Mortgage Glossary of Terms

Amortization Period: The actual number of years it will take to pay back your mortgage loan.

Amortization: Repayment of a loan in equal instalments of principal and interest, rather than interest-only payments.

Appraised Value: An estimate of the value of the property. Conducted for the purpose of mortgage lending by a certified appraiser. This appraisal is not to be confused with a building inspection.

Assumability / Assumption of Mortgage: Allows the buyer to take over the seller's mortgage on the property.The buyer's agreement to assume the liability under an existing note that is secured by a mortgage. The lender usually must approve the buyer in order to release the original borrower (usually the seller) from liability.

Cap: The limit on how an interest rate or monthly payment can change, either at each adjustment or over the life of the mortgage.

Closed Mortgage: A mortgage that locks you into a specific payment schedule. A penalty usually applies if you repay the loan in full before the end of a closed term.

Condominium Fee: A common payment among owners which is allocated to pay expenses.

Conventional Mortgage: A mortgage loan issued for up to 75% of the property's appraised value or purchase price, whichever is less.

Downpayment: The buyer's cash payment toward the property. The difference between the purchase price and the amount of the mortgage loan.

Equity: The difference between the home's selling value and the debts against it.

High-Ratio Mortgage: A mortgage that exceeds 75% of the home's appraised value. These mortgages must be insured for payment.

Interest Rate: The value charged by the lender for the use of the lender's money, expressed as a percentage.

Land Transfer Tax, Deed Tax or Property Purchase Tax: A fee paid to the government for the transferring of property from seller to buyer.

Maturity Date: The end of the term, at which time you can pay off the mortgage or renew it.

Mortgagee: The person of the financial institution that lends the money.

Mortgage Insurance: Applies to high-ratio mortgages. It protects the lender against loss if the borrower is unable to repay the mortgage.

Mortgage Life Insurance: Pays off the mortgage if the borrower dies.

Mortgagor: The borrower.

Open Mortgage: Allows partial or full payment of the principal at any time, without penalty.

Portability: A mortgage option that enables borrowers to take their current mortgage with them to another property, without penalty.

Pre-Approved Mortgage: Qualifies you for a mortgage before you start shopping. You know exactly how much you can spend and are free to make a "firm" offer when you find the right home.

Prepayment Privileges: Voluntary payments in addition to regular mortgage payments.

Principal: The amount borrowed or still owing on a mortgage loan. Interest is paid on the principal amount.

Refinancing: Paying off the existing mortgage and arranging a new one or re-negotiating the terms and conditions of an existing mortgage.

Renewal: Re-negotiation of a mortgage loan at the end of a term for a new term.

Second Mortgage: Additional financing. Usually has a shorter term and higher interest rate than the first mortgage.

Term: The length of time the interest rate is fixed. It also indicates when the principal balance becomes due and payable to the lender.

Title: Legal ownership in a property.

Variable-Rate Mortgage: A mortgage with fixed payments, but fluctuates with interest rates. The changing interest rate determines how much of the payment goes towards the principal.

Vendor Take-Back Mortgage: When the seller provides some or all of the mortgage financing in order to sell their property.