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Accelerated
Refers to the payment of 13 monthly payments in a 12 month
period. Refer to Payment Options. |
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Amortization
Amortization refers to the number of years it will take
to repay a mortgage loan in full. The longer the amortization
period the lower the payment. However, the shorter the amortization
period the less interest you will pay. |
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Canada
Mortgage And Housing Corporation (CMHC)
Minimum 5% down payment must come from the borrower's own
resources. (Note that a gift down payment must be documented
by a letter from the donor that confirms that the money
is a true gift, not a loan and the gift money must be in
the borrower's possession at least 15 days before closing.)
The Approved Lender must verify that the borrower can cover
closing costs of at least 1.5% of the purchase price. However,
the purchasers can borrow the money to satisfy this condition
if the borrower agrees to repay this amount within 1 year
from closing. The loan payment for this amount must be included
into your total debt service calculations. |
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Condominium
Fee
A common payment among owners which is allocated to pay
expenses. |
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Estimated
Annual Property Taxes
In order to determine how much of a mortgage you qualify
for it is necessary to determine what 1/12th of the annual
property taxes are. Refer to GROSS DEBT SERVICE RATIO. |
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Estimated
Annual Condo Fees
In order to determine how much of a mortgage you qualify
for it is necessary to determine the amount that 1/12th
of ½ of the annual condominium fees. Refer to GROSS
DEBT SERVICE RATIO. |
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Estimated
Annual Heat Costs
In order to determine how much of a mortgage you qualify
for it is necessary to determine the amount that 1/12th
of the total annual heating costs represents. Refer to GROSS
DEBT SERVICE RATIO. |
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Gross
Debt Service (G.D.S.)
The amount of money needed to pay principal, interest, property
taxes, heat costs and 50% of condominium fees if applicable. |
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Gross
Debt Service (G.D.S.) Ratio
The borrower must not commit more than 32% of total gross
household income towards the payment of principal + interest
+ property taxes + heating + 50% of condominium fees. |
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Loan
to Value Ratio
The PRINCIPAL or MORTGAGE AMOUNT divided by the lesser of
the PURCHASE PRICE or APPRAISED VALUE. |
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Mortgage
A contract providing security for the repayment of a loan,
registered against the property, with stated rights and
remedies in the event of default.Lenders consider both the
property (security) and the financial worth of the borrower
(covenant) in deciding on a mortgage loan. |
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Mortgagee
The person or financial institution lending the money, secured
by a mortgage. |
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Mortgage
Features
Portability Allows you to transfer the terms
and conditions of your mortgage to your next home. This
may allow you to keep a low interest rate if you sell
one house and buy another.
Assumability
Allows you to assume an existing mortgage registered against
a property, normally subject to approval of your credit
worthiness and ability to service the existing obligation.
The assumable mortgage may have an attractive feature
such as an interest rate lower than the prevailing market
rate. An assumable mortgage may also be a selling feature
for you when you sell your home.
Expandability
This lets you increase the principal on your mortgage
at the lender's agreed-upon rate of interest. |
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Mortgage
Principal or Amount
The amount borrowed or still owing on a mortgage loan. |
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Mortgage
Types
Open Mortgage One which allows payment of
the principal, in part or in full, at any time without penalty.
Closed Mortgage One which requires you to
maintain a specific payment schedule. A penalty usually
applies if you repay the loan in full before the end of
the term. Conventional
Mortgage With a conventional mortgage a lender
will generally provide up to 75% of the lesser of the
appraised value or purchase price of a property. You must
be able to provide at least 25% of the financing on your
own.
Convertible
Mortgage One which allows you to renew your mortgage
at any time without penalty for a longer term, closed
mortgage.
CMHCInsured
Mortgage / High Ratio Mortgage With this type
of mortgage a lender will provide up to 95% of the lesser
of the appraised value or purchase price of a qualified
single family residential property to a qualified applicant.
This type of mortgage must, by law, be insured against
non-payment by either the Canada Mortgage and Housing
Corporation (CMHC) or the GE Capital Mortgage Insurance
Company, a private sector source of mortgage insurance
to lenders in Canada. Beware: This insurance is for the
benefit of the lender and must not be confused with mortgage
life insurance.
