|
Real Estate Article (Loans and Interest)
Loan-to-value Ratio
The ratio of the loan to the lending value of a
property expressed as a percentage. For example, the loan-to-
value ratio of a loan for $90,000 on a home which costs $100,000
is 90%.
Lending Value
The purchase price or market value of a property,
whichever is less.
Amortization
The period of time, most often 15, 20 or 25 years,
required to reduce a debt to zero when payments are made
regularly.
CMHC
Canada Mortgage and Housing Corporation. A Crown
corporation that administers the National Housing Act for the
federal government and encourages the improvement of housing and
living conditions for all Canadians. CMHC also creates and sells
mortgage loan insurance products.
Down Payment
The portion of the house price the buyer must pay up
front from personal resources, before securing a mortgage. It
generally ranges from 5%-25% of the purchase price.
Interest
The cost of borrowing money. Interest is usually paid
to the lender in installments along with repayment of the
principal loan amount.
Interest Adjustment Date (IAD)
A date from which interest on the mortgage advanced is
calculated for your regular payments. This date is usually one
payment period before regular mortgage payments begin. Interest
due from the date your mortgage is advanced to the IAD is due on
closing.
P.I.T.
Principal, interest and taxes - payments due on a
regular basis under the terms of the mortgage agreement.
Generally, payments are made monthly and include one-twelfth of
the estimated annual municipal and school taxes. Since these
taxes change from year to year, this section of the mortgage
will change accordingly.
P.I.T.H.
Principal, interest, taxes and heating - costs used to calculate
the Gross Debt Service ratio (GDS).
Total Debt Service Ratio (TDS)
The percentage of gross monthly income required to
cover all monthly payments for housing and all other debts, such
as car payments.
Principal
The amount of money actually borrowed.
Net Worth
Your total financial worth, calculated by subtracting
your total liabilities from your total assets.
Blended Payment
A mortgage payment that includes principal and
interest. It is paid regularly during the term of the mortgage.
The payment total remains the same, although the principal
portion increases over time and the interest portion decreases.
| 
