"Martel Mortgages"

The Power to Choose!

Finding the right mortgage can be a stressful experience. With so many lenders offering so many options, choosing the right mortgage can be a difficult choice. The staff at Martel Mortgages listen carefully to ensure that their mortgage recommendations serve you not only today but well into the future.

Glossary of Canadian Mortgage Terms

Accelerated Payments - Where bi-weekly mortgage payments are paid every 14 days instead of twice a month. Accelerated adds two extra payments annually thus reducing the principal amount of the mortgage faster.

Agreement of Purchase and Sale - An agreement usually for a real estate property where a prospective purchaser offers a certain price for a home. Agreements of Purchase and Sale may be firm (with no conditions attached), or conditional (certain conditions must be fulfilled before the deal can be closed).

Amortization Period - The time it would take when paying all your regular payments to pay off the mortgage. Normally 25 years for a new mortgage, however it can be greater up to 40 years.

Appraised Value - An estimate of the value of the property, conducted for the purpose of mortgage lending by a certified appraiser.

Arms Length - A transaction between unrelated parties.

Assumable - A feature found in some mortgages that permit’s a buyer to take over the seller’s mortgage.

Blended Payments - Payments consisting of both principal and interest. Whereas the principal portion of payment increases, while the interest portion decreases over the term of the mortgage.

Canada Mortgage and Housing Corporation (CMHC) - Mortgage loan insurance is typically required by lenders when homebuyers make a down payment of less than 20% of the purchase price. Mortgage loan insurance helps protects lenders against mortgage default, and enables consumers to purchase homes with as little as 5% down payment — with interest rates comparable to those with a 20% down payment.

Certificate of Location or Survey - The certificate of location sets out a property’s boundaries and dimensions as well as the location of the buildings erected on the property. It also indicates the servitudes (easements) and encroachments.

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. Penalties are usually the greater of a 3 month interest penalty or IRD (Interest Rate Differential)

Closing Costs - Expenses associated with purchasing a home, and can include, legal costs and disbursements, property land transfer taxes, as well as adjustments for prepaid property taxes or condominium common expenses, if any. Most lenders require that the purchaser have 1.5% of the purchase price available at closing to cover these costs.

Conventional Mortgage - A mortgage that does not exceed 80% of the property’s appraised value or purchase price, whichever is the less.

Creditor - A creditor is the holder of a debt, in other words the person to whom money is owed.

Debt-Service Ratio - The percentage of the borrower's gross income that will be used for monthly payments of principal, interest, taxes, heating costs and condominium fees.

Equity - The difference between the value of a property and the total debt against the property.

Fixed-Rate Mortgage - A mortgage for which the rate of interest is fixed for a specific period of time known as the term.

Foreclosure - The legal process where the lender takes possession of your property and sells it to cover the debts you have failed to pay off. When you default on a loan and the lender feels that you are unable to make payments, you may lose your home to foreclosure.

Gross Debt Service (GDS) Ratio - This is a way of estimating the maximum home-related expenses you can afford to pay each month. To qualify for CMHC insurance, the total should not exceed 32% of your gross monthly household income.

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, Genworth or AIG.

Interest Rate Differential Amount (IRD) - An IRD is the amount of compensation a borrower must pay when paying off a mortgage principal prior to the maturity date. The IRD amount is calculated on the amount being prepaid using an interest rate equal to the difference between an existing mortgage interest rate and the interest rate that the lender can now expect to achieve when re-lending the funds for the remaining term of the mortgage.

Interim Financing - Short-term financing bridges the gap between the closing date on a new property and the closing date on the sale of the current property.

Maturity Date - Last day of the term, at which time you can pay off the mortgage, renew it or refinance with another lender.

Mortgage - A mortgage is a security for a loan on the property you own. It is repaid in regular mortgage payments, which are usually blended payments. This means that the payment includes the principal (amount borrowed) plus the interest (the charge for borrowing money). The payment may also include a portion of the property taxes.

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 - Insurance to pay-off the mortgage at death.

Mortgagee and Mortgagor - The lender is the mortgagee and the borrower is the mortgagor.

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.

Net worth - Your financial worth, calculated by subtracting your total liabilities from your total assets.

Open Mortgage - A mortgage which can be prepaid at any time, without penalty (sometimes a nominal processing fee is charged).

P.I.T. - Principal, interest and taxes.

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.

Principal - The amount of money borrowed for a new mortgage.

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

Renewal - This is known as renewing a mortgage. The lender is entitled to be repaid in full. In this case, the borrower may seek alternative financing.

Term - The term is the period during which the borrower pays a certain interest rate on his mortgage loan. Most terms are for 5 years, however longer and shorter terms are available from different lenders.

Total Debt Service (TDS) Ratio - Includes the annual principal, interest, tax and heat payments (PITH) and gross rental income for all properties owned by the borrower. This includes the borrower’s personal residence, the subject property, and all other investment properties, where applicable. Heat component included only on properties where the borrower is responsible for payment. For condominiums, include 50% of condominium/strata fees.

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

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