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Mortgage Terms

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Amortization Period: The number of years it takes you to pay off your loan in regular payments of principal and interest.

Appraisal: The process of determining the value of property, usually for lending purposes. This value may or may not be the same as the purchase price of the home.

Assumable Mortgage: New owners of a property can take over your existing mortgage of your property, at the same terms, subject to qualification.

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Canada Mortgage and Housing Corporation (CMHC): The National Housing Act (NHA) authorized Canada Mortgage and Housing Corporation (CMHC) to operate a Mortgage Insurance Fund which protects NHA Approved Lenders from losses resulting from borrower default.

Closing Costs: 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.

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

Condition Of Financing (COF): 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.

Conventional Mortgage: A mortgage that does not exceed 80% of the purchase price of the home. Mortgages that exceed this limit must be insured against default, and are referred to as high-ratio mortgages (see below).

Custodian: A custodian is legally responsible for ensuring that an item or person is safe and secure. In investment terms, a custodian is the financial services company that maintains electronic records of financial assets or has physical possession of specific securities. The custodian’s client may be another institution, such as a mutual fund, a corporation, or an individual. Computershare is used by MERIX Financial for all mortgages, for more information, please click here.

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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.

Discharge Statement: A document that is prepared outlining the costs of paying out an existing mortgage. Items listed on the statement include (but are not limited to) the balance, interest accumulated since last payment, per diem, penalty and discharge fee.

Down Payment: The difference between the purchase price and the mortgage amount as a result of money paid.

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Fire Insurance: Fire insurance is a specialized form of insurance beyond property insurance, and is designed to cover the cost of replacement, reconstruction or repair beyond what is covered by the property insurance policy.

First Canadian Title (FCT): FCT offers many services such as instructing, processing, management and reporting of mortgage documents. There are a variety of ways that we use FCT as a lender. Primarily they are used to assist us in the closing process and are used to order Lenders Title Insurance Coverage on every mortgage.

Fixed Rate: The interest rate remains fixed, or locked in, for the term of the mortgage.

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Gross Debt Service (GDS) Ratio: The percentage of gross income required to cover monthly payments associated with housing costs. Most lenders recommend that the GDS ratio be no more than 32% of your gross (before tax) monthly income.

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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 or Genworth Financial.

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Insurance Premium: Mortgage insurance insures the lender against loss in case of default by the borrower. Mortgage insurance is provided to the lender by CMHC or Genworth and the premium is paid by the borrower. The premium will depend on the loan-to-value and product you are applying for.

Interest Rate Differential Amount (IRD): An IRD Amount is a prepayment 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 equivalent to the difference between your annual interest rate and the posted interest rate on a mortgage that is closest to the remainder of the term less any rate discount you received, multiplied by the amount being prepaid, and multiplied by the time that is remaining on the term.

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Maturity Date: Last day of the term of the mortgage agreement Mortgagee: The lender who holds the mortgage.

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.

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

Portable Mortgage: A mortgage that allows you to transfer the amount and terms over to a new property without cost or penalty, subject to qualification.

Prepayment: Paying extra payments or a lump sum to pay down your mortgage faster.

Prepayment Penalty: Money charged for extra payments or lump sum payments on the mortgage. A prepayment clause in your mortgage agreement allows you to make extra payments without incurring a penalty.

Prepayment Penalty: The amount of money borrowed for a new mortgage.

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

Renewal: 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.

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Solidifi: Solidifi is a web-based property valuation marketplace which provides us with access to the largest list of appraisers’ and the required tools to order an appraisal, track its process and delivery.

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Term: The length of the current mortgage agreement. A mortgage may be amortized over a long period (such as 30 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. Visit our Renewal site.

Title insurance:

  1. Lender Title insurance: All our mortgages require lender title insurance policies which protect only the lender against losses arising from defects in title, unmarketability of the title, and title to the property not being vested in the borrower. In addition, depending on the nature and amount of the policy, losses due to certain off-title matters such as zoning, work orders, and taxes are covered. The lenders title insurance is a cost that you will incur. If you refinance at a later date a new lenders policy will be required.
  2. Borrower Title insurance: As a borrower you can talk to your lawyer about obtaining your own title insurance to cover you as a borrower. Title insurance is protection against loss arising from problems connected to the title to your property. Before you purchase a home, the property may go through several ownership changes. Having title insurance in place can protect against a forged signature in transferring title, unpaid real estate taxes or other liens. Title insurance covers the insured party for any claims and legal fees that arise out of such problems.

Total Debt Service (TDS) Ratio: The percentage of gross income needed to cover monthly payments for housing and all other debts and financing obligations. The total should generally not exceed 40% of gross monthly income.

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