At Mortgage Architects we understand that mortgages can sometimes seem like another world and the language a little confusing. Our Mortgage Planners will always strive to help you make sense of it all and answer your questions. Here's a primer on some of the terms you may hear.

Acceleration
This is an expression that is usually used when a person chooses to pay a mortgage on a weekly or a bi-weekly basis, although it can apply to any repayment program. All mortgages are drawn with a requirement that you make payments monthly, however, the bank will usually agree to administer one half of the required monthly payment every two weeks-you end up paying the equivalent to one extra monthly payment per year and therefore paying off your mortgage more quickly. If you chose to pay weekly and pay one quarter of a monthly payment each weekly period you get the same benefit. Be sure to arrange that your mortgage payment dates match your payday!

Agreement of Purchase and Sale
A legal agreement that offers a certain price for a home. The offer may be firm (no conditions attached), or conditional (certain conditions must be fulfilled before the deal can be closed).

Amortization
The period of time it takes to pay off your mortgage in full. Typically people choose 25 years.

Appraisal
A process that determines the market value of property. It's usually performed by a professional appraiser who prepares a comprehensive report complete with photographs of the home.

Appraisal Value
An estimate of the market value of the property.

Assumable
When a mortgage is assumable a buyer may take over the responsibilities and benefits of the sellers' existing mortgage. This may be advantageous to a buyer if the interest rate on the mortgage is below the current market rates. Before assuming a mortgage, approval must be obtained from the lender.

Blended Payment
A mortgage payment that includes both interest and principal repayment. The amount of interest taken from each payment reduces while the amount applied to principal reduction increases over time, but the payment remains constant.

Canada Mortgage and Housing Corporation (CMHC)
The National Housing Act (NHA) authorized CMHC to operate a Mortgage Insurance Fund, which protects NHA Approved Lenders from losses resulting from borrower default.

Certificate of Location or Survey
A document specifying the exact location of the building on the property and describing the type and size of the building including additions, if any.

Certificate of Search or Abstract of Title
A document setting out instruments registered against the title to the property, e.g. deed, mortgages, etc.

Closed Mortgage
A mortgage may be an open or closed mortgage. An open mortgage usually charges a higher interest rate but may be paid off at any time without penalty, while a closed mortgage may not be paid off during the term without penalty. Note some mortgages may not be paid off (even with a penalty) before the maturity date. See also Prepayment Penalty and Maturity Date.

Closing Costs
Expenses, in addition to the purchase price of the home, that are payable on completion date.

CMHC or GENWORTH Insurance Premium
Mortgage insurance insures the lender against loss in case of default by the borrower. Mortgage insurance is provided to the lender by CMHC or GENWORTH and the borrower pays the premium.

Commitment Letter
Written notification from the lender to the borrower that approves the mortgage request and which should include the amount of the mortgage, interest rate, payment and all terms and conditions.

Completion Date
The date on which your purchase will complete and money will change hands between you and the sellers.

Conditional Offer
An offer to purchase subject to conditions. These conditions may relate to financing, or the sale of an existing home. Usually a time limit in which the specified conditions must be satisfied is stipulated.

Conventional Mortgage
A mortgage loan up to a maximum of 80% of the purchase price is referred to as a conventional mortgage. Any mortgage in excess of 80% must be insured against default. See High Ratio Mortgage.

Deed (Certificate of Ownership)
The document signed by the seller transferring ownership of the home to the purchaser. This document is then registered against the title to the property as evidence of the purchaser's ownership of the property.

Deposit
A sum of money deposited in trust by the purchaser when making an offer to be held in trust by the vendor's agent, lawyer or notary until the closing of the transaction.

Equity
The interest of the owner in a property over and above all claims against the property. It is usually the difference between the market value of the property and any outstanding encumbrances.

Fire Insurance
Before a mortgage can be advanced, the purchaser must have arranged fire insurance. A certificate or binder from the insurance company may be required on closing.

Firm Offer
An offer to buy the property as outlined in the offer to purchase with no conditions attached.

Fixed-Rate Mortgage
A mortgage for which the rate of interest is fixed for a specific period of time (the term).

Foreclosure
A legal procedure whereby the lender eventually obtains ownership of the property after the borrower has defaulted on payments.

Gross Debt Service Ratio (GDS)
The percentage of your gross income that you will be using for the mortgage payment including property taxes. See also Total Debt Service Ratio. (TDS).

High Ratio Mortgage
A mortgage with a down payment of less that 20% of the purchase price. This type of mortgage must be insured against default. See also Conventional Mortgages.

Holdback
An amount of money required to be withheld by the lender during the construction or renovation of a house to ensure that construction is satisfactorily completed at every stage.

Home Equity
The difference between the price for which a home could be sold (market value) and the total debts registered against it.

