What does it mean? 

A
Amortization
           The period of time over which the entire mortgage is to be paid assuming
           regular payments.

Appraisal
           An independent assessment of the property by a qualified individual.

Appraiser
Certified professional who carries out an appraisal.

Appreciation
The increase in value of something because it is worth more now than when you bought it.

Assumable
Some mortgages are assumable with qualification. This means that should you sell your house before the term of the mortgage is completed, the purchaser can take over your mortgage if they qualify. This allows you to avoid paying a penalty to break your mortgage.  Only some lenders allow you to assume.

B

Blended Payment
A mortgage payment that includes principal and interest. It is paid regularly during the term of the mortgage. The payment total remains the same, although the principal portion increases over time and the interest portion decreases. 

Bridge Financing
When the purchase of your new home closes in 60 days but the firm sale of your current home closes in 90 days, you will need interim or bridge financing. This is because for 30 days, you will own both properties, and of course, not receive the equity out of your old property.
C

Closed Mortgage
A mortgage that cannot be prepaid, renegotiated or refinanced prior to maturity, unless stated in the agreed terms.

Closing Costs
Costs in addition to the purchase price of the home, such as legal fees, transfer fees and disbursements, that are payable on closing day. They range depending on a home’s selling price.
Closing Date
The date on which the sale becomes final, the new owner takes possession of the property and funds are transferred from the purchaser to the vendor.

Commitment Letter
This is the document that your lender will confirm the basic terms and conditions upon which the lender will provide the mortgage and indicate the conditions that must be met before funding.  Conditions may include (but are not limited to) receipt of an appraisal, review of Form B for stratas, income verification,  as well as verification of the purchasers' down payment.

Conventional Mortgage
A mortgage where the borrower is contributing more than 20% or more of the value of the property as the down payment – in contrast to a High-Ratio Mortgage

Credit Bureau
A company that collects information from various sources and provides credit information on a person’s borrowing and bill paying habits to help lenders assess whether or not to lend money to the person.

Credit History or Credit Report
The main report a lender uses to determine your creditworthiness. It includes information about your ability to handle your debt obligations and your current outstanding obligations.

D

Default on Payment
Failure to make a mortgage payment.

Delinquency
Failing to make a mortgage payment on time.

Deposit
Money placed in trust by the purchaser when an Offer to Purchase is made. The sum is held by the real estate representative or lawyer/notary until the sale is closed and then it is paid to the seller.

Depreciation
The decrease in value of something because it is now worth less than when you bought it.

Discharge
          A document required to be prepared and signed off by the lender to remove the mortgage from the title.
Down Payment
The money that you pay up-front for a house. Down payments typically range from 5%-20% of the total value of the home.

E

Early Pay-Out Penalty
Many people don't think about breaking their mortgage when they are in the midst of arranging it, however, this possibility cannot be overlooked. An individual's circumstances can change with transfer of employment, marriage breakdown, etc. Some mortgages are fully closed and cannot be broken under any circumstance. Other mortgages have a sales clause allowing for early payout of the mortgage upon an arms-length sale of the property, subject to a penalty (for example, three months interest). Some mortgages allow the borrower to break the mortgage, for any reason, upon payment of a penalty.

Equity
The difference between the market value of a property and the amount owed on the property. This difference is the amount a homeowner actually owns outright.

F

Fixed Mortgage Interest Rate
A locked-in rate that will not increase for the term of the mortgage.

Foreclosure
The legal process where the lender takes possession of your property and sells it to cover the debts you have failed to pay off. When you default on a loan and the lender feels that you are unable to make payments, you may lose your home to foreclosure.

Freehold
Ownership of land and buildings (house) by one person (or two, such as joint ownership by spouses). Detached and semi-detached homes, duplexes and townhouses are usually owned freehold. Freehold owners can do what they want with their property — up to a point. They must obey municipal bylaws, subdivision agreements, building codes and federal and provincial laws, such as those protecting the environment.

G

Gross Debt Service Ratio (GDS):
The percentage of the borrower's gross monthly income that will be used for monthly payments of principal, interest, taxes and heating costs (P.I.T.H.) and half of any condominium maintenance fees.

Gross Monthly Income:
Monthly income before taxes and deductions.

H
High Ratio Mortgage
A mortgage where the borrower is contributing less than 20% of the value of the property as the down payment – in contrast to a Conventional Mortgage

Home Inspector
A person who visually inspects a home to tell you if something is not working properly, or is unsafe. He or she will also tell you if repairs are needed, and maybe even where there were problems in the past.

Home Insurance
Insurance to cover both your home and its contents (also referred to as property insurance). This is different from mortgage life insurance, which pays the outstanding balance of your mortgage in full if you die.


I

Interest Adjustment Date
It may apply to mortgages that close on any day other than the requested day of payment. For instances: since some lenders want monthly payments to be made on the first day of the month, they will adjust the interest due on closing so that interest on your mortgage is paid up until the first of the coming month. If you close on the 20th of the month (and the month has 30 days), you will have to pay interest for 10 days so that you are paid up until the first of the coming month. Then your first full mortgage payment will be due on the first of the following month.

