Below are some phrases you hear often in the mortgage business. At Verico Lozinski Mortgage Corp., we’d like you to be aware of any buzzwords being bandied about as you prepare to make what ultimately will be a very important decision.
Abandonment of Property - To vacate a property with a definite intention never to return.
Acceleration Clause - A clause in a mortgage which provides that, where default has occurred in making any payment of moneys due under a mortgage or in the observance of any covenant in a mortgage and under the terms of the mortgage, by reason of such default, all moneys secured thereby become due and payable.
Acceptance - The offeree’s consent to enter into a contract and to be bound by the terms of the offer.
Accrued Interest - The interest charged for the period of time that has elapsed since interest was last deducted.
Adjustment on Sale - A pro-rated division and distribution of pre-paid or accrued taxes, pre-paid insurance premiums, pre-paid rents, and other income and expenses. Apportionment usually occurs when a property is sold, and is the manner of determining the amounts due to and from the parties.
Agreement of Purchase and Sale - A written agreement between vendor and purchaser in which the purchaser agrees to buy certain real property and the vendor agrees to sell upon terms and conditions as set forth in that agreement.
Amending Agreement - An agreement between the lender and borrower which may or may not be registered on title by the lender in which terms of the registered mortgage have changed.
Amortization - Term used to describe the time over which the mortgage is to be paid, assuming equal payments. The life of a loan, e.g. a mortgage with a 25-year amortization period means that if all regular payments were made on time and the terms (payment, interest rate) remained the same, it would take 25 years to reduce the balance owing to 0.
Amortization Schedule - A table showing the amounts of principal and interest comprising each level payment due at regular intervals and the outstanding principal balance of the loan after each level payment is made.
Amortized Mortgage - A mortgage requiring regular payments, which includes both principal and interest sufficient to fully repay the loan by maturity.
Anniversary Date - The same date in each calendar year during the term of the mortgage, with the first anniversary date taking place one year from the date interest is finally adjusted.
Appraiser - An appraiser determines the market value of a house based on its condition and the selling price of comparable houses recently sold in the area.
Assessment - A value placed upon property (land and buildings) for taxation purposes.
Assignment of Mortgage - The transfer of ownership of a mortgage from one party to another.
Assumption of Mortgage - The act of assuming liability for an existing mortgage on a property by the purchaser of that property. With builders’ loans, the assumption is usually evidenced by written agreement.
Balloon Payment - The payment of the principal balance of a mortgage loan outstanding on maturity of the term. A balloon mortgage is one that does not fully amortize over the term of its maturity.
Bank Rate - The rate at which the Bank of Canada charges loans to the chartered banks. This is the rate on which lending institutions base their prime lending rate.
Blanket Mortgage - A single mortgage registered against two or more individual parcels of real property.
Blended Payments - Regular equal mortgage payments combining interest and principal components.
Blended Rate - A new interest rate on an increased mortgage loan which is derived from a formula that takes into account the interest rate and remaining term on the existing loan and the derived rate and term on the new funds being advanced.
Building Code - A set of minimum regulations respecting the safety of buildings with reference to public health, fire protection and structural sufficiency.
Buy Down - A lump-sum payment as consideration for the reduction in the interest charged on a loan from which it would normally be charged.
Canada Mortgage Bonds - A bullet type of bond investment. Issued by Canada Housing Trust and guaranteed as to full and timely payment by CMHC, these bonds feature semi-annual interest payments and principal at maturity.
Central Bank - A body established by a national government to regulate currency and monetary policy on a national/international level. In Canada, it is the Bank of Canada; in the United States, the Federal Reserve Board; in the U.K., the Bank of England.
Chain of Title - Chain of title is uncovered through the lawyer’s search, revealing any factors affecting ownership of the land.
Chattels - Movable possessions, personal property (generally items that may be removed without injury to the freehold estate).
Chattel Mortgage - A mortgage given on chattels. Usually given as collateral security to a mortgage on real estate. As an example, a chattel mortgage on refrigerators and stoves in an apartment building.
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.
Co-Applicant - A person applying with another for a loan.
Commitment - A letter/document issued by a lender reciting the basic terms of a loan which when accepted by the borrower forms a binding contract.
Compound Interest - Interest charged not only on the principal sum but also on interest amounts charged but not paid in preceding periods that accumulate as new principal.
Condominium - Ownership of property whereby the owners hold negotiable title to their own unit and, at the same time, share with fellow owners the title and cost of the operation of the balance of the property (common elements) constituting the condominium.
Contract - A contract is a legally binding agreement between two or more capable persons for consideration or value, to do or not to do some lawful and genuinely intended act.
Co-Ownership - The idea that an estate (present or future) can be simultaneously held by several persons. The most common types of co-ownership are joint tenancy and tenants-in-common.
Creditor - One to whom a debt is owed.
Current Value Assessment - Refers to the amount of money a property would realize if sold at arm’s length by a willing seller to a willing buyer.
