THE HOME BUYER'S GLOSSARY
Amortization Period - The actual number of years it will take to pay off your mortgage loan.
Appraised Value - An estimate of the value of the property. Conducted for the purpose of mortgage lending.
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 the term.
Conventional Mortgage - A mortgage loan issued for up to 75% of the property's appraised value or purchase price, whichever is less.
Down Payment - The buyer's initial payment on 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 is between 75% and 100% of the home's appraised value. These mortgages must be insured.
Interest Rate - The amount charged by the lender for using the lender's money (expressed as a percentage).
Land Transfer Tax - A fee paid to the municipal and/or provincial government for the transferring of property from seller to buyer. For more details see Purchaser Info -> Moving Costs.
Maturity Date - The end of the term, at which time you can pay off the mortgage or renew it for another term.
Mortgagee - The person or financial institution that lends the money.
Mortgagor - The borrower.
Mortgage Insurance - Applies to high-ratio mortgages. It protects the lender against loss if the borrower is unable to repay the mortgage.
Open Mortgages - 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 Privilege - 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 renegotiating the terms and conditions of an existing mortgage.
Renewal - Renegotiation 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 money becomes due and payable to the lender.
Variable-Rate Mortgage - A mortgage with fixed payments, but fluctuating interest rates. The changing interest rate determines how much of the payment goes towards the principal.