller. The buyer assumes responsibility for the mortgage terms and payments.
Blended Mortgage:
A mortgage that combines two or more types of interest rates (usually fixed and variable) to create a single mortgage with an average interest rate.
Bridge Loan:
A short-term loan that provides temporary financing to cover the gap between the purchase of a new home and the sale of the old one.
Closing Costs:
Expenses associated with finalizing the purchase of a home, including legal fees, land transfer taxes, and other fees.
Conventional Mortgage:
A mortgage where the down payment is at least 20% of the purchase price, not requiring mortgage insurance.
Credit Score:

A numerical representation of your creditworthiness, based on your credit history. Lenders use this to assess your eligibility for a mortgage.

Debt-Service Ratio (DSR):

A measure of your ability to manage debt, calculated by dividing your monthly debt payments (including the mortgage) by your gross monthly income.

Default:

Failing to meet the mortgage terms, such as missing payments, which can lead to foreclosure.

Down Payment:
The initial amount of money you pay upfront when purchasing a home. In Canada, a minimum down payment is required, usually a percentage of the home’s purchase price.
Equity:
The portion of your home’s value that you own outright. It’s the difference between the home’s market value and the outstanding mortgage balance.
First-Time Homebuyer Incentive:
A federal program that provides financial assistance to first-time homebuyers by helping them with their down payment.
Fixed-Rate Mortgage:
A mortgage with a stable interest rate that remains unchanged throughout the term of the loan, providing predictability for monthly payments.
GDS Ratio (Gross Debt Service Ratio):

A calculation that measures the percentage of your gross income needed to cover housing expenses, including mortgage payments, property taxes, and heating costs.

High Ratio Loan Insurance Premium:
The premium paid for mortgage default insurance when the down payment is less than 20% of the purchase price.
Interest Rate:

The cost of borrowing money, expressed as a percentage of the loan amount. This can be fixed or variable.

Land Transfer Tax:
A tax imposed by the provincial government on the transfer of property ownership in Ontario. The amount varies based on the purchase price and location.
Lien:
A legal claim on a property used as collateral for a debt. A mortgage is a type of lien.
Mortgage Broker:
A professional who helps you find and secure a mortgage from various lenders. They can provide you with mortgage options from multiple sources.
Mortgage Default Insurance:
Insurance that protects the lender in case the borrower defaults on the mortgage. Required for high-ratio mortgages.
Mortgage Life Insurance:
An insurance policy that pays off the mortgage in the event of the borrower’s death.
Mortgage Payment Frequency:
The frequency at which you make mortgage payments (e.g., monthly, bi-weekly, weekly).
Mortgage Term:
The length of time your mortgage agreement is in effect, typically ranging from 1 to 10 years. At the end of the term, you can renew or renegotiate your mortgage.
Portability:
The ability to transfer your existing mortgage to a new property when you sell your current home and purchase a new one.
Pre-Approval:

A preliminary assessment of your creditworthiness and borrowing capacity by a lender, which gives you an idea of the mortgage amount you may qualify for.

Principal:

The amount of money borrowed for the mortgage, excluding interest and other charges. It’s the portion of your monthly payment that reduces your loan balance.

Principal and Interest (P&I)l:

The two components of your monthly mortgage payment, where “principal” is the loan amount you’re paying down, and “interest” is the cost of borrowing.

Private Mortgage Insurance (PMI):
Insurance that protects the lender in case the borrower defaults on the mortgage. Required for some conventional mortgages with less than a 20% down payment.
Refinance:

The process of replacing an existing mortgage with a new one, often to take advantage of better interest rates or access home equity.

Second Mortgage:
A secondary loan taken out against a property with an existing mortgage, often used for home improvements or debt consolidation.
Term Life Insurance:

A life insurance policy that provides coverage for a specified term or period and can be used to cover the mortgage balance.

Title Insurance:
Insurance that protects against losses due to title defects, ownership disputes, or liens on the property.
Total Debt Service (TDS) Ratio:
A calculation that measures the percentage of your gross income needed to cover all of your debts, including housing costs, credit card payments, and loans.
Underwriting:
The process by which a lender assesses a borrower’s creditworthiness and risk to determine whether to approve a mortgage application.
Variable-Rate Mortgage:
A mortgage with an interest rate that can fluctuate based on changes in the lender’s prime rate or other benchmark interest rates.
Vendor Take-Back Mortgage:
A financing arrangement in which the seller provides part of the mortgage financing to the buyer.