Amortization
Period
The time over
which all regular payments would pay off the mortgage. This is
usually 25 years for a new mortgage, however can be greater, up to
a maximum of 40 years.
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Appraisal
The process
of determining the value of property, usually for lending
purposes. This value may or may not be the same as the purchase
price of the home.
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Assumable
Mortgage
A type of
financing arrangement in which the outstanding mortgage and its
terms can be transferred from the current owner to a buyer. By
assuming the previous owner's remaining debt, the buyer can avoid
having to obtain his or her own mortgage.
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Blended
Payments
Payments
consisting of both a principal and an interest component, paid on
a regular basis (e.g. weekly, biweekly, monthly) during the term
of the mortgage. The principal portion of payment increases, while
the interest portion decreases over the term of the mortgage, but
the total regular payment usually does not change.
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Certificate
of Search or Abstract of Title
A document
setting out instruments registered against the title to the
property, e.g. deed, mortgages, etc.
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Closed
Mortgage
A mortgage
agreement that cannot be prepaid, renegotiated or refinanced
before maturity, except according to its terms.
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Collateral
Properties or
assets that are offered to secure a loan or other credit.
Collateral becomes subject to seizure on default.
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Conventional
Mortgage
A mortgage
that does not exceed 80% of the purchase price of the home.
Mortgages that exceed this limit must be insured against default,
and are referred to as high-ratio mortgages.
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Debt-Service
Ratio
The
percentage of the borrower's gross income that will be used for
monthly payments of principal, interest, taxes, heating costs and
condominium fees.
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High Ratio
Mortgage
If you don't have 20% of
the lesser of the purchase price or appraised value of the
property, your mortgage usually must be insured against payment
default by a Mortgage Insurer.
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Interest Rate
Ceiling
The absolute
maximum rate of interest that a financial institution can charge
for an adjustable rate mortgage or loan.
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Mortgage
A debt
instrument, secured by the collateral of specified real estate
property, that the borrower is obliged to pay back with a
predetermined set of payments. Mortgages are used by individuals
and businesses wishing to make large value purchases of real
estate without paying the entire value of the purchase up front.
Mortgages are also known as liens against property, or claims on
property.
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Mortgage
Banker
A company,
individual or institution that originates, sells and services
mortgage loans.
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Mortgage
Broker
The
matchmaker between a home buyer and a lender whose goal is to
originate a mortgage loan. The broker draws from a pool of various
lenders to find the right match.
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Mortgagee
An entity that lends
money to a borrower for the purpose of purchasing a piece of real
property. By accepting a mortgage on the real property, the lender
creates security in the full repayment of the loan in the future.
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Mortgagor
An individual or company
who borrows money to purchase a piece of real property. By
granting the lender an interest in the property, which allows it
to lend the funds with an accurate assessment of risk, the
mortgagor provides the lender with a guarantee for the full
repayment of the loan. Also known as a "chargor".
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Total Debt
Service (TDS) Ratio
The percentage of gross
income needed to cover monthly payments for housing and all other
debts and financing obligations. The total should generally not
exceed 40% of gross monthly income.
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