The length of time it will take to pay your mortgage in full, which can be longer than the term of your original mortgage contract. The total length of a mortgage is usually made up of several terms. Take a look at a sample amortization table.
A mortgage rate that blends together two different rates and applies against a single property. For example, if you refinance your mortgage and your old rate is higher or lower than your new rate, your mortgage specialist will calculate the average of the two rates—this is called a blended rate mortgage. For example, if you have a $50,000 mortgage at a 5% interest rate and get a second $50,000 mortgage at a 10% interest rate, the total blended rate would be calculated as: (50,000 x 0.05 + 50,000 x 0.10) / (50,000 + 50,000) = 7.5%.
A short-term loan that helps you "bridge" (or cover) the gap of time between buying your new home and selling your existing home. You’ll probably need this type of financing if your closing dates don’t match.
A type of loan that’s registered against your property, in addition to your mortgage. This allows you to borrow more money using your property as the security without having to refinance your mortgage.
The amount of cash you pay to the vendor (seller) to show your intent to buy a home. If your offer is accepted, the deposit is applied to your down payment. If you decide not to buy the property, your deposit is usually not returned.
The percentage of your gross monthly income that is used to pay your housing costs, including your monthly mortgage payment (principal and interest), heating costs, property taxes and condominium fees (if you have them). Based on BMO guidelines, the GDS ratio shouldn’t be more than 32% of your monthly gross income.
A type of insurance that can cover the remaining balance of your mortgage if you can’t make your payments. Mortgage default insurance is mandatory in Canada for high-ratio mortgages where the down payment is between 5% and 19.99%.
Before your mortgage reaches maturity, you can negotiate the terms of the mortgage, including the interest rate. If you don’t renew your mortgage by the original maturity date, you’ll have to pay it in full.
How often you make your mortgage payments— e.g. monthly, semi-monthly (usually on the 1st and 15th of the month), bi-weekly or weekly (usually on Fridays). If you have extra cash on hand, you can accelerate your payments to pay down your mortgage faster. See the difference two extra payments can make.
Getting pre-approved means going through an evaluation to determine whether you qualify for a loan. If you are pre-approved for a mortgage, you’ll have an estimate of how much you’ll be able to borrow and have a better idea of the interest you’ll be charged and the amount you’ll be paying each month if you’re locked in at that interest rate. An approval is typically good for 90 days.
Paying some, or all, of your mortgage principal before the term is up. While you can save money by reducing the amount of interest you’ll pay, prepayments may be subject to restrictions or fees, so it’s best to speak with your mortgage specialist for details.
You have a prepayment privilege to pay up to 10% of the original mortgage balance per year as well as the annual option to increase the monthly payment by 10% without penalty. In exercising a combination of the two options, your prepayment cannot exceed 10% of the original mortgage amount. There is no additional interest or fee when you exercise either or both of the "10+10" privileges.
You have a prepayment privilege to pay up to 20% per year of the original mortgage balance as well as the annual option to increase the monthly payment by 20% without penalty. In exercising a combination of the two options, your prepayment cannot exceed 20% of the original mortgage amount. There is no additional interest or fee when you exercise either or both of the "20+20" privileges.
A mortgage ranking in priority immediately below a first mortgage. It`s an additional mortgage you can get. If the borrower defaults and the property is sold, the second mortgage is paid after the first mortgage is paid off.
A document detailing your property's boundaries, measurements and structures. It can also describe any easements, rights-of-way or encroachments made by either your property or by neighbouring properties.
The period of time that your mortgage agreement (including your interest rate) is in effect. Most mortgage terms are between six months and five years, although there are also terms of six, seven, or 10 years. At the end of your term, you can either repay the balance of your mortgage (made up of the remaining principal amount plus interest), or renew your mortgage for another term. Most mortgages are made up of several terms.
A search of registered documents to make sure there are no liens, encumbrances or claims on the property you want to buy. A title search also confirms who owns the property and has the right to sell it.
A type of insurance that can help you pay for losses due to title defects such as fraud, municipal work orders, zoning violations, encroachments and other issues which may impact your title to the property or result in costs to you.
The total percentage of your gross annual income needed to cover all of your debts and loans, including mortgage payments, interest, taxes, utilities, and any consumer debt like credit cards and car payments. Based on BMO guidelines, the TDS ratio shouldn’t be more than 40% of your gross annual income.
With a variable rate mortgage, the amount of the mortgage payment is usually locked in, but the amount of interest and principal comprising the mortgage payment fluctuates depending on market conditions. When the prime lending rate drops, you pay less toward interest and more toward the principal. When the prime rate increases, you pay more toward interest and less to the principal. BMO Mortgage Prime Rate is 2.70% (SPIFF).