Agreement of Purchase and Sales
The legal contract a purchaser and a seller go into. We recommend that you have your offer prepared by a professional realtor that has the knowledge and experience to satisfactorily protect you with the most suitable clauses and conditions.
The number of years it takes to repay the entire amount of the financing based on a set of fixed payments.
The process of determining the market value of a property.
What you own or can call upon. Often used in determining net worth or in securing financing.
A legal document signed by a buyer that requires the buyer assume responsibility for the obligations of an existing mortgage. If someone assumes your mortgage, make sure that you get a release from the mortgage company to ensure that you are no longer liable for the debt.
Equal payments consisting of both an interest and a principal component. Typically, while the payment amount does not change, the principal portion increases, while the interest portion decreases.
Canada Guaranty (CG)
A private mortgage insurance company. One potential source of mortgage insurance for high-ratio mortgages
Canada Mortgage and Housing Corporation (CMHC)
CMHC is a federal Crown corporation that administers the National Housing Act (NHA). Among other services, they also insure mortgages for lenders that are greater than 80% of the purchase price or value of the home. The cost of that insurance is paid for by the borrower and is generally added to the mortgage amount. These mortgages are often referred to as “Hi-Ratio” mortgages.
A mortgage that cannot be prepaid or renegotiated for a set period of time without penalties.
Costs that are in addition to the purchase price of a property and which are payable on the closing date. Examples include legal fees, land transfer taxes, and disbursements.
The date on which the new owner takes possession of the property and the sale becomes final.
An asset, such as term deposit, Canada Savings Bond, or automobile, that you offer as security for a loan.
A mortgage up to 80% of the purchase price or the value of the property. A mortgage exceeding 80% is referred to as a “Hi-Ratio” mortgage and the lender will require insurance for that mortgage.
A system that assesses a borrower on a number of items, assigning points that are used to determine the borrower’s credit worthiness.
Certificate of Deposit
A document written by a bank or other financial institution that is evidence of a deposit, with the issuer’s promise to return the deposit plus earnings at a specified interest rate within a specified time period.
A loan where the balance must be repaid upon request.
A sum of money deposited in trust by the purchaser on making an offer to purchase. When the offer is accepted by the vendor (seller), the deposit is held in trust by the listing real estate broker, lawyer, or notary until the closing of the sale, at which point it is given to the vendor. If a house does not close because of the purchaser’s failure to comply with the terms set out in the offer, the purchaser forgoes the deposit, and it is given to the vendor as compensation for the breaking of the contract (the offer).
The difference between the market value of the property and any outstanding mortgages registered against the property. This difference belongs to the owner of that property.
A debt registered against a property that has first call on that property.
A mortgage for which the interest is set for the term of the mortgage.
Genworth Financial Canada (GE)
A private mortgage insurance company. One potential source of mortgage insurance for high-ratio mortgages.
Gross Debt Service Ratio (GDS)
It is one of the mathematical calculations used by lenders to determine a borrower’s capacity to repay a mortgage. It takes into account the mortgage payments, property taxes, approximate heating costs, and 50% of any maintenance fees, and this sum is then divided by the gross income of the applicants. Ratios up to 32 % are acceptable.
A person with an established credit rating and sufficient earnings who guarantees to repay the loan for the borrower if the borrower does not.
A mortgage that exceeds 80% of the purchase price or appraised value of the property. This type of mortgage must be insured. To avoid the cost of the insurance, a 1’st mortgage up to 80% is arranged and a 2’nd mortgage for the balance (up to 90% of the purchase price).
Home Equity Line of Credit (HELOC)
A personal line of credit secured against the borrower’s property. Generally, up to 75% of the purchase price or appraised value of the property is allowed to be borrowed with this product.
Insurance to cover both your home and its contents (also referred to as property insurance). This is different from mortgage life insurance, which pays the outstanding balance of your mortgage in full if you die.
Interest Adjustment Date (IAD)
The date on which the mortgage term will begin. This date is usually the first day of the month following the closing. The interest cost for those days from the closing date to the first of the month are usually paid at closing. That is why it is always better to close your deal towards the end of the month.
