Amortization period: The number of years over which you will repay a loan. The most common mortgage amortization periods are 20 and 25 years.
Appraisal: A process for estimating the market value of a particular property.
Blended Payment: A mortgage payment that includes principal and interest. It is paid regularly during the term of the mortgage. The payment total remains the same, although the principal portion increases over time and the interest portion decreases.
Borrower: An individual who requests a loan from a bank.
Closed Mortgage: A mortgage that cannot be prepaid or renegotiated before the term's end, unless the lender agrees and the borrower is willing to pay an interest penalty.
Closing Costs: Fees associated with the purchase of a home, in addition to the purchase price of the home. Closing costs – such as legal fees, transfer fees, and disbursements – are payable on the closing day of the mortgage.
Closing Date: The date at which the sale of a property becomes final and the new owner takes possession.
Canada Mortgage and Housing Corporation (CMHC): A federal Crown corporation that administers the National Housing Act. CMHC provides housing information and assistance to consumers, mortgage default insurance for high ratio mortgages.
Conditional Offer: An offer to purchase property that is subject to specified conditions, for example, the arrangement of a mortgage. There is usually a specific time limit within which specified conditions must be met.
Conventional Mortgage: A mortgage loan up to a maximum of 80% of the lending value of the property. Typically, the lending value is the lesser of the purchase price or the market value of the property. Mortgage default insurance is usually not required for this type of mortgage.
Counteroffer: When the seller has amended something on your original offer, such as the price or closing date. If a counteroffer is presented, you have a specified amount of time to accept or reject it.
Credit Report: The main report a lender (bank) uses to determine whether you can repay the loan. It includes information about your ability to handle your debt obligations and your current outstanding obligations.
Deed: A legal document that transfers ownership from the seller to the purchaser (you). You and the seller sign the document and it is then registered as evidence of ownership.
Default: Failure to fulfill the terms of a mortgage loan agreement. If you fail to make mortgage payments (defaulting the loan) this may result in the mortgage holder taking legal action to possess (foreclose) the mortgaged property.
Deposit: Money placed in trust by the purchaser when an Offer to Purchase is made. The money is held by the real estate representative or your lawyer/notary, and is paid to the vendor when the sale is closed.
Depreciation: The decrease in value of something over time.
Down Payment: The portion of the home price that is not financed by the mortgage loan. The buyer must pay the down payment from his/her own funds or other eligible sources before securing a mortgage.
Equity: The difference between the price for which a home could be sold and the total debts registered against it (outstanding mortgage amount). Equity usually increases as the mortgage is reduced through regular payments. Market values and improvements to the property may also affect the amount of equity.
Fixed rate mortgage: A mortgage for which the rate of interest is fixed for a specific period of time (the term).
Foreclosure: The legal process where a lender takes possession of a mortgaged property if the borrower defaults on payments.
Gross Debt Service Ratio (GDS): The percentage of the borrower's gross monthly income that is used for monthly housing payments (principal, interest, taxes, heating costs, and half of any condominium maintenance fees).
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: A mortgage loan higher than 80% of the value of the property. This type of mortgage may have to be insured – for example, by CMHC or a private company – against payment default.
HSBC Equity Power Mortgage: Access up to 80% of your home's value and use the funds for things such as home renovations, purchasing a vacation property, or consolidating high-interest debts.
Maturity Date: The last day of the term of the mortgage. On this day, the mortgage loan must be paid in full, the mortgage agreement renewed, or a new mortgage arranged.
Mortgage Approval/Commitment Letter: A written notice from the mortgage lender (bank) to the borrower that approves a specific amount of mortgage funds.
Mortgage Life Insurance: Provides coverage for your family should you die before your mortgage is paid off. This insurance can be purchased through your lender and the premium added to your mortgage.
Mortgage Loan Insurance: If you have a high-ratio mortgage (more than 80% of the lending value of the property) your lender will probably require that you purchase mortgage loan insurance, which is available from CMHC or a private company.
Open Mortgage: A mortgage that can be prepaid or paid off or renegotiated at any time and in any amount without interest penalty. The interest rate on an open mortgage is usually higher than a closed mortgage with an equivalent term.
Principal: The amount that you borrow for a mortgage.
PITH (Principal, interest, taxes and heating). These costs are used to calculate the Gross Debt Service ratio (GDS)
Property Insurance: Insurance that you buy for building(s) on land you own (the insurance amount should be high enough to pay for the building to be re-built if it is destroyed).
Rate (interest): The annual percentage amount charged by a lender for borrowed funds.
Refinancing: The process of renegotiating your existing mortgage agreement. This may include increasing the principal or paying out the mortgage in full.
Renewal: At the end of a mortgage term, your mortgage may be renewed with new terms and conditions. You are not required to renew with the same lender.
Survey or Certificate of Location: A document that shows property boundaries and measurements. It specifies the location of buildings on the property, indicates areas where the public has authorized access, (such as utility company rights-of-way), or areas where buildings or landscape structures cross over neighbouring property lines.
Term: The length of time that mortgage conditions, including the interest rate you pay, are in effect. At the end of the term, the borrower (you) can pay off the mortgage, or renew for another term. Mortgage terms can range from six months to ten years.
Title: Full and exclusive ownership of land and building(s) for an indefinite period.
Total Debt Service Ratio (TDS): The percentage of gross monthly income required to cover the monthly housing payments and other debts, such as car payments.
Traditional (Residential) Mortgage/Conventional Mortgage: A mortgage loan up to a maximum of 80% of the value (the purchase price or the market value, whichever is less) of the property.
Variable Rate Mortgage: A mortgage in which the rate of interest changes if market conditions change. This is also referred to as a floating rate mortgage.
Vendor: The individual who is selling a property (also called the seller).
What you need to know before applying
- You are at least the age of majority, 18 or 19 years of age depending on your province of residence
- You are a Canadian resident
- You will be asked to provide personal details and gross annual income (pre-tax)
- You will be asked to consent to us obtaining your credit report
- If you are applying for a joint loan, the co-applicant must complete the application. If there is more than one co-applicant, please call us to proceed at 1-866-609-4722
- All mortgages are subject to standard credit approval.
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