Interest Rate
The rate of interest is a key consideration when arranging your mortgage. The interest is the payment to the lender for the use of the mortgage money.
The interest rate can be fixed (where the rate remains constant for the term) or floating (where the rate changes at regular intervals). Short term or convertible terms usually have lower interest rates and can be used to a borrower's advantage in an unstable market. These mortgages allow you to ride out a fluctuating or falling rate market until rates reach a level where you wish to "lock-in" to a longer term. On the other hand, long term rates offer stability and eliminate the need to monitor rates daily.

L

Land Survey
A document that shows property boundaries and measurements, specifies the location of buildings on the property and states easements or encroachments.

Land Registration
A legal document that records the ownership of a property and land.
 
Land Transfer Tax
           A tax that is levied on any sale of property in B.C.

Lien
A claim against a property for money owing. A lien may be filed by a supplier or a subcontractor who has provided labour or materials but has not been paid.

Lump Sum Prepayment
An extra payment, made in lump sum, to reduce the principal balance of your mortgage, with or without penalty. A closed mortgage typically restricts the amount and frequency of the prepayments you can make. With an open mortgage, however, you can make a lump sum prepayment at any time without penalty. Making prepayments can help you pay off your mortgage sooner and ultimately save on interest costs over the life of your mortgage.

M

Maturity Date
The last day of the term of the mortgage. On this day, the mortgage loan must either be paid in full or the agreement renewed.

Mortgage
           A loan that you take out in order to buy property. The collateral is the
           property itself.

Mortgage Approval
Written notification from the mortgage lender to the borrower that approves the advancement of a specified amount of mortgage funds under specified conditions.

Mortgagee/Mortgagor
           Mortgagee is the lender; mortgagor is the borrower.

Mortgage Broker
The job of the mortgage broker is to find you a lender with the terms and rates that will best suit you.

Mortgage Payment
A regular payment to the lender that includes either includes interest and principal or just interest.

Mortgage Term
Length of time that the agreed-upon mortgage contract conditions, including interest rate, is fixed.

MLS — Multiple Listing Service
A multiple listing service is a real estate agents’ cooperative service that contains descriptions of most of the homes that are for sale. Real estate agents use this computer-based service to keep up with properties they are listing for sale in their area.

N

Networth
Your financial worth, calculated by subtracting your total liabilities from your total assets.

O

Offer to Purchase
A written contract setting out the terms under which the buyer agrees to buy the home. If the Offer to Purchase is accepted by the seller, it forms a legally binding contract that binds the people who signed to certain terms and conditions.

Open Mortgage
A mortgage which you can pay off, renew or refinance at any time. The interest rate for an open mortgage is usually higher than a closed mortgage rate.

Operating Costs
The expenses that a homeowner has each month to operate a home. These include property taxes, property insurance, utilities, telephone and communications charges, maintenance and repairs.

P

Payment Schedule
The frequency of mortgage payments such as: monthly, biweekly, or weekly mortgage payments.

Porting
Transferring an existing mortgage from one home to a new home when you move. This is known as a "portable" mortgage.  The lender must approve and agree to this.

Pre-Payment
Repaying part of your mortgage ahead of schedule. Depending on your mortgage agreement, there may be a penalty for pre-paying.

Principal
The amount that you borrow for a loan. Depending on whether you have an interest only mortgage or an amortizing mortgage will determine what principal you will owe at the end of your term.
R

Refinancing
Increasing the amount of your current mortgage, at a new interest rate.
Renewal/Renewing
Once the original term of your mortgage expires, you have the option of renewing it with the original lender or paying off all of the outstanding balance.

S

Security
Property that can be claimed by a creditor if a loan is not repaid.

Survey or Certificate of Location
A document that shows property boundaries and measurements, specifies the location of buildings on the property and states easements or encroachments.

T

Tax Holdback
When property taxes are included with your mortgage payments, your lender will hold back funds from your mortgage proceeds to cover interim or final property taxes payable to the municipality. The amount depends on the month the mortgage was funded and on the dates when interim and final taxes are due. Holdbacks are used to pay for the current year's taxes, while your monthly tax installments are accumulated in the account to pay for the next year's taxes.

Term
The period of time that the interest rate and the loan is contracted for. Terms can vary from 3 months to 25 years.

Title
A freehold title gives the holder full and exclusive ownership of the land and building for an indefinite period. A leasehold title gives the holder the right to use and occupy the land and building for a defined period.

Title Insurance
Insurance against loss or damage caused by a matter affecting the title to immoveable property, in particular by a defect in the title or by the existence of a lien, encumbrance or fraud.

Total Debt Service (TDS) ratio
The percentage of gross monthly income required to cover the monthly housing payments and other debts, such as car payments.
V

Variable Rate Mortgage
A mortgage with an interest rate that changes with the market. The rate changes each month, so the portion of your monthly payment that goes towards interest may go up or down each month. But your total monthly payment will probably stay the same.

Vendor
The seller of a property.

Vendor Take-Back Mortgage (Sometimes called take-back mortgage)
The vendor, not a financial institution, finances the mortgage. The title of the property is transferred to the buyer who makes mortgage payments directly to the seller. These types of mortgages, can be helpful if you need a second mortgage to buy a home.