Adjustable Mortgage

Both the interest rate and payment vary concurrently during the term subject to two options: (1) The mortgage payment is adjusted to cover both principal and interest to maintain the original amortization schedule when the interest rate increases; or (2) The mortgage payment is adjusted to ensure the interest is paid when the interest rate increases until the term renewal (at least every 5 years) at which point the payment is adjusted to maintain the original amortization schedule.

Affidavit

A written statement of facts, the contents of which are sworn under oath to be true by the person making the statement. An affidavit is sometimes used in court proceedings as evidence in place of oral testimony.

Amortization

The entire length of time that it will take for mortgage to be paid and the house to be "free and clear".

Appraisal

A process for estimating the market value of a particular property.

Arms Length Transaction

Transaction in which the parties involved are not inclined towards making voluntary concession to each other.

Assets

Items of value owned by a business or person. Contrast to Liabilities

Assumable Mortgage

A legal document signed by a homebuyer that requires the buyer to assume responsibility for the obligations of a mortgage by the builder or the original owner.

Balance Sheet

A financial statement listing Assets, Liabilities and Owner’s Equity at a specific point in time.

Bridge Financing

A process of obtaining temporary short term financing to close a real estate transaction. A buyer who is selling a home to buy another often uses bridge Financing or Interim Financing, but the sale of the first home cannot be completed before the purchase of the second home must be completed. Bridge Financing is used to cover the remaining purchase price of the second home until the proceeds of the first sale are received.

Building Permit

A certificate that must be obtained from the municipality by the property owner or contractor before a building can be erected or repaired. It must be posted in a conspicuous place until the job is completed and passed as satisfactory by a municipal building inspector.

Closing Costs

Expenses, in addition to the purchase of the home, such as lawyer fees, title transfer, etc.

Closing Date

The date on which the sale of a property becomes final and the new owner takes possession. In the case of a refinance, the anticipated date the funds will be advanced.

Closed Mortgage

A loan agreement that does not allow the mortgagor to pay off the loan before its maturity date without penalty. Be careful, as some mortgages may not be paid off even with a penalty before the maturity date.

CMHC

Canada Mortgage and Housing Corporation. A crown corporation that administers the National Housing Act (NHA) for the federal government and encourages the improvement of housing and living conditions for all Canadians. The National Housing Act authorized CMHC to operate a Mortgage Insurance Fund that protects the NHA Approved Lenders from losses resulting from borrower default. http://www.cmhcschlgc.ca/en/co/buho/.

Collateral Mortgage

A mortgage that secures a loan by way of a promissory note. Registered mortgage without amortization that can be re-advanced. The money that is borrowed can be used to buy a property or for another purpose such as home renovation or for a vacation.

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.

Conventional Mortgage

A mortgage loan up to a maximum of 80% of the lending value of the property. Mortgage loan insurance is not required for this type of mortgage.

Convertible Mortgage

A mortgage that gives the borrower the flexibility to change from a short term to a longer term mortgage if it seems advantageous to do so. For example, when interest rates appear to have hit bottom within the lender chosen.

Covenant

A promise to engage in or refrain from a specified action. It is the title to the property in which the grantor of the title makes certain guarantees to the grantee.

Caveat

A notice registered against the title to land warning those looking at the title that a claim has been made.

Co-Borrower

Is essentially the same as the borrower. For example, when a husband and wife apply for a loan together, one is the borrower and the other is the co-borrower. There is no difference between the two borrowers. Both submit applications and the income, assets, liabilities and credit history for both borrowers are considered in determining whether or not their loan request can be approved.

Co-Signer

: A co-signer is used when a homebuyer needs assistance in qualifying for a mortgage and will get it from someone who will not be an owner of the property. The typical example is a parent who co-signs for a child buying a home. In this scenario, both the parent and the child submit applications together. The income, assets, liabilities and credit history of both borrowers are considered by the underwriter to approve the loan. The co-signer signs the mortgage note and is obligated to repay the loan with the borrower, but the co-signer is not on title for the property and has no ownership interest.

Default

Failure to abide by the terms of a mortgage loan agreement. A failure to make mortgage payments (defaulting on the loan) may give cause to the mortgage holder to take legal action to possess (foreclose) the mortgage property.

Deposit

Money placed in trust by the purchaser when an offer to purchase is made. The real estate representative or lawyer holds the sum until the sale is closed, and then paid to the vendor.

Discharge of Mortgage

A document signed by the lender and given to the borrower when a mortgage loan has been repaid in full.