Inspection
The examination of the house by a building inspector, usually selected by the purchaser.

Interest Adjustment Date
The date that the lender will start collecting interest. Your regular payments will commence one payment period after this date. For example, if you have chosen to make bi-weekly payments, your first payment will come due two weeks after the Interest Adjustment Date. When you sign your mortgage papers the bank will collect from you an "Interest Adjustment" which is a calculation of interest from the Completion Date to the Adjustment Date.

Interim 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 the current home.

Loan to Value Ratio (LTV)
The amount of the mortgage expressed as a percentage of the value of the home. For example, if you wish to borrow $190,000 on a home you are buying for $200,000, the LTV is 95%.

Maturity Date
The last day of the term of your mortgage agreement. On the Maturity Date the mortgage must be paid in full, renewed with the same lender or transferred to a new lender.

Mortgage
A mortgage is actually a document that is registered in Land Titles Office and provides evidence that you have given your home as collateral to a lender to secure a loan. In practice, the loan itself is usually referred to as a mortgage.

Mortgage Life Insurance
A form of reducing term insurance recommended for all mortgagors. If you die, have a terminal illness, or suffer an accident, the insurance can pay the balance owing on the mortgage. The intent is to protect survivors from the loss of their homes.

Mortgage Term
The number of years or months during which you pay a specified interest rate. Terms usually range from six months to 10 years.

Mortgagee
The lender who provides a loan secured by a mortgage.

Mortgagor
A person who takes out a loan, which is secured by a mortgage.

Net Worth
The difference between what you own (assets) and what you owe (liabilities) is your net worth.

Open Mortgage
A mortgage that can be prepaid at any time, without penalty.

Principal, Interest and Taxes (P.I.T)
Together, these make up the regular payment on a mortgage if you elect to include property taxes in your mortgage payments.

Portable
A portable mortgage is a mortgage that can be transferred from one property to another. This is particularly useful if you sell one home and buy another.

Porting
This allows you to move to another property without having to lose your existing interest rate. You can keep your existing mortgage balance, term and interest rate plus save money by avoiding early discharge penalties.

Prepayment Option
The ability to prepay all or a portion of the principal balance. Prepayment charges may be incurred on the exercise of prepayment options.

Prepayment Penalty
Unless it is open, the mortgage may not be paid off before the Maturity Date without paying a Prepayment Penalty. Be very careful when negotiating a mortgage, as some mortgages cannot be paid off at all before the Maturity Date. See also Closed Mortgages and Maturity Date.

Prepayment Privilege
When you negotiate a closed mortgage, you are entering into an agreement with the lender that you will not pay off the mortgage during the term. In return, the lender agrees to maintain the same interest rate throughout the term. However, most mortgages allow certain prepayment privileges such as an annual prepayment of a certain percentage of the mortgage amount or an annual increase in the mortgage amount. An open mortgage will usually cost more but allows you to repay the mortgage in full or in part at any time without penalty.

Principal
The amount of money actually borrowed.

Refinancing
Renegotiating your existing mortgage agreement. May include increasing the principal or paying out the mortgage in full.

Renewal
At the end of a mortgage term, the mortgage may "roll over" on new terms and conditions acceptable to both the lender and the borrower. This is known as renewing a mortgage. Otherwise, the lender is entitled to be repaid in full. In this case, the borrower may seek alternative financing.

Security
In the case of mortgages, real estate offered as collateral for the loan.

Survey
A certificate showing the home and other buildings relative to the property boundary.

Term
The length of time that the lender guarantees the interest rate. At the end of the term, the mortgage comes up for re-negotiation. See also Maturity Date.
Total Debt Service Ratio The percentage of your gross income which you will be using to pay for the mortgage payment including property taxes and all other debt payment such as credit cards and bank loans. See also Gross Debt Service Ratio (GDS).

Title Insurance
Protecting purchasers against loss is accomplished by the issuance of a title insurance policy, which states that if the status of the title to a parcel of real property is other than as represented, and if the insured suffers a loss as a result of title defect, the insurer will reimburse the insured for that loss and any related legal expenses, up to the face amount of the policy. Title insurance differs significantly from other forms of insurance. While the functions of most other forms of insurance is to guard against future events (such as death or accidents or in the case of property, fire or flood), the primary purpose of title insurance is to eliminate risks and prevent losses caused by events that have happened in the past. To achieve this goal, title insurers perform an extensive search of the public records to determine whether there are any adverse claims to the subject of real estate. Either those claims are eliminated prior to the issuance of a title policy or their existence is exempted from coverage.

Variable Rate Mortgage
A mortgage for which the rate of interest may change if other market conditions change. This is sometimes referred to as a floating rate mortgage.