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RateSupermarket.ca > Mortgage glossary
RateSupermarket.ca mortgage glossary
You may come across the following jargon or terms when looking for a mortgage.
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A
Acceleration Clause
Mortgage documents may contain an Acceleration Clause to protect the lender in the event of a default. The clause enables the lender to make the entire principal amount of a mortgage due in the event of a default by speeding up the payment date.
Acceptance
Acceptance refers to the formal written approval when a property seller accepts the offer made by the buyer for purchasing the property.
Accredited Mortgage Professional
The Accredited Mortgage Professional (AMP) is Canada's national designation for mortgage professionals. Launched in 2004, the AMP was developed by CAAMP (formerly CIMBL) as part of an ongoing commitment to increasing the level of professionalism in Canada's mortgage industry through the development of educational and ethical standards. The AMP designation sets a single national proficiency standard for Canada's mortgage professionals.
Add-on Interest
Interest that is calculated at the beginning of the loan and added to the principal amount owing. This means that the added interest must also be repaid, even if the loan is paid off early.
Additional Principal Payment
You can pay extra money in addition to your required loan payment to help pay off the principal loan amount faster. By making the extra payment, you also reduce the amount of interest paid.
Adjustable Rate Mortgage (ARM)
An Adjustable Rate Mortgage or ARM refers to the type of mortgage loan where the interest rate and monthly payments can be adjusted to rise and fall with market conditions. The interest rate and payments can be adjusted as frequently as once a month or you can adjust the principal loan balance or the loan term to reflect the rate change.
Adjustment Period
The period of time between interest rate changes in an adjustable-rate mortgage.
Agreement of Sale
A legally binding document that details the agreement between a property buyer and the property seller. This document specifies the agreed price and any other terms of the title transfer or sale.
Alternative Mortgage
When a home loan is not a standard fixed-rate mortgage, it is considered an alternative mortgage.
Amenities
Amortization
Amortization refers to the process of gradually paying down the principal of a loan. Each payment toward the principal reduces your loan by that amount. This is different than an interest
Amortization period
The amount of time it will take to pay off a mortgage by making routine payments.
Amortization Schedule
A schedule or table that details the life of the loan or the amortization. This schedule includes the principal amount owing at the origination of the loan, period payments, interest paid on each payment, principal reduction on each payment, and the final balance.
Amortization Term
The period of time that is required and agreed upon to repay (amortize) an entire mortgage loan.
Amortized Loan
An amortized loan is a loan where the interest and principal are both paid off in their entirety through a series of scheduled payments over a specified amount of time.
Anniversary Period
The agreed 12 month period that starts annually on your interest adjustment date or, if you've just renewed your mortgage, the date of the renewal.
Annual Mortgagor Statement
An annual report or statement sent to the borrower which details the remaining principal amount owing on the loan and the amount paid in taxes and interest for the previous year.
Annual Percentage Rate (APR)
A yearly interest rate that includes fees and costs paid to obtain the loan. Lenders are required by law to disclose this interest rate. The rate is calculated in a standard way, taking the average compound interest rate over the loan term, so borrowers can compare loans.
In mortgages, it is the interest rate of a mortgage when taking into account the interest, mortgage insurance, and certain closing costs including points paid at closing.
Annual Percentage Yield (APY)
The percentage disclosed on interest-bearing deposit accounts that reflect the total interest to be earned based on an institution's compounding method, assuming funds remain in the account for a 365-day year. This disclosure is required by Truth in Savings regulations.
Application
A document or form that is filled out by a prospective borrower to qualify for a loan. The application requires the borrower to provide detailed information about his or her financial situation.
Application Fee
Lenders charge a fee to process the application or document as filled out by a prospective borrower to qualify for a loan. The application generally details the financial situation of the borrower and must be reviewed before a loan decision can be made.
Appraisal
A market value estimate for a parcel of real estate that is made by a professional who is knowledgeable about local real estate prices and market trends.
Appraisal Report
A detailed evaluation a property's value that is typically conducted by a professional. The report is then based on an inspection of the property and a review of nearby, comparable properties along with their values.
Appraised Value
An educated opinion or estimate regarding the value (monetary worth) of a property.
Appraiser
A person who is qualified by education, training, and work experience to estimate the value of real and personal property.
Appreciation
Appreciation refers to the increase in the value of a property or item over time.
Approval
An assessment or judgment made by a lender regarding the ability of a borrower to repay a mortgage loan. Being approved also helps the borrower when looking for a home because the lender will confirm the amount the borrower can obtain to purchase a home.
Assumable Mortgage
An existing mortgage that can be taken over or "assumed" by the buyer from the seller when a property is sold.
Assumption Clause
A provision in a mortgage contract that enables the buyer to assume or take responsibility for the existing mortgage loan from the seller.
Assumption Fee
Lenders will charge a fee to update mortgage records when a buyer assumes an existing mortgage from the seller.
Automatic Payment
An agreement giving authorization to various company's or lenders to make specified withdrawals from a person's bank account to make payments towards bills or loans. For example, regular monthly payments such as car or mortgage payments can be set up to automatically be withdrawn from your account each month or as specified in your authorization agreement.
Average Annual Yield
The average yield per year over the life or term of the investment, assuming all principal and interest remain on deposit until maturity.
B
Balloon Mortgage
This type of loan requires the borrower to make regular monthly payments which amortize over a specified term, but at the end of that term a final payment or large lump sum (balloon payment) must be made to pay off the remaining principal. The typical term for a balloon loan is 10 year.
Balloon Payment
A payment or installment that is made at the end of a specified loan term to pay off the remaining principal. This payment is larger than the regular payments that are made throughout the term of the loan.
Bank Rate
The minimum rate charged by the Bank of Canada for one-day loans to chartered banks, trust and loan companies and other members of the Canadian Payments Association. The bank rate affects the Prime Lending Rate that these financial institutions give to their most credit-worthy borrowers.
Bank Spread
Bank spread refers to the difference between the interest rate in which a bank charges a borrower and the interest rate the bank pays a depositor.
Bank Wire
An electronic money transfer system used to move funds between banks.
Bargain Sale
A bargain sale refers to purchasing a property or an item for less than the market value.
Basis Point
A basis point is a measurement of a percentage: 1/100th of one percent. For example, the difference between a 9.0% loan and a 9.5% loan is 50 basis points.
Bi-weekly Mortgage
A mortgage loan that requires payments every two weeks instead of one standard monthly payment. Each 26 biweekly payment is equal to one-half of the standard monthly payment. Making biweekly mortgage payments is advantageous to the buyer because it results in a substantial reduction in interest payments because the mortgage is paid off quicker.
Blanket Mortgage
A mortgage that covers more than one property owned by the same buyer.