Down Payment

The portion of the house price the buyer must pay up front before securing a mortgage. It generally ranges from 5% - 20% 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.

Equity

The difference between the price for which a home could be sold and the total debts registered against it. Equity usually increases as the outstanding principle of the mortgage is reduced through regular payments. Market values and improvements to the property also affect equity.

Estoppel Certificate

A document from the condominium corporation providing assurance about the condominium fees, any special assessments or any known problems.

Financial Statements

A report written by an accountant that describes the financial health of a company. This includes an income statement and balance sheet and often also includes cash flow statement. Financial Statements are usually compiled on an annual basis.

Fixed Mortgage

A mortgage for which the interest is fixed for a specific term. Terms range from 6 months to 10 years.

Fire Insurance

Fire insurance is a form of property insurance that protects people from the costs incurred by fires. When a structure is covered by fire insurance, the insurance policy will pay out in the event that the structure is damaged or destroyed by fire. Some standard property insurance policies include fire insurance in their coverage, while in other cases, fire insurance may need to be purchased separately.

Foreclosure

A legal procedure in which the lender gets ownership of the property if the borrower defaults on the mortgage loan.

Funding Date

The date the money is advanced from the lender.

Gross Debt Service Ratio (GDS)

The percentage of the borrower’s gross monthly income that will be used for monthly payments of principal, interest, taxes, heating costs and half of any condo maintenance fees.

Gross Income

The amount earned through employment or investment before taking taxes or other deductions into consideration. Lender uses this to calculate affordability.

High-ratio Mortgage

A mortgage loan in excess of 80% of the lending value of the property. The type of mortgage must be insured for example by CMHC against payment default.

Holdback

An amount of money withheld by the lender/lawyer during the progress of construction of a house to ensure that construction is satisfactory at every stage. A standard holdback amount is 10% of the total cost of the building project.

Home Insurance

Also known as property insurance, provides payment to the homeowner in the event of loss due to fire, theft, or damage through certain natural elements such as hail, tornado, lightning and flooding. All lenders will require a borrower to purchase home insurance, and additionally, make the lender a beneficiary on the policy. This is because the mortgage holder has a lien interest in the property and the property damage loss will affect the fair market value of the property if not repaired.

Income Property

Real estate developed or bought for the purposes of generating income.

Interest

The cost of borrowing money. Interest is usually paid to the lender in installments along with repayment of the principal loan amount.

Interest Adjustment Date (IAD)

A date from which interest on the mortgage advanced is calculated for your regular payments. The date is usually one payment period before regular mortgage payments begin. Interest due from the date your mortgage is advanced to the IAD is due on closing. This allows you to get on track with your payment frequency.

Interest Rate Differential (IRD)

The difference in the interest payable on your existing mortgage versus that payable on a replacement mortgage, calculated on the time remaining in your existing mortgage term.

Interim Financing

Short term financing to help a buyer bridge the gap between the closing date on the purchase of a new home and the closing on the sale of the current home.

Joint Tenancy

Where two or more persons acquire an equal undivided interest on a property. When one person dies, that person’s share automatically goes to the survivor of the survivors.

Letter of Direction

A balance sheet statement that indicates credits to the vendor, such as the purchase price and any prepaid taxes, and credits to the buyer, such as the deposit and the balance due on closing.

Liabilities

Monies owed by business or person. Contrast to Assets.

Lien

A claim against a property for money owing. A supplier or a subcontractor who has provided labour or materials but has not been paid may file a lien. A claimant must properly file a lien. It has a limited life, prescribed by statute that varies from province to province. If the lienholder takes action within the prescribed time, the homeowner may be obliged to pay the amount claimed by the lien- holder. Alternatively, the lienholder may force a sale of the property to pay off the debt.

Loan to Value Ratio (LTV)

The ratio of the loan to the lending value of a property expressed as a percentage. For example, the loan- to-value ratio of a loan for $90,000 on a home that costs $100,000 is 90%.

Lump Sum Payment

A clause in some loans allowing the borrower to pay off the mortgage prior to its due date without incurring a penalty.

Maturity Date

The last day of the term of the mortgage agreements. On this day the mortgage loan must be paid out in full, moved to another lender or renewed.

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

Is required by lenders when homebuyers make a down payment of less than 20% of the purchase price. Mortgage loan insurance helps protect lenders against mortgage default, and enables consumers to purchase homes with a minimum down payment of 5% — with interest rates comparable to those with a 20% down payment.

