Adjustable Rate Mortgage
A mortgage with an interest rate that can fluctuate based on market conditions.
If you're new to the world of mortgages, you may be feeling overwhelmed by the various terms and jargon that are used. Our goal is to provide you with a comprehensive list of definitions and explanations for some of the most commonly used mortgage terms in Canada.
A mortgage with an interest rate that can fluctuate based on market conditions.
A legal document that outlines the terms of the sale of a property between the buyer and seller.
The process of paying off a mortgage through regular payments over a set period of time.
The length of time it takes to pay off a mortgage in full, typically 25 or 30 years in Canada.
A schedule that shows how much of each mortgage payment goes towards interest and how much goes towards the principal balance, over the term of the mortgage.
The estimated value of a property is determined by a professional appraiser.
The central bank of Canada is responsible for setting monetary policy and regulating the supply of money in the Canadian economy.
A type of mortgage that allows the borrower to blend different interest rates and terms when refinancing.
A clause in a mortgage agreement that allows the lender to demand full repayment of the mortgage if the borrower sells the property to someone who the lender considers to be a non-arm’s-length party.
Short-term financing helps borrowers “bridge” the gap between buying a new property and selling their current one.
An offer made on a property that is substantially higher than the asking price is intended to pressure the seller into accepting it.
A mortgage with pre-determined terms and conditions, such as fixed interest rates and payment amounts.
Fees associated with closing a real estate transaction, such as legal fees, land transfer taxes, and appraisal fees.
The Canada Mortgage and Housing Corporation is a federal agency that provides mortgage insurance, affordable housing programs, and research on the Canadian housing market.
A person who applies for a mortgage with the primary borrower and shares the responsibility for repaying the loan.
Property or other assets that are pledged as security for a loan or other debt.
A mortgage is used to finance commercial real estate, such as office buildings or retail spaces.
An offer to buy a property that is contingent upon certain conditions being met, such as financing or a satisfactory home inspection.
A type of mortgage used to finance the construction or renovation of a property, with funds disbursed to the borrower in stages as the work is completed.
A mortgage with a down payment of at least 20% of the purchase price and not insured by a government agency.
The interest rate on a mortgage with a down payment of 20% or more, which does not require mortgage default insurance.
A report that outlines a borrower’s credit history and is used by lenders to assess creditworthiness.
Insurance that protects borrowers from defaulting on their mortgage due to unforeseen circumstances such as death or disability.
Combining multiple debts into one loan with a lower interest rate and monthly payment.
A calculation used by lenders to determine a borrower’s ability to repay a mortgage, taking into account their income and debt levels.
Failing to make mortgage payments on time, which can result in penalties and even foreclosure.
Insurance protects lenders against losses due to a borrower’s default on a mortgage.
A sum of money paid by a buyer to a seller as a show of good faith and to secure a property purchase.
A document that shows that a mortgage has been paid in full and the lender no longer has a claim on the property.
The initial amount of money paid by a buyer towards the purchase of a property, is often a percentage of the total purchase price.
One of the two major credit reporting agencies in Canada, providing credit reports and credit scores to lenders and individuals.
The difference between the market value of a property and the amount still owed on any mortgages or other liens.
A mortgage in which the lender provides financing based on the borrower’s existing equity in the property, rather than on the property’s appraised value.
The price that a willing buyer would pay and a willing seller would accept for a property, assuming both parties are knowledgeable about the local market and under no undue pressure to complete the transaction.
Helps first-time homebuyers save for down payments. Enjoy tax-free savings up to 40k, diverse investments, and $8k yearly contributions with tax-free withdrawals for qualifying home purchases.
A person who is purchasing their first home is often eligible for special programs or incentives to help with down payments and closing costs.
A mortgage with a pre-determined interest rate that remains the same for the duration of the mortgage term.
The legal process by which a lender takes possession of a property from a borrower who has defaulted on their mortgage payments.
A type of work in which individuals work as independent contractors or freelancers rather than as traditional employees.
A calculation used by lenders to determine the percentage of a borrower’s gross income that is required to cover housing expenses, including mortgage payments, property taxes, and heating costs.
The total income earned by all household members before taxes and other deductions.
Individuals who agree to take on responsibility for a borrower’s debt if they default on their loan.
A mortgage that requires a down payment of less than 20% of the purchase price, and therefore requires mortgage default insurance.
A mortgage with a higher-than-usual interest rate is typically offered to borrowers with poor credit or other risk factors.
A sum of money withheld by a lender until certain conditions, such as repairs or renovations, are completed on a property.
A government program that allows first-time homebuyers to withdraw up to a certain amount of money from their Registered Retirement Savings Plan (RRSP) to use towards the purchase of a home.
The difference between the value of a property and the outstanding balance of any mortgages or other liens on the property.
A professional assessment of a property’s condition, including its structure, electrical and plumbing systems, and overall safety.
A mortgage is insured by a government agency to protect the lender against borrower default.
The interest rate on a high-ratio mortgage (with a down payment of less than 20%), which is typically lower than the interest rate on a conventional mortgage.
The date on which interest charges on a mortgage begin to accrue, usually at the time of closing.
The percentage a lender charges on a loan or mortgage for using their money.
A penalty charged by a lender for breaking a fixed-rate mortgage before its maturity date.
A mortgage in which the borrower only pays the interest owed each month, without reducing the principal balance.