Blended rate mortgage
The new interest rate when an existing property loan is refinanced and extended. The rate becomes a weighted average of the previous and new interest rates.
Borrow
1. To be approved and obtain a loan of money. 2. Sand, gravel, or other material used for grading.
Borrower
The person who obtains the loan.
Bridge financing
A short-term, high interest loan that allows a seller to purchase a new property before selling an existing property.
Bridge Loan
A loan that "bridges" the gap between the purchase of a new home and the sale of a current or existing home. The current home is used as collateral and the bridge loan is used to pay closing on the new home before the current home is sold. Some bridge loans are structured to completely pay off the existing mortgage at the bridge loan's closing, while other variations of the loan add the new debt to the old debt. Bridge loans usually come with six month terms.
Broker
A person or firm who acts on behalf of another. For example, a mortgage broker works on behalf of a client to find the best mortgage rate possible for the client.
Buy-down Mortgage
A type of mortgage loan where the lender charges below-market interest in exchange for discount points.
Buy-down or Buydown
The option of buying a lower mortgage rate. The borrower "buys down" the interest rate on a mortgage by paying discount points when the loan is first initiated. It can also be a mortgage where an initial lump-sum payment is made to temporarily reduce a borrower's monthly payments during the first few years of the mortgage.
C
Call Option
A mortgage clause that provides the lender with rights to request the remaining balance of a mortgage at any time.
Canada Deposit Insurance Corporation (CDIC)
A crown corporation that provides deposit insurance for protection against the loss of deposits made with other member financial institutions.
Canada Education Savings Grant
A federally introduced program in which the Government will invest, in the form of grants, with parents who save for their children's education through Registered Education Savings Plans (RESPs). The government will add to contributions made by parents to an RESP by 20% up to a yearly maximum of $400 per beneficiary.
Cancellation Clause
A precaution or provision in a lease or contract that details the conditions under which the parties involved can terminate the agreement.
Cap
The upper most limit on the amount the interest rate can increase during a single time period of an adjustable
Capital Adequacy Ratio
A ratio of total capital divided by risk
Carrying costs
The cost of maintaining a property. For example, mortgage payments, property taxes, and the expenses of utilities, repairs and upkeep.
Cash Flow
The amount of money (after expenses are subtracted) that is generated by an investment or a business during a specific time period. One measure of cash flow is earnings before interest, taxes, depreciation, and amortization. Cash flow is often considered to be a company's most important financial statistic because money drives business.
Chartered Banks
Financial institutions that are regulated under the Bank Act. Chartered banks are designated as Schedule I or Schedule II depending on their ownership.
Chattel Mortgage
A loan that is certified by movable personal property such as a mobile or trailer home.
Client
Bank clients can use a money management software application on their personal computers to access their bank accounts using a modem and a phone line. Clients are then able to conduct bank transactions from the comfort of their own homes.
Closed Mortgage
A mortgage product that has a strict repayment schedule. Payment amounts are pre-set with optional limited lump sum payments and payment increases as detailed in the loan agreement.
Closing
In real estate, the closing refers to the completion of the real estate transaction. Before closing can occur, there are a number of things that must happen. For example, the deed must be delivered to the buyer, the money must be transferred for the purchase price, the notes must be signed, and the closing costs must be paid in full.
Closing Costs
The various costs or expenses associated with closing a real estate transaction. Such costs can include paying for title insurance or appraisal fees. It is important to remember that these costs are over and above the purchase price of the property.
Closing date
The date a buyer takes possession of a property title.
Canadian Mortgage and Housing Corporation (CMHC)
CMHC is an acronym for the Canadian Mortgage and Housing Corporation. This Federally run institution provides banks and lenders with mortgage insurance (which is not the same as life or property insurance). If a borrower defaults on their mortgage loan or there is a foreclosure on the property, CMHC assumes responsibility and reimburses the bank or lender the entire mortgage amount. This insurance is typically required when a borrower has less than 25% equity or down payment and it must be paid in advance (or it can be added to the mortgage).
Co-mortgagor
A second borrower who signs a mortgage contract to provide financial assistance for the loan requirements.
Co-signer
An individual who signs a promissory note in conjunction with one or more additional parties. All parties are responsible for the debt repayment once the papers are signed. This means that any one party could be responsible for repaying the entire debt if any of the other parties back out or renege on the repayment.
Combined Loan
The connection between the unpaid principal balances of all the mortgages on a property (first and second usually) and the property's appraised value (or sales price, if it is lower).
Commission
A fee paid to an agent for negotiating a real estate or loan transaction, often expressed as a percentage of the property selling price.
Commitment
A written agreement from a lender promising to lend money on certain terms for a specified time period.
Commitment Fee
A fee paid by a borrower to a lender who promises to lend money on certain terms for a specified time period.
Commitment Letter
A formal document supplied by a lender to a home buyer that details the terms under which the lender will lend money to the home buyer. Also known as a "loan commitment." This letter indicates the contingencies that must be cleared prior to funding the loan.
Conditional Offer
An offer to purchase an item subject to a list of specified conditions. These could include many things such as getting a quality mortgage, completing an inspection, or the selling your current home. A time limit could be included as well.
Confirmation
After approval is given, all of the debtors' pre-petition debts are eliminated as provided by the plan.
Conforming Loan
A mortgage that is eligible for purchase or securitization by one of the government
Contract
1. An agreement between two or more parties, especially one that is written and enforceable by law.
2. In real estate parlance, the contract is the legal document by which buyer and seller make offers and counteroffers for a piece of property. The real estate contract describes the property, includes or excludes items in the property, names the price, apportions the closing costs between the parties and sets forth a closing date. When buyer and seller agree on terms and sign the same document, the property is said to be "under contract." More formally known as agreement for sale, purchase agreement or earnest money contract.
Contract to Purchase
A document used by a property buyer and seller to approve the price and other terms of the transfer of title. Also known as an agreement of sale, a purchase contract, or a sale contract.
Conventional Mortgage
A mortgage that is not insured or guaranteed by CMHC or GE Capital, for mortgages up to 80% of the property value.
Conversion Clause
A provision that may be present in an adjustable-rate loan agreement which allows the loan to be changed to a fixed-interest rate loan, usually for an additional charge.
Convertible ARM
An adjustable rate mortgage (ARM) that can be converted to a fixed-rate mortgage under certain conditions.
Convertible Mortgage
An adjustable-rate mortgage where the borrower has the option at specified times to change into a fixed-rate mortgage.
Cooperating Broker
A real-estate broker who finds a buyer for a property and initiates a negotiation for a share of the commission.
Correspondent Bank
A bank that holds deposits of another bank, usually a smaller bank, and provides various banking services that may not be available to the smaller bank.
Counteroffer
A step in the negotiation process where a seller rejects a purchase offer from a buyer, but then submits another offer with different terms (such as price or closing date) for the buyer to consider.
