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Amortization period: The actual number of years it will take to repay a mortgage in full. This period can be longer than the loan's term. For example, a mortgage may have a five-year term and a 25-year amortization period.
Appraised value: An estimate of the market value of the home and property that the borrower pledges as security for the mortgage determined through an appraisal process. This value may be more or less than the purchase price of the property.
Blended rate mortgage: A mortgage that combines the amount the borrower owes under an existing mortgage with additional mortgage money required by the borrower. The interest rate for the new amount borrowed is a "blend" – or combination – of the interest rate of the old mortgage and the interest rate for the additional amount to be borrowed.
Blended mortgage payment: A regular instalment payment composed of both principal and interest in which part of the money received is applied toward the principal of the loan and part is applied to pay the interest. This is the standard for mortgage payments.
Bridge financing: A loan made for a short term, to "bridge" (or cover) the time gap between completing the purchase of one property and finalizing arrangements to pay for it. The need for this type of financing often results from mismatched closing dates. More information
CMHC/Canada Mortgage and Housing Corporation: The Canada Mortgage and Housing Corporation is a federal Crown corporation that administers the National Housing Act. CMHC's services include providing housing information and assistance to consumers and providing mortgage default insurance for high ratio mortgages.
Closed mortgage: A mortgage that generally cannot be prepaid or renewed early unless the borrower is willing to pay a prepayment charge. Some lenders may allow limited prepayment options without prepayment charges.
Collateral mortgage: A loan evidenced by a promissory note and backed by the collateral security of a mortgage on a property. The money borrowed is generally used for a purpose other than the purchase of a home, such as a vacation or home renovations.
Convertible mortgage: A mortgage that may be prepaid or changed to another term at any time. More information
Deposit: A sum of cash that must be paid to the vendor by the purchaser. This money is a symbol of the purchaser's commitment to buy. If the offer is accepted, the deposit is applied to the down payment. If the buyer turns down the offer later, the deposit may or may not be returned.
Fixed rate mortgage: A mortgage for which the rate of interest is fixed for the term, i.e., a set period of time. More information
Gross debt service ratio: The percentage of a borrower's gross monthly income that can be used to pay housing costs, including the monthly mortgage payment (principal and interest), heating costs, property taxes and condominium fees (if applicable). The total should not be more than 32% of monthly gross income.
High ratio mortgage: A mortgage for more than 80% of either or both a property's appraised value and its purchase price. In other words, the down payment amount is less than 20% of the purchase price/appraised value.
Mortgage disability insurance: Insurance that pays your mortgage payments should you become ill or disabled and unable to work. More information
Mortgage life insurance: Insurance that pays off your mortgage debt in the event of your death. More information
Mortgage payment: The regular instalments made towards paying back the principal and paying interest on a mortgage. The payment may also include optional creditor insurance premiums and property taxes.
Open variable mortgage: A variable rate mortgage in which the interest rate varies with money market conditions. You may prepay or renegotiate an open variable mortgage at anytime without additional interest. More information
Pre-approved mortgage: A mortgage for a set maximum amount and interest rate that is arranged prior to the purchaser finding a property. Often arranged prior to shopping for a home, this option can help the purchaser establish an affordable price range. Also known as a pre-arranged mortgage. More information
Prepayment: Allows the borrower to prepay a portion or all of the principal mortgage balance, with or without a prepayment charge, ahead of schedule. This decreases the total amount of interest paid over the life of your mortgage. For closed mortgages, this option is typically restricted to specific amounts in a calendar year.
Prepayment Charge: An additional interest amount charged by the bank when you prepay principal or renegotiate the terms of a mortgage with a closed term. The amount compensates the bank for loss of revenue.
Second mortgage: Another mortgage registered in 2nd position that is granted when a first mortgage is already registered against a property in first position. If the borrower defaults and the property is sold, the second mortgage is paid after the first.
Survey: A document providing details of a property's boundaries, measurements and structures. It also describes any easements, rights-of-way or encroachments made by either your property or by adjoining properties onto your property.
After this period, the borrower can either repay the balance-the remaining principal plus interest-of the mortgage, or renew the mortgage for another term. The total length of a mortgage is usually made up of several terms.
Total debt service (TDS) ratio: The percentage of a borrower's gross (before tax) monthly income needed to cover payments for housing costs, including principal, interest, taxes, heating costs and condominium fees (if applicable), and all other debts and obligations, such as loans and credit cards. The total should not be more than 40% of gross monthly income.
"10+10" Prepayment Options: Apply to the Low Rate Fixed Closed Mortgage. Under the first "10", you may increase your principal and interest payment by up to 10% once each calendar year. Under the second "10", you may prepay up to 10% of the original balance of your mortgage in minimum amounts of $100 each calendar year. There is no prepayment charge or fee when you exercise either or both of the "10 + 10" options.
"20+20" Prepayment Options: Under the first "20", you may increase your principal and interest payment by up to 20% once each calendar year. Under the second "20", you may prepay up to 20% of the original balance of your mortgage in minimum amounts of $100 each calendar year. There is no prepayment charge or fee when you exercise either or both of the "20 + 20" options.
Variable Rate Mortgage (also known as a floating rate mortgage): A mortgage in which your monthly payments remain the same throughout the term but the amount applied towards the principal (amount initially borrowed under the mortgage) versus interest may change with fluctuations in Bank of Montreal's Prime Rate. As a result, the amortization period may be longer than you selected if interest rates have risen since the start of the term, or shorter if interest rates have fallen since the start of the term. More information