Debt Coverage Ratio - The percentage of the borrower’s income used for monthly payments of principal, interest, taxes, heating costs and condo fees (if applicable).
Deed - A legal document in writing, duly executed and delivered, that conveys title or an interest in real property.
Default - Failure to fulfill contractual obligations.
Discharge of Mortgage / Charge - A legal document executed by the mortgagee, and given to the mortgagor when a mortgage loan has been repaid in full releasing him or her from all obligations and covenants contained in the mortgage.
Disclosure Statement - A written statement by lenders disclosing information about a specific loan as may be required under various consumer protection acts.
Effective Gross Income (Income Property) - The annual income from a property if fully leased, less an annual allowance for vacancies and bad debts.
Encumbrance - Outstanding claim or lien recorded against property or any legal right to the use of the property by another person who is not the owner.
Equity - In mortgaging, the difference between lending value and indebtedness.
Equity of Redemption - The right of the mortgagor to have title to their property restored to him or her when he or she has repaid the mortgage in full.
Equitable Mortgage - A mortgage which has a claim solely on the equity of redemption and not to the title of the property itself.
Escheat - The revision of property to the state in the event the owner dies, leaving no will and having no legally qualified heir to whom the property may pass by lawful descent.
Expropriation - Taking private property for public use, with fair compensation to the owner, through the exercise of the right of eminent domain.
Extension Agreement - An agreement extending a loan past the original maturity date.
Exculpatory Clause - A clause in a contract holding one party harmless in the event of some default.
Face Rate - The contractual interest rate stated in a mortgage document or other financial instrument.
Face Value - The face value of the loan is the amount of money the borrower promises to repay (at the contract rate of interest).
Finders Fee - A fee or commission paid by a lender to a mortgage professional for referring a mortgage loan.
First Mortgage - A mortgage registered before all others on title.
Foreclosure - A legal remedy available to a mortgagee where there is default under any of the covenants in the mortgage. It deprives the mortgagor of their equitable right to redeem.
Guarantor - One who promises to pay a debt or perform an obligation contracted by another in the event the original obligor fails to pay or perform as contracted.
Home Inspection - A visual inspection of the major components of a home, by a qualified individual, giving the home buyer a true and unbiased picture of the home’s condition.
Interest Adjustment Date - The date one month prior to commencement of amortization when accrued interest computed on the moneys advanced becomes due.
Interest Rate - Interest rate is the percent charged on outstanding loan balances.
Late Charge - An additional charge a borrower is required to pay as penalty for failure to pay a regular installment when due.
Lending Value - The property value for mortgage purposes. Usually, the lesser of appraised value or sale price.
Market Value - The highest price which a buyer, willing, but not compelled to buy, would pay, and the lowest a seller, willing, but not compelled to sell, would accept.
Maturity Date - The final day of the term of the mortgage.
Mortgage - Any charge on real property as security for a loan.
Mortgage Insurance - Required if you are contributing between 0% and 25% of the value of the property as the down payment. Available through CMHC or GE, covering whole or partial losses of principal and interest.
Mortgage Term - The length of time the interest is guaranteed for a mortgage. Mortgage terms normally range from 6 months to 5 years or more, after which time you can repay the balance of the principal owing or re-negotiate the mortgage at current rates.
Offer to Purchase - A written contract outlining the terms under which the buyer agrees to purchase the property. There may be conditions attached to the offer, for example: offer being subject to arranging the mortgage or selling the home.
Perfecting Title - The elimination of any claims against title.
Prime Rate - The rate at which financial institutions lend to their best customers.
Pre-payment Clause - A clause inserted in a mortgage that gives the mortgagor the privilege of paying all or part of the mortgage debt in advance of the maturity date.
Pre-payment Penalty - The sum of money (usually equal to an amount of interest) a mortgagee may require from a mortgagor to repay all or part of any outstanding principal.
Real Estate - The physical land and appurtenances including structures affixed thereto.
Real Property - The interests, benefits, and rights inherent in the ownership of the physical real estate. It is the bundle of rights with which the ownership of real estate is endowed, with limitations, and does not include personal property. Often called “property,” “real estate” or “land.”
Renewal Agreement - An agreement whereby the lender may agree to extend the mortgage loan but possibly on revised terms as to principal repayments and interest rates.
Survey - A property survey is a process by which land boundaries and areas are determined and defined. Improvements may be plotted thereon. Surveys are also used for locating and identifying property lines, improvements on the land and easements on the land.
Title - The means of evidence by which the owner of land has lawful ownership thereof.
Title Insurance Policy - A contract by which the insurer, usually a title insurance company, agrees to pay the insured a specific amount for any loss caused by defects of title to real estate, wherein the insured has an interest as purchaser, mortgagee or otherwise.
Total Debt Service Ratio - The ratio of an amount equal to the annual mortgage charges and acceptable instalment account payments to an amount equal to the effective gross annual income of the borrower.
Do you have general questions?