The Simple Mortgage Glossary

Assumption of Mortgage - someone who takes over your mortgage upon the sale of your home.

Agreement of purchase and sale - the legal document prepared when you apply an offer to buy a home. Most offers are conditional on certain things you may need to confirm before firming up the final offer, i.e. the financing condition.

Amortization period - the time over which equal payments would totally pay off the mortgage. This is normally 25 years for a new mortgage.

Appraised value - an estimate of the market value of the property.

Closing date - the date on which the sale of a property becomes final and the new owner takes possession.

CMHC - Canada Mortgage and Housing Corporation. CMHC the government body that supplies the default insurance on a mortgage when the person has less than 25% as the downpayment in a home.

Conventional/high-ratio mortgages - a conventional mortgage is one that does not exceed 75% of the purchase price of the home. Mortgages that exceed this limit are called high ratio mortgages.

GROSS DEBT SERVICE RATIO (GDS)
The calculation of one's total mortgage payment (including principal, interest and taxes and heating) divided by ones gross monthly income. Should not exceed 32%.

Home equity - the current value of your home minus the total mortgages you have against it.

Bridge 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 date on the sale of their current home.

Mortgagee and mortgagor - the lender is the mortgagee and the borrower is the mortgagor.

Mortgage prepayment - any payment over and above your regular scheduled monthly payment which all goes towards principal to pay off the mortgage sooner.

Mortgage term - the number of years or months which you mortgage rate is locked in for. Terms usually range from six months to 10 years.

P.I.T. - principal, interest, and taxes. Together, these make up the regular payment on a mortgage.

Principal - the amount of money of your total payment that goes toward reducing the original amount borrowed.

Portable Mortgage - the ability to transfer your mortgage including rate and terms, from your existing property to a new property.

PREPAYMENT PENALTY
A penalty charge (can be approx. $2000 - $3000), for paying back your mortgage before the term expires.

RATE COMMITMENT
The number of days the lender will guarantee the mortgage rate on a mortgage approval, they vary from 30 to 120 days.

TOTAL DEBT SERVICE RATIO (TDS)
The calculation of one's total mortgage payments plus any other outstanding debts (at the time of application for mortgage approval) divided by the applicant's gross monthly income. Should not exceed 40$.

WEEKLY AND BI-WEEKLY PAYMENTS
You can usually choose to make your mortgage payments once a week or once every two weeks. This pays your principal down faster because you are making the equivalent of one extra monthly payment per year.

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