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Glossary

Amortization Period:
The actual number of years it will take to repay a mortgage in full.
Appraised Value:
An estimate of the market value of a property by a certified appraiser.
Assets:
An item of property, something of value. Example: Real estate, RRSP's, Stocks and Bonds, vehicles.
Beacon Score:
Your credit report is rated by a beacon score. The higher your beacon score the higher your credit rating. Your beacon score is determined by your ability to repay loans and credit cards on a timely basis. It is very important to meet your payment deadlines and make those monthly payments even if you intend to pay off a credit card or loan a few months down the road. Do not skip or miss payments.
Blended Payment:
A mortgage payment consisting of both a principal and an interest component, paid regularly during the term of the mortgage.
Closed Mortgage:
A mortgage agreement that cannot be prepaid, renegotiated or refinanced before maturity, except with compensation or breakage costs.
Closing Date:
On the sale of a property it is the date on which the title is transferred to the new owner. For a new mortgage it is the date on which a new mortgage takes effect.
Conventional Mortgage:
A mortgage that does not exceed 80% of the appraised value or purchase price of the property, whichever is less.
Credit Report:
  • A Credit Report is a mandatory requirement for all Lenders.
  • The Better your Credit / the Higher your Beacon Score.
  • Your beacon score is determined by your ability to repay loans and credit cards on a timely basis. It is very important to meet your payment deadlines and make those monthly payments even if you intend to pay off a credit card or loan a few months down the road. Do not skip or miss payments.
Effective Interest Rate:
The real rate of interest after the effects of compounding are included. More frequent compounding adds up to a higher effective rate.
Equity:
Equity is the owners financial interest in their home. Equity is the difference between the fair market value of the property and the amount still owed in its mortgage and other liens.
Fixed Rate Mortgage:
A mortgage for which the rate of interest is fixed for a specific period of time (the term).
Gross Debt Service (GDS) Ratio:
The percentage of gross income required to cover monthly payments associated with housing, ( principal, interest, taxes, condo fee (if applicable) heating cost) Most lenders recommend that the GDS ratio be no more than 32% of your gross (before tax) monthly income.
High Ratio Mortgage:
A mortgage that exceeds 80% of the appraised value or purchase price of the property whichever is less. This type of mortgage must be insured against payment default to a certain maximum by the Canadian Mortgage and Housing Corporation or by another approved insurer. This amount is added on to the mortgage amount.
Liabilities:
Debt obligations. Example: Current mortgages, credit card debt, bank loans, student loans, vehicle leases.
Maturity Date:
Last day of the term of the mortgage agreement.
Mortgage Default Insurance:
Lenders typically require mortgage loan insurance when homebuyers make a downpayment of less than 20% of the purchase price. Mortgage loan insurance helps protect lenders against mortgage default, and enables consumers to purchase homes with little or no downpayment -- with interest rates comparable to those with a 20% downpayment.
Mortgage Life insurance:
Insurance that pays off the mortgage debt should the insured borrower die.
Notice of Assessment (NOA):
Statement received from Revenue Canada after filing your annual income tax return. It reflects all income and taxes paid.
On Approved Credit (OAC):
On Approved Credit refers to your credit worthiness taking into factors such as:
  • Personal credit history **Credit Report / Beacon Score
  • Type of property to be financed
  • Type of loan
  • Term of loan
  • Amount of loan
  • Assets and Liabilities
Open Mortgage:
A mortgage in which you can repay the loan, in part or in full, at any time prior to maturity without penalty in most cases.
Pre-approved Mortgage:
Preliminary approval by the lender of the borrower’s application for a mortgage to a certain maximum amount and rate.
Prepayment:
Any amount paid to reduce the principal balance of a loan before the due date.
Prepayment Penalty:
A fee that may be charged to a borrower who pays off a loan before it is due.
Prepayment Privilege:
The annual amount your Lender allows you to pay towards your principal as extra payments over and above your monthly payments without penalty.
Prime Rate:
The interest rate that banks charge to their preferred customers.
Principal:
The mortgage amount actually borrowed.
Second Mortgage:
A mortgage granted when there is already a mortgage registered against the property.
Secured:
A secured line of credit or loan means it is registered against your title at the registry office for the protection of the Lender.
Term:
The length of time a mortgage agreement covers. Usually one to ten years, do not confuse with amortization. At the end of a term, if the mortgage is not paid in full it is then renegotiated and almost always at a new rate.
Title:
When you buy a home, you are buying the title to the property. It is sometimes also referred to as a deed. This means that you own the property and your lawyer registers you as the owner in the land registry system.
Title Insurance:
Title insurance is distinctive in that it protects your ownership or title against losses incurred as a result of undetected or unknown title defects, for as long as you own your home. Even if you are the rightful owner of your home, there are instances such as real estate title fraud, when your title can come into question.
Total Debt Service Ratio (TDS):
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 40% of gross monthly income.
Variable Rate Mortgage:
A mortgage for which the rate of interest changes as money market conditions change. The payments may change every month or be consistent. When the payments remain consistent the amount applied toward the principal changes according to the change (if any) in the rate of interest.