Creative Financing
An innovative or unusual way of structuring a mortgage loan to allow the buyer to purchase the property.
Credit
Access to money or funds by a borrower on the condition of repayment to the lender over a certain period.
Credit Bureau
A company that collects and sells information about people's credit histories. The company issues credit reports that show how individuals manage debts and make payments. The report also shows how much credit a person still has and whether or not the person has applied for a loan recently. The reports are made available to those who have a legitimate need for the information including the individual being reported upon.
Credit History
A record of an individual's or company's past borrowing patterns and whether or not debts were repaid on time.
Credit Insurance
An insurance policy that pays off credit card debt if the borrower loses his or her job, dies or becomes disabled. The structure of protection for a revolving credit card debt is calculated each month to cover only the debt that existed at the last billing cycle.
Credit Life Insurance
A type of optional life insurance coverage that repays the loan if the borrower becomes disabled. The cost of the policy is often included in the principal amount of the loan.
Credit Limit
The maximum amount of charges a cardholder may apply to a credit card account as allowed by the credit lender.
Credit Line
The maximum money amount available in an open-end credit arrangement such as a credit card or overdraft protection.
Credit Rating
A judgment of a person's ability to repay debts. The rating is often based on a person's current and projected income and past debt payment history. Also called a credit score.
Credit Report
A report on past behavior regarding a borrower's willingness and ability to repay debt in a timely manner. This report is provided to the bank by an outside agency.
Credit Reporting Agency
An agency that prepares credit history reports. These reports are used by lenders to determine a potential borrower's financial worthiness. The agency obtains data for these reports from a credit repository as well as from other sources.
Credit Repository
Simply another term for a credit bureau.
Credit Risk
The risk of loss assumed under a financial contract that a borrower or a counter-party to a loan or other credit-related contract may default or fail to fulfill its obligations.
Credit Score
A number, roughly between 300 and 800, that reflects a person's credit history. Lenders calculate this number using a computer systems as part of the process for assigning rates and terms to the loans they grant.
Credit Union
A non-profit, cooperative financial institution owned and controlled by the people who use its services, usually a group such as employees in the same company or industry. Credit unions historically have been able to offer lower rates and fees and still operate in the black. Credit unions rely on a financial reserve to absorb unexpected losses from loan defaults or other financial setbacks, and the majority of credit unions carry federal deposit insurance that protects individual accounts up to a specified amount in the event the credit union fails.
D
Debit
The withdrawal of funds from your account. In accounting, a debit is an item of debt as recorded in an account.
Debt
An obligation or liability to pay or render something to another person or a firm.
Debt Consolidation
The act of replacing more than one loan with a single loan, often with a lower monthly payment and a longer repayment period. Also called a consolidation loan. CanEquity has access to Canada's best debt consolidation products, for more info about debt consolidation see our debt consolidation page.
Debt/Equity Ratio
A comparison of debt and equity used to measure the livelihood of a business.
Default
When a borrower fails to fulfill the obligations of a loan or lease.
Delinquency
A debt or other financial obligation on which payment is overdue, such as a failure to make mortgage payments when they are due.
Delinquent Mortgage
A mortgage loan where the borrower fails to make payments as specified in the loan agreement.
Demand Loan
A loan that must be repaid in full, on demand.
Deposit
Money that is put towards a given transaction, such as a property purchase, to prove the buyer is serious about making the transaction.
Deposit Insurance
The Canada Deposit Insurance Corporation insures depositors' funds to a maximum of $60,000 per depositor, per institution, with some exceptions, in the event of the failure of a federal financial institution. Deposits in some provincial financial institutions are also covered.
E
F
First mortgage
A mortgage that is registered first against the property. This mortgage has to be paid first to the lender in the event of sale of the property, bankruptcy or default on the mortgage.
Fixed rate mortgage
A mortgage for which the rate of interest is fixed for the term, ie. 5 years in a 5 year fixed mortgage.
Floating rate mortgage
Another term for variable rate mortgages
Foreclosure
This is a legal procedure that happens when a lender takes ownership of the property after a borrower has defaulted on the mortgage loan.
Full Market Value
In reference to property taxes, refers to the tax rate that is applied to 100% of the property's value. Also known as full cash value.
G
GE Capital
GE Capital is the new CMHC alternative in the Canadian Mortgage Market place. GE Capital like CMHC provides banks/lenders with mortgage insurance. Not to be confused with life or property insurance. In the event of default or foreclosure, GE Capital assumes responsibility of the property and reimburses the bank/lender the entire mortgage amount. This insurance is required generally when you have less than 25% equity or down payment. This insurance is paid by the property owner in advance but usually added to the mortgage amount.
Gross Debt Ratio
The total monthly mortgage (or rent) payments, property taxes, utilities and maintenance fees as a percentage of gross monthly income. Ideally, your ratio should not exceed 32%.
Gross Income
Annual income including overtime that is regular or guaranteed. The income may be from one source or multiple sources. Salary is generally the principal source, but other income may qualify if it is significant and stable.
Gross Overtime
Overtime pay before taxes that is averaged over two years can be considered monthly income, but it must be over the two years or it does not count.
Guarantor (or covenanter)
A person who promises to be responsible for the repayment of a loan.
H
High-ratio mortgage
A mortgage that exceeds 75% of the property's appraised value or purchase price, whichever is less. A high-ratio mortgage must be insured against default by CMHC or Genworth Financial.
Holding Period
Refers to the length of time a capital asset is owned. Assets held for one year (12 months) or less are short
Home Equity
The portion of a property's value that the mortgage borrower owns outright. Essentially, it is the difference between the fair market value (selling price) of the home and what is left owing on all mortgages.
Home Equity Debt
Debt secured by your home.
Home Equity Line of Credit
An open-ended loan, paid as revolving debt, that is backed by the equity in a property.
Home Equity Loan
A loan that can replace or be added to the first mortgage. This type of loan is generally used when a home owner wants to make renovations to the property.
I
Independent Bank
A locally owned bank that is operated without being affiliated with a bank holding company. Also known as a community bank.
Initial Interest Rate
The introductory interest rate on an adjustable
Installment
A payment made towards the settlement of a debt that is typically paid at regular intervals to the creditor or lender.
Interest
Money that is paid by a borrower to a lender for the use of borrowed funds. Interest is usually expressed as an annual percentage.
Interest Adjustment Date
The date one month prior to the beginning of amortization when accrued interest computed on the monies advanced becomes due.
Interest Factor
The decimal equivalent for an interest rate on a unit amount for a time period. It is computed by interest rate divided by number of days in basic year times the number of days accrued.
Interest Rate Cap
A limit that is imposed upon interest rate increases and decreases for an adjustable rate loan. The cap or limit can be imposed from one adjustment period to the next or over the entire life of the loan.
