Mortgage Glossary
Mortgage Glossary
Agreement of Purchase and Sales
Amortization Period
Appraisal
Assets
Assumption Agreement
Blended Payments
Closed Mortgage
Closing Date
Collateral
Conventional Mortgage
Credit Scoring
Demand Loan
A loan where the balance must be repaid upon request.
Deposit
Equity
First Mortgage
Fixed-Rate Mortgage
Gross Debt Service Ratio (GDS)
Guarantor
High-Ratio Mortgage
Home Equity Line of Credit
Interest Adjustment Date (IAD)
Interest-Only Mortgage
Mortgage
Mortgagee
Mortgagor
Open Mortgage
P.I.T.
Portable Mortgage
Prepayment Penalty
Prime
Principal
Rate Commitment
Refinance
Refers to the replacement of an existing debt obligation with a debt obligation under different terms. The most common consumer refinancing is for a home mortgage.
If the replacement of debt occurs under financial distress, it is also referred to as debt restructuring.
A loan (debt) can be refinanced for various reasons:
1.) to take advantage of a better interest rate (which will result in either a reduced monthly payment or a reduced term);
2.) to consolidate other debt(s) into one loan(this will result in a longer term);
3.) to reduce the monthly repayment amount (this will result in a longer term)
4.) to reduce or alter risk (e.g. changing from a variable-rate to a fixed-rate loan)
5.) to free up cash (this will result in a longer term).
Breaking your mortgage contract to renew at a new rate and a new term, may include a prepayment charge to reimburse your financial institution for the lost interest income. As a rule, the prepayment charge is based on three months interest or the interest rate differential (the difference between your current mortgage rate for the balance of your term and the new rate you want to refinance at), whichever is greater.
This amount will tell you if you should refinance the mortgage. The shorter the remaining term – less than a year is best – the smaller the penalty. The longer the term left on your mortgage, the greater the prepayment penalties. I am able to calculate your information to determine if you should break your mortgage and take advantage of current lower rates.
Mortgages insured by the Canadian Mortgage and Housing Corporation, has a maximum penalty of three months interest after the third anniversary date of the interest adjustment period, or after the third anniversary date from your most recent renewal.
Renewal
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).
When renewing your mortgage, the banks often only offer the posted rates. You have to push a little harder for them to give you a break. They know that most homeowners don’t want to have to shop around, so, they offer you a higher rate and hope that you will take it.
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Term
Total Debt Service (TDS) Ratio
Variable Rate Mortgage
Vendor Take Back (VTB) Mortgage
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