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 Accelerated
Refers to the payment of 13 monthly payments in a 12 month period. Refer
to Payment Options.
Amortization
Amortization refers to the number of years it will take to repay a mortgage
loan in full. The longer the amortization period the lower the payment. However,
the shorter the amortization period the less interest you will pay.
Canada
Mortgage And Housing Corporation (CMHC)
Minimum 5% down payment must
come from the borrower's own resources. (Note that a gift down payment must be
documented by a letter from the donor that confirms that the money is a true gift,
not a loan and the gift money must be in the borrower's possession at least 15
days before closing.) The Approved Lender must verify that the borrower can cover
closing costs of at least 1.5% of the purchase price. However, the purchasers
can borrow the money to satisfy this condition if the borrower agrees to repay
this amount within 1 year from closing. The loan payment for this amount must
be included into your total debt service calculations.
Condominium
Fee
A common payment among owners which is allocated to pay expenses.
Estimated
Annual Property Taxes
In order to determine how much of a mortgage you
qualify for it is necessary to determine what 1/12th of the annual property taxes
are. Refer to GROSS DEBT SERVICE RATIO.
Estimated
Annual Condo Fees
In order to determine how much of a mortgage you qualify
for it is necessary to determine the amount that 1/12th of ½ of the annual
condominium fees. Refer to GROSS DEBT SERVICE RATIO.
Estimated
Annual Heat Costs
In order to determine how much of a mortgage you qualify
for it is necessary to determine the amount that 1/12th of the total annual heating
costs represents. Refer to GROSS DEBT SERVICE RATIO.
Gross
Debt Service (G.D.S.)
The amount of money needed to pay principal, interest, property
taxes, heat costs and 50% of condominium fees if applicable.
Gross
Debt Service (G.D.S.) Ratio
The borrower must not commit more than 32% of total gross
household income towards the payment of principal + interest
+ property taxes + heating + 50% of condominium fees.
Loan
to Value Ratio
The PRINCIPAL or MORTGAGE AMOUNT divided by the lesser
of the PURCHASE PRICE or APPRAISED VALUE.
Mortgage
A contract providing security for the repayment of a loan, registered against
the property, with stated rights and remedies in the event of default.Lenders
consider both the property (security) and the financial worth of the borrower
(covenant) in deciding on a mortgage loan.
Mortgagee
The person or financial institution lending the money, secured by a mortgage.
Mortgage
Features
Portability Allows you to transfer the terms and
conditions of your mortgage to your next home. This may allow you to keep a low
interest rate if you sell one house and buy another.
Assumability
Allows you to assume an existing mortgage registered against a property, normally
subject to approval of your credit worthiness and ability to service the existing
obligation. The assumable mortgage may have an attractive feature such as an interest
rate lower than the prevailing market rate. An assumable mortgage may also be
a selling feature for you when you sell your home.
Expandability
This lets you increase the principal on your mortgage at the lender's agreed-upon
rate of interest.
Mortgage
Principal or Amount
The amount borrowed or still owing on a mortgage loan.
Mortgage
Types
Open Mortgage One which allows payment of the principal,
in part or in full, at any time without penalty.
Closed Mortgage
One which requires you to maintain a specific payment schedule. A penalty usually
applies if you repay the loan in full before the end of the term.
Conventional
Mortgage With a conventional mortgage a lender will generally provide
up to 75% of the lesser of the appraised value or purchase price of a property.
You must be able to provide at least 25% of the financing on your own.
Convertible
Mortgage One which allows you to renew your mortgage at any time without
penalty for a longer term, closed mortgage.
CMHCInsured
Mortgage / High Ratio Mortgage With this type of mortgage a lender will
provide up to 95% of the lesser of the appraised value or purchase price of a
qualified single family residential property to a qualified applicant. This type
of mortgage must, by law, be insured against non-payment by either the Canada
Mortgage and Housing Corporation (CMHC) or the GE Capital Mortgage Insurance Company,
a private sector source of mortgage insurance to lenders in Canada. Beware: This
insurance is for the benefit of the lender and must not be confused with mortgage
life insurance.
Variable
Rate Mortgage A mortgage where the interest rate may vary during the term
of the mortgage. The varying rates usually decided by such factors as the prime
bank rate or a particular lenders guaranteed investment certificate rate.