J
Joint Credit
Credit that is issued to two people based their credit reports and their combined assets and incomes. The repayment of joint credit is the responsibility of both parties.
Joint Liability
When two or more people are responsible for repaying a single debt.
Joint Tenancy
When two people (typically spouses) both own an undivided interest in a property. If one joint tenant passes away, the other receives the title to the entire property.
Jointly
Property that is legally held in more than one person's name.
Junior Mortgage
A loan that is subsequent to the claims of the holder of a prior (senior) mortgage.
K
Kicker
Any benefit to a lender above ordinary fixed-interest payments such as an equity position in a property or a percentage participation in the income stream.
L
Late Charge
A fee that is charged to a borrower who does make his or her payment on time.
Late Payment
An installment or sum of money that is paid to a lender after the due date as specified in the loan agreement.
Lead Lender
A financial institution that governs or leads a financial consortium or syndicate to provide funds for mortgages.
Leasehold
An estate or interest in an estate in real property held by virtue of a lease for a term of years. A leasehold is considered personal property.
Leasehold Mortgage
A mortgage given by a lessee on the security of his leasehold interests in the land.
Legal Mortgage
The written geographical description of a property as described in the land register.
Lender
A financial institution, such as a bank, or a mortgage company that offers and provides loans.
Lending Value
For mortgage purposes, this refers to the property value which is typically the lesser of the appraised value and the sale price.
Letter of Credit
A written letter that gives authorization to a person or company to draw on a bank or which states that the bank will honour the credit up to the stated amount.
Letter of Intent
Written notification in the form of a letter indicating a buyer's intentions to purchase a property which is not legally enforceable.
Liabilities
A borrower's debts and legal obligations.
Liability Insurance
A policy that protects owners against claims by other parties of negligence, personal injury, or property damage.
Line of Credit
A credit agreement, often arranged before funds are needed, in which a financial institution agrees to lend money to a client up to a maximum amount for a specific period of time. Having a line of credit provides flexibility for customers and enables them to meet short
Liquid Assets
Assets in the form of cash or personal property that is easy to convert to cash. Real estate is an example of a liquid asset.
Liquidation
To settle the debts of a business or individual by selling the debtor's property, assets, and liabilities.
Liquidity
The capacity to convert assets to cash quickly, without suffering significant losses.
Loan Application
A document that is filled out by those who want to borrow money. Applicants must provide detailed financial information on the application for the lender to consider before loans are granted.
Loan Application Fee
A cost charged by a lender for processing loan application documents that are submitted by prospective borrowers.
Loan Commitment
A promise made by a lender to advance a specific loan amount on specific terms.
Loan Processing
The steps taken by a lender to convert a loan application into an approved loan for the potential borrower. These steps include processing the application, conducting a credit investigation, evaluating the loan, etc.
Loan Servicing
After a loan is granted, it must be maintained by the lender to ensure the loan terms are met. Servicing a loan involves collecting payments, keeping accounting records, computing interest and principal, etc.
Loan Term
The amount of time, as written in the promissory note, for a borrower to repay a loan, such as a mortgage. Most conventional mortgages have a loan term of 5 or 10 years.
Loan
The ratio of the principal amount of the loan to the lesser of the purchase price of the property or the property's appraised value. This can be expressed as an 80% loan, or 80% LTV.
Local Improvement Charge
A fixed annual fee levied by a municipality against specific real property for a specific period which amortizes the capital costs of local improvements such as sewers, paved roads, etc. This charge is in addition to real estate taxes.
A lender's guarantee that the quoted mortgage rate will not change for a specific period. The borrower wants the lock to stay in effect until closing.
Low-documentation Loan
A mortgage that requires less income or asset verification than conventional loans. Low
Low-down Mortgages
Loans that allow a low down payment, usually less than 10 percent.
Low-down-payment Loan
A mortgage where the borrower puts down a small amount and borrows a high percentage of the purchase price.
LPQ Amount
Representing the three types inquiries made when financing mortgages (Loan / Purchase / Qualification). Loan can be for home improvements, debt consolidations or investment purposes and you must be a homeowner to take out a mortgage loan. A Purchase can be a first when applications are submitted, the LPQ amount is dependant on the type of mortgage inquiry. Typically a Loan is a fixed amount that is always lower then the value of the home. Purchase amount is the purchase price of the home/property and can be up to 100% of the value (down
Lump sum payment
An extra payment made to reduce a loan.
M
Margin
The amount (expressed as percentage points) that a lender adds to an index to arrive at the final interest rate. For example, if the index is 9 percent and the margin 2.75 percent, the final interest rate is 11.75 percent.
Market Conditions
Factors that can affect the sale of homes in a certain area. Such factors include interest rates, the unemployment rate, home appreciation, weather, time of year, etc.
Market Value
The estimated value of a property that an owner can expect to receive if he or she sells under normal conditions. Also known as "Fair Market Value."
Maturity
The date when the principal balance of a loan is due and payable to the lender. Also, the date when a bond pays off its principal.
Maximum Financing
A loan given for a property where the buyer puts down the lowest allowable down payment possible.
Merged Credit Report
A summary of a person's credit history from the big two credit bureaus: Equifax and Trans Union.
Modification
Altering or making changes to the terms of a loan agreement.
Monthly Periodic Rate
The interest rate factor used to calculate the interest charges on a monthly basis. The factor equals the yearly rate divided by 12.
Mortgage
A temporary and conditional agreement that stipulates the use of real property as collateral to a creditor for the guaranteed repayment of a loan. The mortgage incurs a rate of interest that varies according to term and other loan features.
Mortgage Acceleration Clause
A provision or clause in a loan agreement that allows a lender to demand full payment of the loan balance under certain circumstances. Such circumstances can include the sale of the property, loan default, or mortgage refinancing. This clause is not commonly used in Canada or by Canadian lenders.
Mortgage assumption
Taking responsibility for an existing property loan.
Mortgage Banker
An individual who finds and offers financing for the general public through one institution's guidelines and products.
Mortgage Broker
An individual who finds clients perspective lenders at no charge. Mortgage Brokers have special relationships with lenders and can offer clients the best rates and service in Canada.
Mortgage Disability Insurance
An insurance policy that pays the monthly mortgage payment for the insured individual if he or she becomes disabled. The disability must be one that is covered under the policy and payments are only made for a specified amount of time.
Mortgage Insurance
In Life insurance, a policy covering a mortgagor from which the benefits are intended (1) to pay off the balance due on a mortgage upon the death of the insured, or (2) to meet the payments on a mortgage as they become due in the case of death or disability. Also called "Mortgage Redemption Insurance."
Mortgage Lien
A legal claim against a mortgaged property which must be paid when the property is sold.
Mortgage Life Insurance
A term policy that pays off an entire mortgage if the borrower passes away.