A mortgage on which only the monthly interest cost is paid each month. The full principal remains outstanding. The payment is lower than an amortized mortgage since once is not paying any principal.
Land Transfer Tax
A tax that is levied (in some provinces) on any property that changes hands.
Legal fees and disbursements
Some of the legal costs associated with the sale or purchase of a property. It's in your best interest to engage the services of a real estate lawyer (or a notary in Quebec).
A mortgage is a loan that uses a piece of real estate as a security. Once that loan is paid-off, the lender provides a discharge for that mortgage.
Mortgage Life Insurance
This form of insurance pays the outstanding balance of your mortgage in full if you die. This is different from home or property insurance, which insures your home and its contents.
The financial institution or person (lender) who is lending the money using a mortgage.
The person who borrows the money using a mortgage.
Multiple Listing Service (MLS)
A computerized listing of the properties available in your area, including information and sometimes pictures of each property.
A mortgage that can be repaid at any time during the term without any penalty. For this convenience, the interest rate is between 0.75-1.00% higher than a closed mortgage. A good option if you are planning to sell your property or pay-off the mortgage entirely.
Offer to Purchase
A legally binding agreement between you and the person who owns the house you want to buy. It includes the price you are offering, what you expect to be included with the house, and the financial conditions of sale (your financing arrangements, the closing date, etc.).
Principal, interest, and property tax due on a mortgage. If your down payment is greater than 25% of the purchase price or appraised value, the lender will allow you to make your own property tax payments.
An existing mortgage that can be transferred to a new property. One would want to port their mortgage in order to avoid any penalties, or if the interest rate is much lower than the current rates.
Prepaid Property Tax and Utility Adjustments
The amount you will owe if the person selling you the home has prepaid any property taxes or utility bills. The amount to reimburse them will be calculated based on the closing date.
A fee charged a borrower by the lender when the borrower prepays all or part of a mortgage over and above the amount agreed upon. Although there is no law as to how a lender can charge you the penalty, a usual charge is the greater of the Interest Rate Differential (IRD) or 3 months interest.
The lowest rate a financial institution charges its best customers.
The original amount of a loan, before interest.
A legal description of your property and its location and dimensions. An up-to-date survey is usually required by your mortgage lender. If not available from the vendor, your lawyer can obtain the property survey for a fee.
The number of days the lender will guarantee the mortgage rate on a mortgage approval. This can vary from lender to lender anywhere from 30 to 120 days.
The process of paying out the existing mortgage for purposes of establishing a new mortgage on the same property under new terms and conditions. This is usually done when a client requires additional funds. The client may be subject to a pre-payment cost.
When the mortgage term has concluded, your mortgage is up for renewal. It is open at this time for prepayment in part or in full, then renew with same lender or transfer to another lender at no cost (we can arrange).
Taxes applied to the purchase cost of a property. Some properties are sales tax exempt (GST and/or PST), and some are not. For instance, residential resale properties are usually GST exempt, while new properties require GST. Always ask before signing an offer.
A debt registered against a property that is secured by a second charge on the property.
To transfer an existing mortgage from one financial institution to another. We can have this arranged for you at no cost to you. Facilitated through First Canadian Title (FCT).
The period of time the financing agreement covers. The terms available are: 6 month, 1,2,3,4,5,6,7,10-year terms, and the interest rates will be fixed for whatever term once chooses.
Total Debt Service (TDS) Ratio
It is the other mathematical calculations used by lenders to determine a borrower’s capacity to repay a mortgage. It takes into account the mortgage payments, property taxes, approximate heating costs, and 50% of any maintenance fees, and any other monthly obligations (i.e. personal loans, car payments, lines of credit, credit card debts, other mortgages, etc.), and this sum is then divided by the gross income of the applicants. Ratios up to 40 % are acceptable.
Variable Rate Mortgage
A mortgage for which the interest rate fluctuates based on changes in prime.
Vendor Take Back (VTB) Mortgage
A mortgage provided by the vendor (seller) to the buyer.
We're here to answer any questions you may still have.