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A
Agreement of Purchase and Sale - A legal agreement
that offers a certain price for a home. The offer may be firm (no
conditions attached), or conditional (certain conditions must be fulfilled
before the deal can be closed).
Amortization Period - The time over which equal
payments would pay off the mortgage. This is normally 25 years for a new
mortgage.
Appraisal - The process of determining the value of
property, usually for lending purposes. This value may or may not be the
same as the purchase price of the home.
Appraisal Value - An estimate of the market value of
the property.
B
Blended Payments - Payments consisting of both a
principal and an interest component, paid on a regular basis (e.g. weekly,
biweekly, monthly) during the term of the mortgage. The principal portion
of payment increases, while the interest portion decreases over the term
of the mortgage, but the total regular payment usually does not change.
C
Canada Mortgage and Housing Corporation (CMHC) - The
National Housing Act (NHA) authorized Canada Mortgage and Housing
Corporation (CMHC) to operate a Mortgage Insurance Fund which protects NHA
Approved Lenders from losses resulting from borrower default.
Certificate of Location or Survey - A document
specifying the exact location of the building on the property and
describing the type and size of the building including additions, if any.
Certificate of Search or Abstract of Title - A
document setting out instruments registered against the title to the
property, e.g. deed, mortgages, etc.
Closed Mortgage - A mortgage agreement that cannot be
prepaid, renegotiated or refinanced before maturity, except according to
its terms.
Closing Costs - Various expenses associated with
purchasing a home. These costs can include, but are not limited to,
legal/notary fees and disbursements, property land transfer taxes, as well
as adjustments for prepaid property taxes or condominium common expenses,
if any.
Closing Date - The date on which the sale of a
property becomes final and the new owner usually takes possession.
CMHC or GEMICO Insurance Premium - Mortgage insurance
insures the lender against loss in case of default by the borrower.
Mortgage insurance is provided to the lender by CMHC or GEMICO and the
premium is paid by the borrower.
Conditional Offer - An offer to purchase subject to
conditions. These conditions may relate to financing, or the sale of an
existing home. Usually a time limit in which the specified conditions must
be satisfied is stipulated.
Conventional
Mortgage - A mortgage that does not exceed 75% of the purchase
price of the home. Mortgages that exceed this limit must be insured
against default, and are referred to as high-ratio mortgages (see below).
D
Debt-Service Ratio - The percentage of the borrower's
gross income that will be used for monthly payments of principal,
interest, taxes, heating costs and condominium fees.
Deed (Certificate of Ownership) - The document signed
by the seller transferring ownership of the home to the purchaser. This
document is then registered against the title to the property as evidence
of the purchaser's ownership of the property.
Deposit - A sum of money deposited in trust by the
purchaser when making an offer to be held in trust by the vendor's agent,
broker, lawyer or notary until the closing of the transaction.
E
Equity - The interest of the owner in a property over
and above all claims against the property. It is usually the difference
between the market value of the property and any outstanding encumbrances.
F
Fire Insurance - Before a mortgage can be advanced,
the purchaser must have arranged fire insurance. A certificate or binder
from the insurance company may be required on closing.
Firm Offer - An offer to buy the property as outlined
in the offer to purchase with no conditions attached.
Fixed-Rate Mortgage - A mortgage for which the rate
of interest is fixed for a specific period of time (the term).
Foreclosure - A legal procedure whereby the lender
eventually obtains ownership of the property after the borrower has
defaulted on payments.
G
Gross Debt Service (GDS) Ratio - The percentage of
gross income required to cover monthly payments associated with housing
costs. Most lenders recommend that the GDS ratio be no more than 32% of
your gross (before tax) monthly income.
Gross Household Income - Gross household income is
the total salary, wages, commissions and other assured income, before
deductions, by all household members who are co-applicants for the
mortgage.
H
High Ratio Mortgage - If you don't have 25% of the
lesser of the purchase price or appraised value of the property, your
mortgage must be insured against payment default by a Mortgage Insurer,
such as CMHC.