Mortgage loan insurance
Mortgage loan insurance or mortgage default insurance is typically required by lenders when home buyers make a down payment of less than 20% of the purchase price. Mortgage loan insurance can be purchased from CMHC or a private lender such as Genworth Financial, and helps protects lenders against mortgage default, and enables consumers to purchase homes with little or no down payment with interest rates comparable to those with a 20% down payment
As with any insurance, there are insurance premiums to be paid. The amount of the premium varies and can range between 0.65% and 2.75% depending upon how much of the purchase price/home value is financed with a mortgage loan.
Mortgage loan insurance is not to be confused with mortgage life insurance which guarantees that your remaining mortgage at the time of your death will not be a burden to your estate.
How Much Does CMHC Mortgage Loan Insurance Cost?
To obtain CMHC Mortgage Loan Insurance, lenders pay an insurance premium. Typically, your lender will pass these costs on to you. Your lender will give you the exact price when you apply for a mortgage.
The CMHC Mortgage Loan Insurance premium is calculated as a percentage of the loan and is based on the size of your down payment. The higher the percentage of the total house price/value that you borrow, the higher percentage you will pay in insurance premiums.
Remember: without mortgage insurance you may avoid the insurance premium but you'll typically pay much higher interest rates and additional administrative fees. At the end of the day, for the vast majority of borrowers, the cost of CMHC Mortgage Loan Insurance is more than fully offset by the savings achieved.
Table of CMHC Mortgage Loan Insurance Premiums
Loan Size(% of Lending Value) |
Single Advance Premium(% of Loan) |
Up to and including 65% |
0.50% |
Up to and including 75% |
0.65% |
Up to and including 80% |
1.00% |
Up to and including 85% |
1.75% |
Up to and including 90% |
2.00% |
Up to and including 95% |
2.75% 2.90% |
| Up to and including 100% | 3.10% |
| Note: See your lender for premium surcharges and other terms and conditions that apply. | |
List of Active NHA Approved Lenders
AGF Trust Company
Alberta Motor Association Insurance Company
Alberta Treasury Branches
All Nations Trust Co.
Alliance des caisses populaires de l'Ontario. Lt�
Alterna Savings and Credit Union
AMA Financial Services Ltd.
Assumption Mutual Life Ins Co.
Aylmer & Sherbrooke Investments
B2B Trust
Bank of Montreal
Bank of Montreal Mortgage Corp.
Bank of Nova Scotia
Bank West
BC Housing Management Commission
BCP Bank Canada
BNP Paribus (Canada)
Bridgewater Bank
Brunswick Credit Union Federation Ltd.
Caisse Centrale Desjardins.du Qu�ec Loan Admin All All
Canada Life Assurance Co.
Canada Mortgage and Housing Corp.
Canada Trust Company
Canada Trustco Mortgage Co.
Canadian Imperial Bank of Commerce
Canadian Mortgage Capital Corp
Canadian Mortgage Loan Services Ltd
Canadian Western Bank
Canadian Western Trust Company
CIBC Mortgages Inc. (CMI)
CIBC Mtgs Inc./Firstline Mtgs.
CIBC Trust Corporation
Citibank Canada
Citizens Bank of Canada
Clarica Trust Company
Community Trust
Concentra Financial Services Association
CONEXUS Credit Union 2006.
Cooperators Life Insurance Co.
CPF Advisory Services Ltd.
Credit Union Central Alberta Ltd.
Credit Union Central Nova Scotia
Credit Union Central of B.C.
Credit Union Central of Manitoba Ltd.
Credit Union Central of Ontario
Credit Union Central of Saskatchewan
CS Alterna Bank
Desjardins Credit Union
Desjardins Financial Security Life Assurance
Duca Financial Services CU Ltd.
Dundee Bank of Canada
Effort Trust Company
Empire Life Insurance Co.
Equitable Life Insurance Company Canada
Equitable Trust Company (The)
F��ation des caisses Desjardins du Qu�ec
F��ation des caisses populaires Acadiennes Lt�
F��ation des caisses populaires de lOntario Inc.
F��ation des caisses populaires du Manitoba Inc.
Fiducie Desjardins Inc.
First National Financial General Partnership Corp.
First Nations Bank of Canada
FirstSask CU
GMAC Commercial Mortgage
GMAC Residential Funding of Canada Ltd Underwriting
Excluding
Territories
GMIC Inc.
Great West Life Assurance Co.
Home Trust Company
Excluding
Quebec
Household Trust Company
HSBC Bank Canada
HSBC Trust Company (Canada)
ICICI Bank Canada
Industrial Alliance Insurance & Financial Services
Industrial-Alliance Pacific
ING Bank of Canada
Investors Group Trust Co. Ltd.
Investors Syndicate Ltd.
La Capitale Civil Service Insurer Inc.
Lambton Financial CU Ltd.
Laurentian Bank of Canada
Laurentian Trust of Canada Inc
League Savings and Mortgage. Co.
London Life Insurance Co.
M.R.S. Trust Company
Macquarie Financial Corp.
Manitoba Housing. & Renewal Corp.
Manufacturers Life Ins. Co.
Manulife Bank of Canada
Maple Trust Company
MCAP Financial Corporation
MCAP Service Corporation
Merrill Lynch Canada Inc.
Merrill Lynch Capital Canada
Montreal Trust Co. of Canada
Montrose Mortgage Corp. Ltd.
Murray & Company Holdings Ltd.
myNext Mortgage Company
National Bank of Canada
National Bank Trust Inc.
National Trust Company
New Brunswick Housing Corp.
Newfoundland & Labrador CU Ltd.
North York CU Ltd.
Ontario Municipal Employees Retirement Board-
OMERS
P.E.I. Housing Corp.
PACIFIC & WESTERN Bank of Canada
Peace Hills Trust Company
Peoples Trust Company
Pr�s Hypoth�aires CDPQ inc.
Promutuel Capital, Soci��Fiducie
PW Capital Inc.
ResMor Trust Company
Royal Bank of Canada
Royal Trust Company
Royal Trust Corporation of Canada
Scotia Mortgage Corporation
Soci��de Fiducie Natcan
SSQ, Soci��d'assurance-vie
Standard Life Assurance Co.
State Bank of India (Canada)
St-Stanislaus-St-Casimirs Polish CU
Street Capital Underwriting & Loan Admin
Sun Life Assurance Co. Canada
The Fire Department Employees CU Ltd.
Toronto-Dominion Bank
Transamerica Life Canada Loan Admin All All
Ubiquity Bank of Canada
Union du Canada Assurance Vie
Union Life Mutual Assurance Co
Vancouver City Savings CU
Wawanesa Life Insurance Co
Xceed Mortgage Corporation
Mortgage Rate
The interest rate on a mortgage loan.
