Buyer's Guide » Common Mortgage
Mortgage: A mortgage requiring periodic payments which
include both a partial repayment of the debt and interest on
the outstanding balance.
Schedule: A table showing the amounts of principal
and of interest comprising each level payment due at regular
intervals and the outstanding principal balance of the loan
after each level payment is made
Point: A small unit of measure used to describe yield
changes of less than one per cent in debt instruments such as
mortgages. One basis point is equal to one-hundredth of one
percent. (For example, a rate change of one quarter of a percent
equals 25 basis points).
Mortgage A single mortgage registered against two or
more individual parcels of real property.
Mortgage Payments: Equal or regular mortgage payments, consisting
of both a principal and an interest component.
Mortgage Rate: The interest rate on an increased mortgage
which is derived from a formula that takes into account the
interest rate on the existing loan and the interest rate on
the increase mortgage amount.
When the seller reduces the interest rate on a mortgage by paying
the difference between the reduced rate and the market rate
directly to the lender or to the purchaser.
Mortgage: A mortgage loan that is 75 per cent or less
of the loan-to-value ratio; and does not require insurance by
CMHC or other private insurer.
Service Ratio: The percentage of a borrower's income that
can be used for housing costs. Gross Debt Service (GDS) Ratio
is the amount that a lender will permit a borrower to use from
his/her gross income in order to qualify for a loan for housing
costs, including mortgage payment and taxes (and condominium
fees, when applicable). Total Debt Service (TDS) Ratio
is the maximum percentage of a borrower's income that a lender
will consider for all debt repayment (other loans and credit
cards, etc.) including a mortgage.
The difference between the price for which a property can be
sold and the mortgage(s) on the property. Equity is the owner's
stake in the property.
A legal process by which the lender takes possession and ownership
of a property when the borrower doesn't meet the mortgage obligations.
Mortgage: A mortgage that exceeds 75 per cent of the loan-to-value
ratio; must be insured by either the Canada Mortgage and Housing
Corporation (CMHC) or a private insurer to protect the lender
against default by the borrower who has less equity invested
in the property.
A contract between a borrower and a lender. The borrower pledges
a property as security to guarantee repayment of the mortgage
Insurance: Government-backed or private-backed insurance
protecting the lender against the borrower's default on high-ratio
(and other types of) mortgages.
Prepayment Penalty: Is a fee paid by the borrower to the
lender in exchange for being permitted to break a contract (a
mortgage agreement); usually three months' interest, but it
can be a higher or it can be the equivalent of the loss of interest
to the lender.
Mortgage: A mortgage that can be prepaid or renegotiated
at any time and in any amount, without penalty.
Clause A clause inserted in a mortgage, which gives
the mortgagor the privilege of paying all or part of the mortgage
debt in advance of the maturity date.
The mortgage amount initially borrowed or the portion still
owing on the mortgage. Interest is calculated on the principal
Mortgage A non-amortizing mortgage under which the
principal is paid in its entirety upon the maturity date. Sometimes
called a straight loan.
Mortgage: A mortgage for which payments are fixed, but whose
interest rate changes in relationship to fluctuating market
interest rates. If mortgage rates go up, a larger portion of
the payment goes to interest. If rates go down, a larger portion
of the payment is applied to the principal.
Take-Back Mortgage: When sellers use their equity in a property
to provide some or all of the mortgage financing in order to
sell the property.