Mortgagor
The borrower.
Mortgage
(Interest) Rate
The value charged by the lender for the use of the lender's
money. Expressed as a percentage.
Mortgage
Term
The actual life of a mortgage contract at the end of which the mortgage
becomes due and payable unless the lender renews the mortgage for another term.
During the term the interest rate can be either a fixed rate or a variable rate.
Lenders offer a variety of terms.
Ontario
Land Transfer Tax
Up to $55,000 X .5 % of total property value
From
$55,000 to $250,000 X 1 % of total property value
From $250,000 to $400,000
X 1.5 % of total property value
From $400,000 up X 2 % of total property value
Payment
Options
Review the Calculate a Payment Calculator to calculate your payment
options.
Monthly
Payments This is what you can expect to pay each month for the length
of the mortgage term. A payment made on a given date each month.
Semi
Monthly Multiply the monthly payment by 12 and divide the result by 24.
Comparable to the Bi-Weekly (26) and Weekly (52) options.
Bi-Monthly
Calculated by multiplying the monthly payment by 13 and dividing the result by
24.
Weekly
(52) Like the Bi-Weekly (26) option below don’t be fooled by the
lower payment value stated. Review the Calculate a Payment Calculator and compare
this option vs. the Weekly (48) option.
Weekly (48) Calculated
by either dividing the yearly monthly payment total by 48 or multiplying the monthly
payment by 13 and dividing the result by 52. Either way the payment to be made
every 7 days will be the same. Like the Bi-Weekly (24) this option lowers the
total interest paid and the amortization.
Bi
- Weekly (26) This payment is calculated by dividing your yearly monthly
payment total by 26 weeks. Review the Calculate a Payment Calculator and note
that the difference between this option and the monthly option is minimal. This
lower Bi-Weekly (26) amount vs. the Bi-Weekly (24) looks appealing but will result
in you paying more interest over a longer period of time.
Bi-Weekly
(24) Calculated by dividing the yearly monthly payment total by 24. Or,
some will say multiply the monthly payment by 13 and divide the result by 26.
Either way the payment to be made every 14 days will be the same. Here is a chance
to start controlling the total amount of interest that has to be paid and the
amortization.
Preferred Payment
For Example. If the monthly payment for a $100,000.00 first mortgage at 5.35% amortized over 25 years is $601.68 (principal and interest only) but you feel that you are in a position to pay a larger amount (i.e. $700.00 per month) then you are stating that your preferred payment amount will be $700.00 per month. A decision like this will lower the amortization period and the total amount of interest that you will pay. Goto the KGM Canadian Mortgage Calculators / Comparison Calcularor and test this scenario for yourself.
Prepayment
Clause Options
These vary by the lender. Be certain that you understand
whether or not a prepayment clause is included in the financing that you arrange
and exactly how much and how often you are permitted to make a lump sum or extra
payment without penalty.
Prepayment
Privelege Clause
In most mortgage commitments there will be a PREPAYMENT
PRIVILEGE CLAUSE which sets out how much and when you will be permitted to make
a lump sum payment to be applied directly against the unpaid principal balance
of your mortgage. UNDERSTAND THE TERMS OF THIS CLAUSE BEFORE YOU COMMIT TO ANY
PARTICULAR MORTGAGE.
Gross
Income Required
This is the annual gross income you will need to make
in order to qualify for the stated mortgage. This resumes your Total Debt Service
Ratio is under 40%.
Total
Debt Service (T.D.S.) Ratio
The borrower must not commit more than 40% of total
gross household income towards the payment of principal + interest + property
taxes + heating + 50% of condominium fees + payments on all other debts i.e. credit
card payments, auto loan/lease etc.
Total
Loan Amount
With a CMHC insured mortgage the TOTAL LOAN AMOUNT is the
PRINCIPAL/MORTGAGE AMOUNT plus the CMHC MORTGAGE INSURANCE PREMIUM.
Refinancing
Paying off the existing mortgage and arranging a new one or re-negotiating the
terms and conditions of an existing mortgage.
Renewal
Re-negotiation of a mortgage loan at the end of a term for a new term.
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