Here are Some of the Main Mortgage Terms and their Definitions...

Mortgage payments which are made every 2 weeks for a total of 26 payments per year. Not to be confused with semi-monthly mortgage payments.

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).

The actual number of years it will take to pay back your mortgage loan. This is usually 25 years for a new mortgage, however can be greater, up to a maximum of 35 years.

An estimate of the value of the property, conducted for the purpose of mortgage lending by a certified appraiser. This appraisal is not to be confused with a building inspection.

Payments consisting of both a principal and an interest component, paid on a regular basis (e.g. weekly, biweekly, monthly) during the term of the mortgage. The principal portion of payment increases, while the interest portion decreases over the term of the mortgage, but the total regular payment usually does not change.

Mortgage insurance insures the lender against loss in case of default by the borrower. Mortgage insurance is provided to the lender by CMHC or GEMICO and the premium is paid by the borrower.

A document setting out instruments registered against the title to the property, e.g. deed, mortgages, etc.

A mortgage agreement that cannot be prepaid, renegotiated or refinanced before maturity, except according to its terms.

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.

The date on which the sale of a property becomes final and the new owner usually takes possession.

An offer to purchase subject to conditions. These conditions may relate to financing, or the sale of an existing home. Usually a time limit in which the specified conditions must be satisfied is stipulated.

The number of times per year in which the interest rate is compounded. In Canada, mortgages are generally compounded semi-annual, which is twice per year.

A common payment among owners which is allocated to pay expenses associated with the development.

A mortgage loan issued for up to 80% of the property's appraised value or purchase price, whichever is less.

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

The document signed by the seller transferring ownership of the home to the purchaser. This document is then registered against the title to the property as evidence of the purchaser's ownership of the property.

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.

The buyer's cash payment toward the property. The difference between the purchase price and the amount of the mortgage loan.

The difference between the price for which a property could be sold less the total debt registered against the property.

This is the actual interest rate paid on a loan or mortgage. In Canada, mortgages typically have a higher effective interest rate because of the fact that interest rates are compounded semi-annually or twice per year.

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.

An offer to buy the property as outlined in the offer to purchase with no conditions attached.

The first mortgage in the mortgage agreement that is considered to be in first place and will have first claim on assets in the event of default.

A mortgage in which the rate of interest has been fixed for a specific period of time. This specific period of time is generally known as the term.

A legal procedure whereby the lender eventually obtains ownership of the property after the borrower has defaulted on payments.

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.

An amount of money required to be withheld by the lender during the construction or renovation of a house to ensure that construction is satisfactory.

The percentage of gross annual income required to cover payments associated with housing. Payments include mortgage principal, interest, property taxes and sometimes include secondary financing, heating, condominium fees or pad rent.

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.

The examination of the house by a building inspector selected by the purchaser.

The value charged by the lender for the use of the lender's money. Expressed as a percentage.

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.

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.

A fee paid to the municipal and/or provincial government for the transferring of property from seller to buyer.

The ratio of the loan to the appraised value or purchase price of the property, whichever is lower.

The end of the term, at which time you can pay off the mortgage or renew it.

The lender is the mortgagee and the borrower is the mortgagor.

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.

An interest rate which does not necessarily correspond to the effective interest rate. In Canada, these two rates do not correspond.

Allows partial or full payment of the principal at any time, without penalty.

The amount of principal which is still outstanding at the end of the term.

The choice of making regular mortgage payments every week, every other week, twice a month or monthly.

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

A mortgage option that enables borrowers to take their current mortgage with them to another property, without penalty.

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.

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.

The ability to prepay all or a portion of the principal balance. Prepayment charges may be incurred on the exercise of prepayment options.

The amount borrowed or still owing on a mortgage loan. Interest is paid on the principal amount.

Renegotiating your existing mortgage agreement. May include increasing the principal or paying out the mortgage in full.

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.

In the case of mortgages, real estate offered as collateral for the loan.

Mortgage payments which are made on the 1st and 15th of the month, or twice per month, 24 payments per year. Not to be confused with bi-weekly mortgage payments (26 payments per year).

Additional financing. Usually has a shorter term and higher interest rate than the first mortgage.

The percentage of gross annual income required to cover payments associated with housing and all other debts and obligations, such as car loans and credit cards.

Legal ownership in a property.

A mortgage with fixed payments, but fluctuates with interest rates. The changing interest rate determines how much of the payment goes towards the principal

When the seller provides some or all of the mortgage financing in order to sell their property.