Mortgage Renewal
In the mortgage industry, renewal refers to ending an existing mortgage term and signing a new term for the continuation of the mortgage.
Mortgagee
The lender in a mortgage transaction.
Mortgagor
The borrower in a mortgage transaction.
Move
A homeowner who sells his or her property in order to purchase a more expensive home. The homeowner is basically upgrading.
Multiple Listing Service (MLS)
A database, provided by the Board of Realtors, that lists all properties in an area that are for sale or lease by realtors. This database excludes properties that are for sale by owner.
N
Negative Amortization
A gradual increase in loan debt that occurs when the monthly payment does not cover the entire principal and interest due. The shortfall is added to the remaining balance which creates "negative" amortization.
Negative
Netting
The offsetting with a counter-party of financial obligations or payments one is owed with those one is entitled to receive, thus reducing the costs arising out of payment settlements. Netting is also used as a risk management tool to help counter-parties reduce their exposure to credit risk.
Niche Banks
Small banking centers that cater to certain communities or specialized industries. Niche banks are thriving in the fallout from mega
No-documentation Loan
A loan that does not require the applicant to provide much personal information. The applicant usually provides their name, address, Social Insurance Number (to pull credit reports), and contact information for an employer, if applicable. The underwriter simply approves or denies the loan based on the applicant's credit history, the appraised value of the property, and the amount of down payment. A large down payment is usually required for this type of loan.
No Money Down Mortgage
A true 100% mortgage financing product that is available in Canada. This type of mortgage generally has a higher interest rate.
Non-assumption Clause
A provision or condition of a loan agreement that prohibits the borrower from transferring the mortgage to another borrower without permission from the lender.
Non-dischargeable Debt
Debt that cannot be eliminated in bankruptcy such as Federal taxes.
Note
A legal acknowledgment of a debt and the promise to pay it back. The note details the loan amount, interest rate, and loan term.
Note Rate
The percentage paid by a borrower for the use of money, usually expressed as an annual percentage on a promissory note.
O
One-year Adjustable
A mortgage where the annual rate changes from year to year. The rate is based on movements of a published index plus a specified margin, selected by the lender.
Open-end Lease
A type of lease that offers lowers payments, but more risk to the lessee because he or she must pay the difference between the residual value of the automobile as stated in the lease and the fair market value, if lower, at the end of the lease. The lessor pays for the appraisal that determines the automobile's the value. If the lessee does not agree with the value, he or she can pay for an independent appraisal by an impartial third party. All parties must agree to the selected appraiser. Also know as a finance lease.
Open Mortgage
A type of loan that can be paid off prior to maturity without penalty.
Original Principal Balance
The amount of money borrowed from a lender.
Origination Date
The date on which a loan is funded.
Origination Fee
A fee charged by the lender to the borrower for processing a loan. The fee includes the costs for preparing loan documents, checking the borrower's credit history, inspecting the property, and conducting an appraisal if applicable.
P
Payment Adjustment Period
The time period where payments on an adjustable-rate mortgage (ARM) may fluctuate.
Payment Cap
A contractual limitation on the amount of the monthly payment of an adjustable-rate mortgage or other variable rate loan.
Penalty
In mortgage terms, a penalty is a set rate or length of time the penalty will be charged based on the remaining loan amount. The penalty is usually three months interest or interest rate differential.
Penalty Rate
A rate charged to a borrower after he or she makes two late payments. The rate is generally several percentage points higher than the card's current annual percentage rate. With some cards, a single late payment triggers the penalty rate.
Per-diem Interest
Interest that is charged daily which usually refers to the partial month's interest that the buyer pays on the mortgage covering the period from the day of closing to the end of the month.
Periodic Rate
The interest rate in relation to a specific amount of time. For example, the monthly periodic rate is the cost of credit per month whereas the daily periodic rate is the cost of credit per day.
Periodic Rate Cap
In an adjustable-rate mortgage (ARM), this limit restricts how much an interest rate can fluctuate from one adjustment period to the next.
Personal Loan
A loan made for personal, family, or household purposes as opposed to a business loan or a long-term mortgage loan used to finance real estate purchases.
Personal Savings
1. Money that is put aside, usually in a savings account, which is used for personal reasons at a later time.
2. The difference between personal disposable income and personal consumption spending.
PI
An acronym for principal and interest which are components of a monthly mortgage payment.
PIT
An acronym for principal, interest, and taxes which are components of a monthly mortgage payment.
PITI
An acronym for principal, interest, taxes, and insurance which are components of a monthly mortgage payment.
Portfolio Lender
A company or lender that underwrites mortgage loans and keeps the records instead of selling the mortgages on the secondary market.
Porting
A portable mortgage allows you to transfer the terms and conditions from an existing property loan to a new property loan.
Pre-Approval
A process used by mortgage lenders to determine the loan amount they would give to a potential buyer based on an extensive review of the buyer's credit history. Lenders issue pre-approval letters to strengthen a buyer's position when bidding on a home, because it instills confidence in a seller that the buyer is able to obtain the money needed to purchase the property.
Pre-approval Letter
A written document that details how much a lender will give a potential home buyer based on the current interest rates and the buyer's credit history. The letter is issued by a lender or a mortgage broker and is used to instill confidence in a seller because it verifies that the buyer can obtain the funds needed for the transaction.
Pre-Authorized Payments
Monthly payments that are automatically taken from a person's account with approval or authorization from that person.
Pre-qualification
An informal process where a lender gives an estimate of how much a person can borrow to purchase a property. This estimate is based entirely on financial information provided by the potential borrower. Pre
Prepaid Interest
Interest that is paid before it is due to save the borrower money on taxes.
Prepaid's
Property related expenses or costs that are paid prior to their due date and are usually prorated upon sale. These expenses can include taxes, insurance, rent, etc.
Preparation Charges
An additional fee that a buyer may be charged purely for the profit of a dealer. Some dealers will attempt to pass the preparation fee onto the buyer even though the dealer has already been paid by the manufacturer for the cost of preparing the vehicle for sale.
Prepayment
Paying on the balance of a loan before it is due. Mortgage prepayments decrease the total amount of interest paid over the life of the mortgage. Penalties may or may not apply.
Prepayment Clause
A provision in a loan agreement that stipulates the amount of principal a borrower can prepay ahead of schedule without penalty as well as the prepayment penalty for larger prepayments.
Prepayment Penalty
A fee or cost charged to the borrower for paying off the loan before the end of the term.
Prime Lending Rate
The rate of interest charged to creditworthy bank client for loans offered by chartered banks.
Prime Rate
The rate suggested by the Bank of Canada on which most banks base their prime mortgage lending rate.
Principal
In mortgage terms, principal is the original balance of loaned money on an outstanding loan and fees, excluding interest. Also the remaining balance of a loan, excluding interest.
