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Amortization

The actual number of years it will take to repay the mortgage in full. The longer the amortization, the smaller the monthly mortgage payment. A commonly used amortization period is 25 years or less.

Assumable

An institution should allow the purchaser of your home to assume the existing mortgage. He must qualify though, as you did. The reason behind having an assumable and portable mortgage is that when selling your home, the mortgage won’t have to be discharged. If you discharge an existing mortgage during the term, the penalty can be substantial.

Canada Mortgage and Housing Corporation (CMHC) or Genworth or Canada Guaranty

These organizations provide insurance to financial institutions who lend up to 95% of a property’s value. The insurance premium is paid by the borrower and can cost up to 3.15% of the actual mortgage amount. This premium is added to the mortgage being borrowed.

Closing Date

The date on which the purchaser takes legal possession of the property. At this time the lawyers will transfer funds from the purchaser to the vendor and title of the home to the buyer. Also known as the Possession Date.

Collateral Mortgage

A mortgage that has as its primary security a promissory note or loan agreement and as “backup,” a collateral security, being a mortgage registered against your property.

Conventional Mortgage

A loan that is secured by a mortgage registered against the property. It never exceeds 80% of the appraised value of the property or the purchase price, whichever is less.

High Ratio Mortgage

A conventional mortgage that exceeds 80% of the property’s value. This mortgage must be insured by CMHC or Genworth.

Increasable

A mortgage should always be increasable, meaning that during the term of your mortgage you can increase the amount of the loan for a specific purpose. An example would be borrowing money to build an addition consolidate debt etc.

Payment Frequency

All institutions should give the borrower an option of paying their mortgage monthly, weekly, or bi-weekly. How your salary is paid may dictate to you which is more convenient, however paying your mortgage on an accelerated weekly or bi-weekly (i.e. accelerated bi-weekly is your monthly payment divided by 2, and paid every 2 weeks) basis will pay your mortgage down faster than if paid monthly. Ask how this can benefit you.

Portable

A mortgage should be portable, meaning you can take the existing mortgage with you to a new property being purchased. The new home must be acceptable to your institution.

Prepayment Privileges

Most mortgages, unless specified otherwise, are closed. A closed term means that the mortgage cannot be paid off prior to maturity. So to make long term mortgages attractive, most institutions allow some form of prepayment option. A common example of this would be a 15+15% option. You can pay up to 15% of the original mortgage loan once each year and or you can increase your monthly payment by 15% once a year without penalty. These privileges can vary from one lender to the next.

Survey

A document that shows accurate measurements of land and improvements on a property. If a survey is not available, the lenders will insist on title insurance being arranged on your behalf.

Term

In a mortgage, “term” is the actual length of time for which the money is loaned at a set rate of interest. Terms are commonly from 6 months to 5 years, though longer terms may also be available. After the term expires, you can either repay the balance owing or re-negotiate the mortgage at current rates and conditions with the lender.

Vendor

The individual(s) selling a property.