Short-term financing is used to bridge the gap between the purchase of a new property and the sale of an existing one or to finance construction or renovation projects.
A tax paid by the buyer of a property when it is transferred from the seller’s name to their own.
Fees paid to a lawyer or notary public for legal services related to a real estate transaction, including reviewing contracts and conducting title searches.
A financial institution or individual that lends money to borrowers, often for the purchase of a property.
A document provided by a lender that directs a lawyer or notary public to carry out specific tasks related to a mortgage transaction.
A legal claim against a property, usually by a lender, gives the lienholder the right to take possession of the property if the owner defaults on the mortgage or other debt.
The ratio of the amount of a mortgage loan to the appraised value of the property being purchased.
A mortgage with a down payment of at least 20% of the purchase price does not require default insurance.
The date on which a mortgage term ends and the borrower must either pay off the remaining balance or renew the mortgage.
The Multiple Listing Service is a database of properties for sale by real estate agents and brokers in Canada.
A loan is used to finance the purchase of a property, typically secured by the property itself.
The process of releasing a property from a mortgage and returning the title to the borrower.
A fee charged by a lender for breaking the terms of a mortgage, such as making extra payments or paying off the mortgage early.
The amount of money borrowed for a mortgage, not including interest.
An estimate of the interest rate, payment amount, and other costs associated with a potential mortgage, provided by a lender or mortgage broker.
A document provided by a lender that outlines the details of a borrower’s mortgage, including the outstanding balance and payment due dates.
The length of time a mortgage contract is in effect before it must be renewed or paid in full.
The lender provides the mortgage funds to the borrower.
The borrower receives the mortgage funds from the lender and uses their property as collateral.
An offer to purchase a property not subject to any conditions, such as financing or inspection.
A mortgage that allows the borrower to make additional payments or pay off the mortgage early without penalty.
The frequency at which mortgage payments are made is typically monthly but can also be bi-weekly or weekly.
The ability to transfer an existing mortgage to a new property without breaking the mortgage and incurring prepayment charges.
A process in which a lender assesses a borrower’s creditworthiness and determines the maximum mortgage amount they can afford.
A fee charged by a lender for paying off a mortgage before the end of its term.
Making a payment towards the principal balance of a mortgage before it is due.
Fees charged by a lender for prepaying a mortgage beyond the agreed-upon prepayment privilege.
The ability of a borrower to make prepayments towards their mortgage principal without penalty.
The interest rate charged by banks to their most creditworthy customers.
A non-institutional individual or organization that provides loans to borrowers, often for higher interest rates than traditional lenders.
A mortgage loan is provided by a private lender, rather than a traditional financial institution such as a bank or credit union.
The sale of property directly between the buyer and seller, without the involvement of a real estate agent or broker.
An evaluation of a property’s value is performed by a professional appraiser.
Insurance coverage that protects a property from damage or loss, is often required by lenders as a condition of a mortgage.
A legal document that provides a detailed map of a property and identifies any potential boundary issues or encroachments.
The interest rate used by lenders to assess a borrower’s ability to make mortgage payments.
An agreement between a borrower and lender to lock in an interest rate for a specified period of time.
A mortgage allows a borrower to access the equity in their property through a line of credit.
A real estate professional who is a member of the Canadian Real Estate Association (CREA). Realtors help clients buy, sell, or rent properties and provide expertise on the local real estate market.
The process of paying off an existing mortgage and replacing it with a new one is often to take advantage of lower interest rates or to access home equity.
The process of extending a mortgage for a new term with the same lender, typically at a new interest rate.
A property that is owned by an investor and rented out to tenants, generating rental income.
A mortgage with restrictions on the borrower’s ability to prepay, refinance, or sell the property without incurring penalties or fees.
A type of mortgage available to seniors that allows them to borrow against the equity in their home, with the loan being repaid from the sale of the property after the borrower dies or moves out.
A legally binding agreement between a buyer and seller that sets out the terms of the sale, including the purchase price, deposit, closing date, and any conditions that must be met before the sale can be completed.
A mortgage taken out in addition to a first mortgage, using the same property as collateral.
A mortgage product designed specifically for self-employed borrowers, who may have more complex income structures or difficulty providing traditional income verification documents.
Mortgage payments are made twice per month, rather than once per month, which can reduce the overall interest paid over the term of the mortgage.
A document provided by a lawyer or notary public that summarizes the financial transactions of a real estate transaction, including adjustments to the purchase price and closing costs.
A process used by lenders to assess a borrower’s ability to make mortgage payments at a higher interest rate than the one they are applying for.
The process of removing conditions or contingencies from a real estate contract, such as financing, inspection, or the sale of another property, once they have been met or waived by the buyer. This is often the final step before the sale becomes legally binding.
Offers to purchase a property not subject to any conditions, such as financing or inspection.
The legal ownership of a property is often referred to as a title deed.
A type of property ownership in which the owner owns a unit or apartment within a larger building or complex, as well as a share of the common areas and facilities.
A type of property ownership in which the owner has complete control and ownership over both the land and any buildings on it.
Insurance coverage protects the property owner and mortgage lender from financial loss due to defects in the property’s title.
A type of property ownership in which the owner has the right to use and occupy the land and buildings for a set period of time, but does not own the land outright.
A calculation used by lenders to determine a borrower’s ability to make mortgage payments and manage their other debts.
A mortgage in which the interest rate fluctuates over time based on changes in the lender’s prime rate or other market conditions.
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