Mortgage Life Insurance

A form insurance that pays off the balance of your mortgage in the event of some unexpected occurrence. This insurance can be conveniently purchased through your lender and the premium added to your mortgage payments. However, you may want to compare rates for equivalent products from an insurance broker.

Mortgage Payment

A regularly scheduled payment that is blended to include both principal and interest.

Mortgagee

The lender who provides the mortgage loan.

Mortgagor

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

Net Income

Actual take home income after deductions.

Net Worth

Your total financial worth, calculated by subtracting your total liabilities from your total assets.

Notice of Assessments (NOA)

The form that the Canada Revenue Agency sends to all taxpayers after processing their returns, that states the amount of taxes to be paid or refunded.

Offer to Purchase

A written contract setting out the terms under which the buyer agrees to buy. If accepted by the seller, it forms a legally binding contract subject to the terms and conditions stated in the document.

Open Mortgage

Allows you the flexibility to pay off some or the entire mortgage at any time, without penalty. Interest rates are usually higher and are tied to the bank prime.

Option Agreement

A document stipulating that, in exchange for a deposit, a specified individual is to be given the first chance of buying a property at or within a specified period of time. An option holder who does not buy at or within the specified period loses the right to buy the home, the deposit is returned and the agreement is cancelled.

Payment Increase

A clause in some loans allowing the borrower to pay off the mortgage prior to its due date without incurring a penalty.

P.I.T.

Stands for Principal, Interest, Taxes – payments due on a regular basis under the terms of the mortgage agreement. Generally payments are made monthly and include one-twelfth of the estimated annual municipal and school taxes. Since these taxes change from year to year, this section of the mortgage will change accordingly.

P.I.T.H.

Stands for Principal, Interest, Taxes and Heating costs used to calculate the Gross Debt Service ratio (GDS).

Portable Mortgage

A mortgage that permits the mortgage borrower to transfer their mortgage balance to a new property and with the same lender without penalties. The borrower will transfer the mortgage to the new property with the exact terms that remained at the time of the transfer.

Power of Attorney

A document conferring authority to on person to act as another’s agent on his behalf.

Prepayment

The act of fully or partially paying off the outstanding balance of a loan at any point during the term of the loan at a time earlier than set out in the contract.

Principal

The amount of money actually borrowed.

Property Taxes

Property taxes are collected by the City of Saskatoon on behalf of three taxing authorities: School Boards (Public and Separate), the City of Saskatoon and the Saskatoon Public Library. Each taxing authority establishes its annual budget and, after taking into consideration other sources of revenue, determines the total revenue required through taxation.

Realtor

A real estate representative who is a member of an organization of persons engaged in the business of buying and selling real estate, such as the Saskatoon Region Association of Realtors (SRAR) or Canadian Real Estate Association (CREA).

Refinance

To pay off a mortgage or other registered encumbrance and arrange for a new mortgage, sometimes with a different lender.

Renewal

At the end of a mortgage term, the mortgage may “roll over” on new terms and conditions acceptable to both the lender and the borrower. This is known as renewing a mortgage. Otherwise, the lender is entitled to be repaid in full. In this case, the borrower may seek alternative financing.

Rental Property

Real estate developed or bought for the purposes of generating income.

Second Mortgage

An additional mortgage on a property that already has a mortgage.

Statement of Adjustment

A balance sheet statement that indicates credits to the vendor, such as the purchase price and any prepaid taxes, and credits to the buyer, such as the deposit and the balance due on closing.

Survey

A document that illustrates the property boundaries and measurements, specifies the location of buildings on the property, and indicates any easements or encroachments.

T4

Statement of Remuneration is prepared and issued by an employer to tell you and the Canada Revenue Agency (CRA) how much employment income you were paid during a tax year and the amount of income tax that was deducted.

Tenants in Common

When two or more people acquire interests in a single property. Each may sell or bequeath their interest and in the event of death, their interest becomes a part of their estate.

Term

The period for which your current payment obligations are valid.

TIPPS

Stands for Tax Installment Payment Plan Service, allows property owners to pay their property tax bill in 12 monthly installments by automatic withdrawal rather than a single annual payment.

Title

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

Variable Mortgage

A loan being repaid by payments change as the market interest rate changes.

Vendor Take Back Mortgage

Mortgage financing arranged between the seller of the property and the buyer. The title is transferred to the buyer. Often this type of loan is a second mortgage that the seller is willing to arrange at below market rates to ensure the buyer can purchase the house. Most of these arrangements are not renewable or transferrable to the next owner of the house.