Mortgage Glossary

Term	Definition
Accrued Interest	Interest that is earned, but not paid, adding to the amount owed.
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.
Amortization Period	The time over which all regular payments would pay off the mortgage. This is usually 25 years for a new mortgage, however can be greater, up to 30 years.
Appraisal	The process of determining the value of property, usually for lending purposes.
Appraisal Value	An estimate of the market value of a property.
Bridge Financing	See 'Interim Financing' below.
Canada Mortgage and Housing Corporation (CMHC)	The national housing act (NHA) authorized CMHC to operate a Mortgage Insurance fund which protects NHA Approved Lenders from losses resulting from borrower default.
CMHC (or Genworth or Central Guaranty) Insurance Premium.	Mortgage insurance insures the lender against loss in case of default by the borrower. Mortgage insurance is provided to the lender by the CMHC or GEMICO and the premium is paid by the borrower.
Closed Mortgage	A mortgage agreement that cannot be prepaid, renegotiated or refinanced before maturity, except according to its terms.
Closing Costs	Various expenses associated with purchasing a home. These costs can include, but are not limited to, legal/notary fees and disbursements, property land transfer taxes, as well as adjustments for prepaid property taxes or condominium common expenses, if any.
Closing Date	The date on which the sale of a property becomes final and the new owner usually takes possession.
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).
Deposit or Downpayment	A sum of money deposited in trust by the purchaser when making an offer to be held in trust by the vendor's agent, broker, lawyer or notary until the closing of the transaction.
Equity	The interest of the owner in a property over and above all claims against the property. It is usually the difference between the market value of the property and any outstanding encumbrances.
Fire Insurance	Before a mortgage can be advanced, the purchaser must have arranged fire insurance. A certificate or binder from the insurance company may be required on closing.
Firm Offer	An offer to buy the property as outlined in the offer to purchase with no conditions attached.
Fixed-Rate Mortgage	A mortgage for which the rate of interest is fixed for a specific period of time (the term).
Gross Debt Service (GDS) Ratio	The percentage of gross income required to cover monthly payments associated with housing costs. Most lenders recommend that the GDS ratio be no more than 32% - 35% of your gross (before tax) monthly income.
Gross Household Income	Gross household income is the total salary, wages, commissions and other assured income, before deductions, by all household members who are co-applicants for the mortgage.
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.
Holdback	An amount of money required to be withheld by the lender during the construction or renovation of a house to ensure that construction is satisfactorily completed at every stage.
Home Equity	The difference between the price for which a home could be sold (market value) and the total debts registered against it.
Inspection	The examination of the house by a building inspector selected by the purchaser.
Interest Rate Differential Amount (IRD)	An IRD amount is a compensation charge that may apply if you pay off your mortgage principal prior to the maturity date or pay the mortgage principal down beyond the prepayment privilege amount. The IRD amount is calculated on the amount being prepaid using an interest rate equal to the difference between your existing mortgage interest rate and the interest rate that we can now charge when re-lending the funds for the remaining term of the mortgage.
Interim Financing (Bridge Financing)	Short-term financing to help a buyer bridge the gap between the closing date on the purchase of a new home and the closing date on the sale of the current home.
Maturity Date	Last day of the term of the mortgage agreement.
Mortgagee and Mortgagor	The lender is the mortgagee and the borrower is the mortgagor.
Mortgage Life Insurance	A form of reducing term insurance recommended for all mortgagors. If you die, have a terminal illness, or suffer an accident, the insurance can pay the balance owing on the mortgage. The intent is to protect survivors from the loss of their homes.
Mortgage Term	The number of years or months over which you pay a specified interest rate. Terms usually range from six months to 10 years.
Open Mortgage	A mortgage which can be prepaid at any time, without requiring the payment of additional fees.
Payment Frequency	The choice of making regular mortgage payments every week, every other week, twice a month or monthly.
P.I.T.	Principal, interest and taxes. Together, these make up the regular payment on a mortgage if you elect to include property taxes in your mortgage payments.
Porting	This allows you to move to another property without having to lose your existing interest rate. You can keep your existing mortgage balance, term and interest rate plus save money by avoiding early discharge penalties.
Prepayment Charge	A fee charged by the lender when the borrower prepays all or part of a closed mortgage more quickly than is 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.
Principle	The amount of money borrowed for a new mortgage.
Refinancing	Renegotiating your existing mortgage agreement. May include increasing the principal or paying out the mortgage in full.
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.
Term	Term - The length of the current mortgage agreement. A mortgage may be amortized over a long period (such as 35 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.
Total Debt Service (TDS) Ratio	The percentage of gross income needed to cover monthly payments for housing and all other debts and financing obligations. The total should generally not exceed 42% - 44% of gross monthly income.
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.