Elena Roy
Agreement of Purchase and Sale - A legal agreement that offers a certain price for a home. The offer may be firm (no conditions attached), or conditional (certain conditions must be fulfilled before the deal can be closed).
Closing Date - The date on which the sale of a property becomes final and the new owner usually takes possession.
Gross Debt Service (GDS): The percentage of the borrower’s income that is needed to pay all required monthly housing costs (mortgage payments, property taxes, heat and 50% of condo fees).
Total Debt Service (TDS): The percentage of the borrower’s income that is needed to cover housing costs (GDS) plus any other monthly obligations that an individual has, such as credit card payments and car payments.
Principal - The amount of money borrowed for a new mortgage.
Term - The length of the current mortgage agreement. A mortgage may be amortized over a long period (such as 30 years) with a shorter term (six months to five years or more). After the term expires, the balance of the principal then owing on the mortgage can be repaid or a new mortgage agreement can be entered into at the then current interest rates.
Maturity Date - Last day of the term of the mortgage agreement.
Closed Mortgage - A mortgage agreement that cannot be prepaid, renegotiated or refinanced before maturity, except according to its terms.
Open Mortgage - A mortgage which can be prepaid at any time, without requiring the payment of additional fees.
Prepayment Charge - Compensation when the borrower prepays all or part of a closed mortgage more quickly than is allowed as set out in the mortgage agreement.
Prepayment Option - The ability to prepay all or a portion of the principal balance. Prepayment charges may be incurred on the exercise of prepayment options.
Amortization Period - The time over which all regular payments would pay off the mortgage. This is usually 25 years for High-Ratio Mrtgs, and up to a maximum of 35 years for Conventional.
Conventional Mortgage - A mortgage that does not exceed 80% of the purchase price of the home. Mortgages that exceed this limit must be insured against default, and are referred to as high-ratio mortgages (see below).
High Ratio Mortgage - If you don't have 20% of the lesser of the purchase price or appraised value of the property, your mortgage must be insured against payment default by a Mortgage Insurer, such as CMHC.
Fixed-Rate Mortgage - A mortgage for which the rate of interest is fixed for a specific period of time (the term).
Variable Rate Mortgage - A mortgage for which the rate of interest may change if other market conditions change. This is sometimes referred to as a floating rate mortgage.
Refinancing - Renegotiating your existing mortgage agreement. May include increasing the principal or paying out the mortgage in full.
Home Equity - The difference between the price for which a home could be sold (market value) and the total debts registered against it.
Renewal - At the end of a mortgage term, the mortgage may "roll over" on new terms and conditions acceptable to both the lender and the borrower. This is known as renewing a mortgage. Otherwise, the lender is entitled to be repaid in full. In this case, the borrower may seek alternative financing.