Principal and Interest
The interest owed on a loan and the amount paid towards the principal make up the monthly loan payment amount.
Property Value
The worth or amount of money a real property is sold for depending on the price negotiated by a buyer and seller.
Purchase Agreement
A written contract between the buyer and seller of a property that states the buyer's intention to pay a specific amount for the property by a certain date. The buyer and seller must both sign the agreement if and when the offer is accepted. Also called a purchase contract.
Purchase Contract
A written contract between the buyer and seller of a property that states the buyer's intention to pay a specific amount for the property by a certain date. The buyer and seller must both sign the agreement if and when the offer is accepted. Also called a purchase agreement.
Purchase Option
1. In real estate, an agreement where a portion of monthly rent can be credited toward the eventual purchase of the property. 2. The portion of a vehicle lease that determines how much a lessee pays the lessor at the end of the lease to buy the vehicle. The price is usually the residual value.
Purchase Price
In real estate, purchase price refers to the total selling price of a property which includes the down payment and the principal on the loan.
Q
Qualifying Ratios
As calculated by lenders, the percentage of income that is spent on housing debt and combined household debt. The first qualifying ratio, called the gross debt service or GDS is up to and including a maximum of 32% of the combined gross family income. The second qualifying ratio is the Total debt service or TDS is up to and including 40% of gross income.
R
Rate
The percentage paid by a borrower for the use of money which is generally expressed as an annual percentage.
Rate Cap
A predetermined limit that dictates how much the interest rate on a loan can change, either at each adjustment period or over the life of the loan.
Rate Hold
The length of time, typically between 60 and 120 days, that a lender will guarantee a loan's interest rate once you are locked in. To lock-in your interest rate with CanEquity.com, fill out our easy-to-use online mortgage application.
Rate Index
A table of yields or interest rates being paid on debt (such as Treasury notes or bank deposits) that is used to determine interest-rate changes for adjustable-rate mortgages and other variable-rate loans.
Rate Lock
A written agreement or contract in which the lender guarantees the borrower a specified interest rate, provided the loan closes within a set time period.
Real Property
Permanent, non-movable property, such as land and buildings.
Refinancing
The act of paying off one mortgage with another mortgage to take advantage of lower interest rates. Refinancing is also used to transform equity into cash for vacations, home improvements, or for consolidating debt. CanEquity has access to some of the best refinance products available on the Canadian market.
Refund
1. To give back, return, or repay (typically money). 2. The excess of your withholding and estimated tax payments for the year that you paid over your tax liability. The Federal Government then issues a tax refund if you paid more taxes over the year for your tax bracket.
Regional Bank
A bank with a primary market in a regional or metropolitan area, but takes deposits from throughout the province in which it is located. In Canada it is generally called a Credit Union.
Registered Education Savings Plan
Remaining Balance
The unpaid or remaining principal left on a loan.
Remaining Term
The length of time remaining for a borrower to pay off the rest of an installment loan as scheduled.
Renewal
Extending an unpaid loan with the original lender when the terms of the loan expire.
Repayment Period
With a home equity line of credit, that portion of the life of the loan that follows the draw period. During the repayment period, the borrower cannot take out any more money, but must pay down the loan.
Repayment Plan
Modifications made to the repayment terms of an existing loan after the borrower is delinquent. Often used when the borrower misses payments, but the lender does not foreclose.
Replacement Cost
The amount or cost to rebuild and refurnish with materials and items of similar value. For example, replacement costs are used for insurance purposes in the event of theft or fire when replacing lost items.
Repossession
If a borrower stops making payments on a property, the lender has the legal right to take back the property.
Resale Value
The price or dollar amount that a property owner is able to negotiate when selling an existing home or property.
Residual Value
The value of the vehicle at the end of a lease agreement which is agreed upon at the time of signing.
Restructured Loan
A mortgage in which basic terms -- such as interest rate, term and monthly payment -- are altered or restructured to prevent foreclosure on the property. This is not a regular practice in Canada.
Rests
The periodical balancing of an account for the purpose of converting interest into principal, and charging the party liable thereon with compound interest.
Reverse Mortgage
A type of mortgage loan that allows elderly homeowners to convert built-up equity into cash. The loan comes due if the homeowner sells, moves, or passes away.
Roll Over Mortgage
A type of loan where the interest rate is set for a specific term. At the end of this term, the mortgage is said to "roll-over" and the borrower and lender may agree to extend the loan. If satisfactory terms cannot be agreed upon, the lender is entitled to be repaid in full. In this case, the borrower may seek alternative financing.
S
Sale
A type of real estate transaction where the seller transfers the title to the buyer upon purchase, but then rents the property from the new owner. This practice is not common in Canada.
Sales Contract
A legal written document that details the agreed upon conditions between a seller and a buyer regarding the sale of a specific property. Also called an "Agreement of Sale."
Schedule I Banks
A designation in the Bank Act that refers to Canadian-owned banks that are widely held. This refers to banks where no single owner holds more than 10% of shares.
Schedule II Banks
A designation in the Bank Act that refers to foreign-owned banks and closely held Canadian banks. This refers to banks where a single owner may hold more than 10% of outstanding stock.
Second Mortgage
A mortgage loan that takes priority after a first mortgage on a registered land title.
Secondary Mortgage Market
This market refers to mortgage loans that are bundled together and sold as securities to investors. This process enables more potential home buyers to obtain mortgages because more money is freed up for lending.
Secured Debt
A debt that is secured by a lien on a debtor's property (typically a mortgage loan) that may be taken by the creditor if the debtor defaults on his or her payments.
Secured Loan
The borrower must provide collateral in order to borrow the money.
Security
1. Something deposited or given as assurance of the fulfillment of an obligation. For example, property is often used as collateral for a loan.
2. A document which indicates ownership such as a stock certificate or bond.
Self-employed
An individual who owns and operates a trade or business rather than working as an employee for company. 1. You are self
Seller Broker
An individual who earns a commission (paid by the seller of a property) in exchange for finding a buyer and assisting in the negotiation for the real estate transaction.
Seller Carryback or Transfer Back
A form of financing where the property seller accepts a down payment and agrees to accept payments until the property is paid for in full.
Seller's Market
When the real estate market favors the seller. This type of market usually means the seller is expected to sell quickly and for market or above market value.
Service Charge
Fees charged to customers for specific services or as a penalty for not meeting certain requirements such as insufficient funds in a chequing account.
Shared-appreciation Mortgage
A type of mortgage loan where the lender offers a below-market interest rate in exchange for profit sharing when the property is sold. This is typically only done with private funds/lenders.
Shared-equity Partnership
An agreement between multiple buyers where one buyer inhabits the property and the other buyer has an ownership stake as an investment. The partners split the capital gain after the property is sold.
