GENERAL MORTGAGE TERMS

AMORTIZATION

The number of years that you take to fully pay off your mortgage (not the same as your mortgage term). Amortization periods are often 15, 20, or 25 years long.

ASSUMING A MORTGAGE

Taking over the obligations of the previous owner's (or builder's) mortgage when you buy a property.

BUY DOWN RATE

The portion of the interest rate on a buyer's mortgage that you assume when they buy your home. If you're selling your home and the prospective buyer doesn't like the interest rate on their mortgage, you can offer to add a certain percentage of it onto your existing mortgage. You can add a maximum of 3%.

CANADA MORTGAGE AND HOUSING CORPORATION (CMHC)

A Crown corporation that administers the National Housing Act for the federal government and encourages the improvement of housing and living conditions for all Canadians. One potential source of mortgage insurance for high-ratio mortgages.

CLOSING COSTS

Costs that are in addition to the purchase price of a property and which are payable on the closing date. Examples include legal fees, land transfer taxes, and disbursements.

CLOSING DATE

The date on which the sale of a property becomes final and the buyer takes possession of the property.

DOWNPAYMENT

The money that you pay up front for a house. Downpayments typically range from 5%-20% of the total value of the home.

GENWORTH FINANCIAL CANADA

A private mortgage insurance company. One potential source of mortgage insurance for high-ratio mortgages.

HOME INSURANCE

Insurance to cover both your home and its contents (also referred to as property insurance). This is different from mortgage life insurance, which pays the outstanding balance of your mortgage in full if you die.

INSPECTION

The process of having a qualified home inspector identify potential repairs to the property you are interested in and their estimated cost.

LUMP SUM PAYMENT

An extra payment that you make to reduce the amount of your mortgage principal.

MORTGAGE

A loan that you take out in order to buy property. The collateral is the property itself.

MORTGAGE LIFE INSURANCE

This form of insurance pays the outstanding balance of your mortgage in full if you die. This is different from home or property insurance, which insures your home and its contents.

MULTIPLE LISTING SERVICE (MLS)

A computerized listing of the properties available in your area, including information and sometimes pictures of each property.

PRE-APPROVED MORTGAGE CERTIFICATE

A written agreement that you will get a mortgage for a set amount of money at a set interest rate. Getting a pre-approved mortgage allows you to shop for a home without worrying how you'll pay for it.

OFFER TO PURCHASE

A legally binding agreement between you and the person who owns the house you want to buy. It includes the price you are offering, what you expect to be included with the house, and the financial conditions of sale (your financing arrangements, the closing date, etc.).

PORTING

Transferring an existing mortgage from one home to a new home when you move. This is known as a "portable" mortgage.

PRE-PAYMENT

Repaying part of your mortgage ahead of schedule. Depending on your mortgage agreement, there may be a prepayment cost for pre-paying.

REFINANCING

The process of paying out the existing mortgage for purposes of establishing a new mortgage on the same property under new terms and conditions. This is usually done when a client requires additional funds. The client may be subject to a pre-payment cost.

RENEWAL/RENEWING

Once the original term of your mortgage expires, you have the option of renewing it with the original lender or paying off all of the balance outstanding.

TERM

The length of time during which you pay a specific rate on the mortgage loan (i.e., the number of years in your mortgage contract). This is different than the amortization period. A mortgage is usually amortized over 20-25 years, with a shorter term (typically 6 months to 5 years). After the term expires, the interest rate is usually renegotiated with the lender (your bank, for example).