Glosssary of Terms

Amortization: The period of time required to reduce a debt to zero when payments are made regularly.

Appraisal: The process for estimating the market value of a particular property.

Approved lender: A lending institution authorized by the Government of Canada to make loans under the terms of the National Housing Act. Only approved lenders can negotiate mortgages that require mortgage loan insurance.

Blended payment: A mortgage payment that includes principal and interest.

Closing costs: Costs, in addition to the purchase price of the home, such as legal fees, transfer fees and disbursements, that are payable on the closing date.

Closing date: The date on which the sale of a property becomes final.

CMHC: Canada Mortgage and Housing Corporation. A Crown corporation that administers the National Housing Act for the federal government. CMHC also creates and sells mortgage insurance products.

Conditional offer: An offer to purchase that is subject to specified conditions; for example, the arranging of a mortgage. There is a time limit in the offer for the condition to be met.

Commitment Letter/Mortgage Approval: Written notification from the mortgage lender to the borrower that approves the advancement of a specified amount of mortgage funds under specified conditions.

Deed: A legal document that is signed by both the vendor and purchaser, transferring ownership. This document is registered as evidence of ownership.

Deposit: Money placed in trust by the purchaser when an Offer to Purchase is made. The real estate company pending completion of the transaction usually holds the money in trust.

Down Payment: The portion of the house price the buyer must pay up front from personal resources, before securing a mortgage. It generally ranges from 5% to 25% of the purchase price.

Easement: A right acquired for access to or over, or for use of, another person’s land for a specific purpose, such as a driveway or public utilities.

Encumbrance: A registered claim for debt against a property, such as a mortgage.

Mortgage: A mortgage is security for a loan on the property that you own. It is your personal guarantee to repay the loan as well as a pledge of the property as security for the loan.

Mortgage Loan Insurance: If you have a high ratio mortgage (more than 75% of the purchase price), your lender will require mortgage loan insurance--available from CMHC or a private insurer. The insurance premium varies from 1% to 3.75%.

Mortgage Life Insurance: This insurance guarantees that if you die your mortgage will be paid in full. Though Banks suggest that a Buyer obtain this insurance, it should be noted that the insurance premium is set for the original mortgage amount, but the payout of the mortgage is on a declining balance. It is much better to obtain separate term life insurance at a set premium and a set payout.

Mortgagee: The lender that provides the mortgage loan.

Mortgagor: The borrower who pledges the property as security for the loan.

Principal: The amount of money actually borrowed.