Holdback - An amount of money required to be withheld
by the lender during the construction or renovation of a house to ensure
that construction is satisfactorily completed at every stage.
Home Equity - The difference between the price for
which a home could be sold (market value) and the total debts registered
against it.
I
Inspection - The examination of the house by a
building inspector selected by the purchaser.
Interest Rate Differential Amount (IRD) - An IRD
amount is a compensation charge that may apply if you pay off your
mortgage principal prior to the maturity date or pay the mortgage
principal down beyond the prepayment privilege amount. The IRD amount is
calculated on the amount being prepaid using an interest rate equal to the
difference between your existing mortgage interest rate and the interest
rate that we can now charge when re-lending the funds for the remaining
term of the mortgage. For more information, click on compensation
amounts.
Interim Financing - Short-term financing to help a
buyer bridge the gap between the closing date on the purchase of a new
home and the closing date on the sale of the current home.
M
Maturity Date - Last day of the term of the mortgage
agreement.
Mortgage Critical Illness Insurance - Mortgage
Critical Illness Insurance is available as an enhancement to Mortgage Life
Insurance.¹ Mortgage Critical Illness Insurance is underwritten by the
Canada Life Assurance Company. Complete details of benefits, exclusions
and limitations are contained in the Certificate of Insurance. It is
recommended for all mortgagors. It can pay off your TD Canada Trust
mortgage -- up to $300,000 -- if you are diagnosed with life-threatening
cancer, heart attack or stroke.²
Mortgagee and Mortgagor - The lender is the mortgagee
and the borrower is the mortgagor.
Mortgage Life Insurance - A form of reducing term
insurance recommended for all mortgagors. If you die, have a terminal
illness, or suffer an accident, the insurance can pay the balance owing on
the mortgage. The intent is to protect survivors from the loss of their
homes.
Mortgage Term - The number of years or months over
which you pay a specified interest rate. Terms usually range from six
months to 10 years.
O
Open Mortgage - A mortgage which can be prepaid at
any time, without penalty.
P
Payment Frequency - The choice of making regular
mortgage payments every week, every other week, twice a month or monthly.
P.I.T. - Principal, interest and taxes. Together,
these make up the regular payment on a mortgage if you elect to include
property taxes in your mortgage payments
Porting - This allows you to move to another property
without having to lose your existing interest rate. You can keep your
existing mortgage balance, term and interest rate plus save money by
avoiding early discharge penalties.
Prepayment Charge - A fee charged by the lender when
the borrower prepays all or part of a closed mortgage more quickly than is
set out in the mortgage agreement.
Prepayment Option - The ability to prepay all or a
portion of the principal balance. Prepayment charges may be incurred on
the exercise of prepayment options.
Principal - The amount of money borrowed for a new
mortgage.
R
Refinancing - Renegotiating your existing mortgage
agreement. May include increasing the principal or paying out the mortgage
in full.
Renewal - At the end of a mortgage term, the mortgage
may "roll over" on new terms and conditions acceptable to both the lender
and the borrower. This is known as renewing a mortgage. Otherwise, the
lender is entitled to be repaid in full. In this case, the borrower may
seek alternative financing.
S
Security - In the case of mortgages, real estate
offered as collateral for the loan.
T
Term - The length of the current mortgage agreement.
A mortgage may be amortized over a long period (such as 25 years) with a
shorter term (six months to five years or more). After the term expires,
the balance of the principal then owing on the mortgage can be repaid or a
new mortgage agreement can be entered into at the then current interest
rates. Visit our Renewal site.
Total Debt Service (TDS) Ratio - The percentage of
gross income needed to cover monthly payments for housing and all other
debts and financing obligations. The total should generally not exceed 37%
of gross monthly income.
V
Variable Rate Mortgage - A mortgage for which the
rate of interest may change if other market conditions change. This is
sometimes referred to as a floating rate mortgage.
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