Mortgage Glossary

Mortgage default insurance protects lenders, in the event a borrower ever stops making payments and defaulted on their mortgage loan. This insurance is required by law in Canada for high ratio mortgages (down payments between 5% and 19.99%. )

A mortgage brokerage must employ a mortgage broker to oversee the brokerage employees. Generally, brokers are responsible for the management role within the brokerage. They are also responsible for ensuring that the brokerage complies with the Real Estate Act. An individual must be a licensed mortgage associate for two years before being eligible to become a broker.

A form that is filled out that provides a mortgage broker or lender the financial information required to conduct a credit check. It’s the first step in obtaining financing for a real estate purchase.

Mortgage affordability is the amount of money a mortgage borrower can make on a monthly basis toward a mortgage based upon income, expenses, and the proposed monthly payment and interest rates.

A mortgage is a loan that is secured by a property.

The maturity date is the last day of the term of your mortgage. Any outstanding balance is due on this date. However, if you have an outstanding balance you will usually have the opportunity ahead of time to renew your mortgage with a new principal amount, interest rate, term and amortization.

The best mortgages allow homeowners to pay off their mortgage faster using prepayment options. Each mortgage year, homeowners can make one-time or on-going lump sum prepayments equal to a certain portion of their original mortgage balance without penalty.

The loan to value ratio is the amount of the mortgage loan against the total appraised value of the property on which the loan is secured. For example, if your property is worth $100,000 and you made a down payment of $25,000, your mortgage amount will be $75,000 and your LTV is 75% ($75,000/$100,000 = 75%). The LTV helps determine whether or not mortgage default insurance is required. LTV of 80% or less will be a conventional mortgage and will generally not need mortgage default insurance. LTV of more than 80% will be a high-ratio mortgage and will need mortgage default insurance. Other circumstances may also cause you to need mortgage default insurance.

When you a buy a house, condo or land in Ontario you are subject to land transfer tax which is due upon closing. If you are purchasing a home in Toronto, it is important to note that an additional Toronto Land Transfer Tax will also apply.

An interest adjustment is a closing cost that only some homebuyers have to pay. To be more specific, payments on a Variable Rate Mortgage (VRM) can vary throughout its term depending on what happens with the Prime Rate of your lender – that’s why it’s called variable. On your mortgage funding date, the initial interest rate is set, locking in the interest rate spread. Every three months after that (referred to as the Interest Rate Adjustment Date), the interest rate on your VRM is subject to review and possible adjustment, either up or down, if the prime rate changes. If there is a change in your interest rate, we will mail you an update outlining your new rate and the change in your payment.