Variable
Rate Mortgage A mortgage where the interest rate
may vary during the term of the mortgage. The varying
rates usually decided by such factors as the prime bank
rate or a particular lenders guaranteed investment certificate
rate. |
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Mortgagor
The borrower. |
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Mortgage
(Interest) Rate
The value charged by the lender for the use of the lender's
money. Expressed as a percentage. |
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Mortgage
Term
The actual life of a mortgage contract at the end of which
the mortgage becomes due and payable unless the lender renews
the mortgage for another term. During the term the interest
rate can be either a fixed rate or a variable rate. Lenders
offer a variety of terms. |
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Ontario
Land Transfer Tax
Up to $55,000 X .5 % of total property value
From $55,000 to $250,000 X 1 % of total property value
From $250,000 to $400,000 X 1.5 % of total property value
From $400,000 up X 2 % of total property value |
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Payment
Options
Review the Calculate a Payment Calculator to calculate
your payment options.
Monthly Payments This is what you can expect
to pay each month for the length of the mortgage term. A
payment made on a given date each month.
Semi Monthly Multiply the monthly payment
by 12 and divide the result by 24. Comparable to the Bi-Weekly
(26) and Weekly (52) options. Bi-Monthly
Calculated by multiplying the monthly payment by 13 and
dividing the result by 24.
Weekly
(52) Like the Bi-Weekly (26) option below don’t
be fooled by the lower payment value stated. Review the
Calculate a Payment Calculator and compare this option
vs. the Weekly (48) option.
Weekly (48) Calculated by either dividing
the yearly monthly payment total by 48 or multiplying
the monthly payment by 13 and dividing the result by 52.
Either way the payment to be made every 7 days will be
the same. Like the Bi-Weekly (24) this option lowers the
total interest paid and the amortization.
Bi
- Weekly (26) This payment is calculated by dividing
your yearly monthly payment total by 26 weeks. Review
the Calculate a Payment Calculator and note that the difference
between this option and the monthly option is minimal.
This lower Bi-Weekly (26) amount vs. the Bi-Weekly (24)
looks appealing but will result in you paying more interest
over a longer period of time.
Bi-Weekly (24) Calculated by dividing the
yearly monthly payment total by 24. Or, some will say
multiply the monthly payment by 13 and divide the result
by 26. Either way the payment to be made every 14 days
will be the same. Here is a chance to start controlling
the total amount of interest that has to be paid and the
amortization.
Preferred Payment
For Example. If the monthly payment for a $100,000.00
first mortgage at 5.35% amortized over 25 years is $601.68
(principal and interest only) but you feel that you are
in a position to pay a larger amount (i.e. $700.00 per
month) then you are stating that your preferred payment
amount will be $700.00 per month. A decision like this
will lower the amortization period and the total amount
of interest that you will pay. Goto the KGM Canadian Mortgage
Calculators / Calculator Picker / Calculator 6 and test
this scenario for yourself. |
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Prepayment
Clause Options
These vary by the lender. Be certain that you understand
whether or not a prepayment clause is included in the financing
that you arrange and exactly how much and how often you
are permitted to make a lump sum or extra payment without
penalty. |
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Prepayment
Privelege Clause
In most mortgage commitments there will be a PREPAYMENT
PRIVILEGE CLAUSE which sets out how much and when you will
be permitted to make a lump sum payment to be applied directly
against the unpaid principal balance of your mortgage. UNDERSTAND
THE TERMS OF THIS CLAUSE BEFORE YOU COMMIT TO ANY PARTICULAR
MORTGAGE. |
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Gross
Income Required
This is the annual gross income you will need to make in
order to qualify for the stated mortgage. This resumes your
Total Debt Service Ratio is under 40%. |
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Total
Debt Service (T.D.S.) Ratio
The borrower must not commit more than 40% of total gross
household income towards the payment of principal + interest
+ property taxes + heating + 50% of condominium fees + payments
on all other debts i.e. credit card payments, auto loan/lease
etc. |
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Total
Loan Amount
With a CMHC insured mortgage the TOTAL LOAN AMOUNT is the
PRINCIPAL/MORTGAGE AMOUNT plus the CMHC MORTGAGE INSURANCE
PREMIUM. |
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Refinancing
Paying off the existing mortgage and arranging a new one
or re-negotiating the terms and conditions of an existing
mortgage. |
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Renewal
Re-negotiation of a mortgage loan at the end of a term for
a new term. |
Portability