Simple Interest
Interest that is calculated only on the principal balance, without compounding.
Simple Interest Loan
A method of allocating the monthly payment between interest and principal. The interest charged is determined by the unpaid principal balance on the loan, the interest rate, and the number of days since the last payment. The rest of the payment goes to the principal. Making early payments or additional payments reduces the loan's principal and cuts the total interest paid over the life of the loan.
Spread
The difference between the interest rate charged to borrowers and the interest rate paid to depositors.
Step-rate Mortgage
A fixed-rate mortgage loan where payments are lower at the beginning of the loan, typically for two years, but then increase after the specified time period.
Sub-prime Borrower
A borrower with a less-than-perfect credit report due to late payments or a default on debt payments.
Sub-prime Mortgage
A mortgage loan that is granted to a borrower who is considered sub-prime (has a less-than-perfect credit report). Sub-prime borrowers have either missed payments on a debt or have made late payments. Lenders charge a higher interest rate to compensate for potential losses from customers who may default on the loan.
Syndicated Loans
Loans given to a company that are backed by a group of banks who share the risk of a large transaction. There is usually a lead bank and several participating banks.
T
Takeout Mortgage Loan
A long term mortgage loan that is advanced to a borrower on the completion of construction or in compliance with any other conditions in the loan commitment. The funds are typically used to pay off or take out the construction lender.
Teaser Rate
The the below-market interest rate that is offered by lenders or credit card companies to gain new business. Offering a below-market interest rate often encourages people to switch credit cards or lenders to save money. Also known as an introductory rate.
Term
1. A limited or set period of time.
2. When dealing with a mortgage, term refers to the length of time in which a borrower agrees to pay back the lender. The interest rate and payment schedule is also predetermined. The interest rate typically stays constant during the term unless otherwise specified in the loan agreement. For example, a five year fixed rate mortgage has a term of five years.
Total Debt Service
The ratio of a borrower's total monthly debt as compared to his or her monthly gross income. Lenders use this ratio to determine how much the loan applicant is allowed to borrow.
Total Expense Ratio
The percentage of monthly debt payments compared to total before
Trade Equity
The exchange of property as part of a down payment when opting to buy another property. Other properties and vehicles are commonly used in trade equity as partial down payment.
Transaction Date
The transaction date refers to a calendar date when goods or services were purchased or when banking transactions such as cash advances, deposits, and withdrawals were made.
Trust
A trust is a fund that is set up similar to a will. The trust specifies how money or property will be disbursed, it lists the recipients or beneficiaries, and names one or more trustees to manage the assets. An irrevocable trust cannot be changed after the terms are finalized; a revocable trust has more room for how much can be transferred, but it is usually more expensive to maintain.
Trust Account
An account used by a law firm or real estate agent to control funds set aside for costs associated with a real estate transaction. This account also holds any other money put forth by the buyer and seller before the closing.
Trustee
An individual that manages assets or holds legal title to property in order to administer it for a beneficiary.
U
Umbrella Mortgage
A specific arrangement where one document encompasses one or more already existing mortgages registered on the same property. The mortgagee is responsible for remission of payment(s), to lender(s), while the mortgagor makes one payment to the mortgagee. Also referred to as a wraparound.
Underpayment Penalty
A penalty for not paying enough total estimated tax and withholding. To avoid underpayment penalties, you can pay a percentage of last year's tax due or of the current year's expected tax due. The taxes may be paid in the form of combined estimated and withholding tax payments.
Underwriting
To support or agree to (a decision, for example). In real estate, underwriting refers to the analysis of the risk involved for a lender to grant a mortgage loan and whether or not the risk is acceptable. Underwriting involves a property evaluation as outlined in the appraisal report, and an evaluation of the borrower's ability and willingness to repay the loan.
Unsecured Claim
A claim or debt where the creditor has no guarantee of repayment because collateral is not required from the borrower. Credit is granted solely on an assessment of the debtor's future ability to repay the claim or debt.
Unsecured Debt
Debt that is not guaranteed by collateral is considered unsecure because there is no assurance for repayment. Most credit cards are unsecured debt, which is why the interest rates are higher than other forms of lending, such as mortgages, which use property as collateral.
Unsecured Loan
A type of loan that is given to a borrower without collateral such as property that is acceptable as security for the loan.
Up-front Costs
Certain costs must be paid when signing a vehicle lease agreement before the dealership will release the vehicle to the buyer. These costs might include the first payment, a refundable security deposit, a down payment, taxes, registration, and other fees.
Usurious Rate
An interest rate that is unnecessarily high or well above legal rates. For example, sometimes intangible property taxes are applied to income from usurious rates.
Usury
The act or practice of lending money and charging the borrower interest at an exorbitant or illegally excessive rate.
V
V
If the letter V is displayed after the annual percentage rate (APR), this means the interest rate is variable and subject to periodic changes.
Valuation
The act or process of assessing value or price of a property through an appraisal.
Variable Interest Mortgage
A mortgage product where the interest rate can change or vary during the loan term. The variance in the interest rate usually depends on a specific factor such as prime bank rate or the guaranteed investment certificate rate for a designated lender.
Variable Interest Rate
Percentage paid by a borrower for the use of funds. This interest rate moves up or down periodically due to changes in other interest rates.
Variable Rate
See "Variable Interest Rate."
Variable Rate Mortgage
A mortgage product where the interest rate is adjusted periodically based on a standard financial index, such as the Bank of Canada interest rate. Also called an "Adjustable Rate Mortgage" or ARM.
Vendor
In real estate transactions it is the person selling the property.
Vendor Take Back
In order to sell a property, the seller will provide all or some of the financing to ensure the transaction.
Verification of Employment
Confirmation from a place of employment that verifies a loan applicant is being truthful about where he or she works and about the salary he or she earns.
Void
Something that is void has no validity or effect under the law meaning it is null. For example, a contract can be rendered void.
Voidable
When an individual or party involved in a contract is entitled to renege or retract the contract at his or her discretion.
W
Warranty
1. A guarantee given by a company to the purchaser which states that a product is reliable and free from known defects and that the seller will, without charge, repair or replace defective parts within a given time limit and under certain conditions. 2. In real estate, warranty refers a document certifying clear title a property.
Wraparound Mortgage
A refinanced home loan in which the balances on all outstanding mortgages are amalgamated into a single loan.
X
X
A symbol used in contracts or other legal documents to indicate or mark where the signature or signatures of the parties involved must be written.
Y
Z
Zero Balance
When the outstanding balance on a credit card is paid and no new charges are incurred during the billing cycle, the card holder's monthly statement shows a zero balance. This means nothing is left owing to the credit card company.
Zero Down Mortgage
This type of mortgage is a true 100% mortgage financing product that is available in Canada. See also "No Money Down Mortgage."
