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Real Estate Article
(Mortgage Terms)
Mortgage
A mortgage is security for a loan on the property that
you own. It is your personal guarantee to repay the loan as well
as a pledge of the property as security for the loan.
Mortgage Loan Insurance
If you have a high-ratio mortgage (more than 75% of the
purchase price), your lender will require mortgage loan
insurance — available from CMHC or a private insurer. The
insurance premium will cost between 0.5% and 3.75% of the amount
of the mortgage (additional charges may apply).
Mortgage Life Insurance
This insurance guarantees that if you die your mortgage
will be paid in full. This insurance can be conveniently
purchased through your lender and the premium added to your
mortgage payments. However, you may want to compare rates for
equivalent products from an insurance broker.
Mortgage Payment
A regularly scheduled payment that is blended to
include both principal and interest.
Mortgagee
The lender who provides the mortgage loan.
Mortgagor
The borrower who pledges the property as security for
the loan.
Second Mortgage
An additional mortgage on a property that already has a
mortgage.
Term
The length of time during which a mortgagor pays a
specific interest rate on the mortgage loan. The entire mortgage
principal is usually not paid off at the end of the term because
the amortization period is normally longer than the term.
Maturity Date
The last day of the term of the mortgage agreement. On this day
the mortgage loan must be either paid in full or the agreement
renewed.
High-ratio Mortgage
A mortgage loan in excess of 75% of the lending value
of the property. This type of mortgage must be insured — for
example, by CMHC — against payment default.
Discharge of Mortgage
A document signed by the lender and given to the
borrower when a mortgage loan has been repaid in full.
Collateral Mortgage
A mortgage which secures a loan by way of a promissory note. The
money which is borrowed can be used to buy a property or for
another purpose such as home renovation.
Commitment Letter / Mortgage Approval
Written notification from the mort-gage lender to the borrower
that approves the advancement of a specified amount of mortgage
funds under specified conditions.
Conventional Mortgage Loan
A mortgage loan up to a maximum of 75% of the lending
value of the property. Mortgage loan insurance is not required
for this type of mortgage.
Seller Take Back Mortgage
Mortgage financing arranged between the seller of the property
and the buyer. The title is trans-ferred to the buyer. Often
this type of loan is a second mortgage which the seller is
willing to arrange at below market rates to ensure the buyer can
purchase the house. Most of these arrangements are not renewable
or transferable to the next owner of the house.
Refinance
To pay off a mortgage or other registered encumbrance
and arrange for a new mortgage, sometimes with a different
lender.
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