Here are a few of the common mortgage terms you will encounter. 

Amortization Period

This refers to the length of time over which all regular payments will pay off the mortgage. Most consumers amortize a mortgage over 25 years, however it can be up to a maximum of 40 years. The shorter the amortization period, the higher the payments. The mortgage will be paid off earlier with the least amount of interest paid. 

Appraisal

A property appraisal will determine it's value. Mortgage companies may require one, as they don't want to over finance the property. Real estate appraisers are highly trained individuals in this field and are hired by mortgage companies, insurance companies, banks, etc. to provide an opinion of value. It may or may not be equal to the purchase price.

Assumable Mortgage

This is an arrangement where the mortgage company will allow the outstanding loan and all its terms to be transferred to an other individual. The new mortgagor will have to apply and be approved to assume the existing mortgage. 

Blended Payments  

A blend payment consist of principal and interest, which is paid on a weekly, bi-weekly or monthly basis. This payment usually does not change. Over the life of the mortgage, the interest portion decreases and the principal increases.

Canadian Mortgage and Housing Corporation - CMHC

This is a division of the Government of Canada that provides many housing services to Canadians. One of its main functions it to provide insurance on mortgages. This will protect the lender in the event the borrower defaults on the mortgage. In Canada, the mortgagor is required to provide this insurance when they have a down payment of less than 20%.

Closed Mortgage

This type of mortgage does not allow the borrower to prepay, refinance or renegotiate before the maturity date. In most cases a penalty would apply and this is spelled out in the terms. 

Collateral

A lender may require that the borrower provide assets or properties to secure a loan. In the event of default by the borrower, the lender can seize what they are holding as collateral.

Conventional Mortgage

This applies to a mortgage where the amount financed does not exceed 80% of the purchase price or appraised value of the real estate. For those that cannot submit a 20% down payment, they will be required to pay an insurance premium on their high-ratio mortgage.

Debt Service Ratio

This refers to the percentage of the borrower's income, before taxes, that is used to pay the principal, interest, taxes, condo fees and heating costs.

High Ratio Mortgage

In Canada, a mortgage must be insured by CMHC or another insurer where the borrower does not provide a down payment of 20% of the lesser of the appraised value or purchase price of the property. 

Interest Rate Ceiling

In the case of an adjustable rate loan or mortgage, a ceiling is set as to the maximum rate of interest the lender can charge.

Mortgage Banker

This refers to an individual or company that provides mortgage loans.

Mortgage

A mortgage is a loan that is secured by collateral in a real estate property. The borrower will be obligated to repay the loan by payments that are agreed to. A mortgage is required where the purchaser cannot pay the entire price on closing.

Mortgage Broker

This individual operates as a middleman between a lender and the borrower in order to arrange a mortgage. In the case of Centum Regal Financial, we have access to 21 institutional lenders in Canada. We ‘shop' for our client to find the best interest rate and terms. We also have access to private lenders, should the circumstances dictate it.   

Mortgagor

This refers to an individual that borrows the money to purchase real estate. They will repay the loan by predetermined payments on a specified schedule. The borrower.

Mortgagee

A mortgagee refers to a company or individual that loans the money to a buyer to purchase real estate. They will hold an interest in the property until the loan is repaid. The lender.

Total Debt Service (TDS) Ratio

The TDS should not exceed 40% of the buyers gross monthly income. This is the percentage of income, before taxes are deducted, to cover monthly payments for housing, all their debts and financial obligations.

Learn more on our Mortgage Website.