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A ~ B ~ C ~ D ~ E ~ F ~ G ~ H ~ I ~ J ~ K ~ L ~ M
N ~ O ~ P ~ Q ~ R ~ S ~ T ~ U ~ V ~ W ~ X ~ Y ~ Z
A
Amortization
The number of years or the number of fixed payments in which the entire amount of the mortgage loan is to be repaid.
Assumption Agreement
A legal and binding agreement signed by a buyer assuming the responsibilities and obligations of a former owner’s mortgage.
B
Blended Payments
Equal payments in which a portion of both the principal and the interest of a loan is paid each month during the term of the mortgage. The principal portion will increase each month, while the interest portion will decrease, however, the total monthly payment will remain the same.
C
Closed Mortgage
A mortgage with terms that cannot be renegotiated, prepaid or refinanced.
Conventional Mortgage (Fixed-rate mortgage)
A mortgage loan that is not in excess of 75% of either the purchase price of the property or of its appraised value, whichever is the lesser amount. Mortgages in excess of this limit must be insured.
D
Debt-service Ratio
The percentage of the borrower's gross income needed for the monthly payments of the principal, interest, taxes, heating costs and any condominium fees.
Default
Failure to pay the installments that are due under the terms of the mortgage(s).
Discharge
The removal of all mortgages and other financial encumbrances and responsibilities on a property.
F
Foreclosure
A legal course of action whereby the lender obtains ownership of the property as a result of default by the borrower.
G
Gross Debt Service (GDS) Ratio
The percentage of gross annual income necessary for payments associated with home ownership (mortgage principal and interest, taxes and secondary financing). As a rule of thumb, most lenders prefer a maximum GDS of 32%.
M
Mortgage Insurance Premium
An insurance fee added to the mortgage and paid by the borrower over the period of the mortgage. This premium insures the lender against financial loss in the event of default by the borrower.
Mortgage Life Insurance
Insurance that is recommended for borrowers with the intent of protecting survivors from losing their home. In the event of the death of the owner(s), the insurance covers the balance owing on the mortgage.
Mortgagee
The lender in a mortgage transaction.
Mortgagor
The borrower in a mortgage transaction.
O
Open Mortgage
A mortgage that may be prepaid at any time and without penalty.
P
P.I. (Principal & Interest)
The principal and interest owing on a mortgage.
P.l.T. (Principal, Interest, & Taxes)
The principal, interest and taxes owing on a mortgage.
Penalty
A fee to be paid to a lender for the opportunity of prepaying a mortgage, either in part or in full.
Prepayment Option
This option provides the entitlement to prepay specified amounts towards the principal balance. Prepayment options my incur penalty interest.
Principal
The balance at any time of the original amount of the loan that is outstanding, not including the interest.
R
Rate (interest)
The return, calculated in a percentage, that the lender collects for loaning you the funds for the mortgage.
Roll-over Mortgage
A mortgage that has an established interest rate for a specific term, which, at the end of this term is said to "roll over”. At this point the lender and borrower may agree to extend the terms of the mortgage. In circumstances when satisfactory terms cannot be agreed upon, the lender is entitled to be repaid in full. In these instances, the borrower may seek alternative financing.
S
Second Mortgage
A mortgage that is often negotiated at a higher interest rate than the first mortgage. This second mortgage represents the difference between the price of the house and the first mortgage plus the down payment. Second mortgages may be obtained from banks, finance companies, as well as lawyers or notaries.
T
Term
Within a mortgage, the "term" is defined as the actual length of time for which the money is loaned, and at a particular rate of interest. At the end of the term, a borrower may repay any balances owing or renegotiate the mortgage with current rates and conditions.
U
Underwriting Fees
A fee collected by some lenders to recover the costs they have incurred in the lending transaction.
V
Variable Rate Mortgage (Floating Rate)
A mortgage that has fixed payments for periods from one to five years with interest rates that may vary from month to month based on market conditions. If the interest rates decrease, the monthly principal is reduced. If rates increase, the monthly payments may not be sufficient to cover the interest owing. In these latter cases, payments may be increased for the next term. Most variable rate mortgages will allow prepayment of any amount, subject to certain minimums, on any monthly payment date and usually without penalty.
Vendor Financing (Balance of Sale)
The seller may assume the mortgage at lower than market rates. Generally, these types of arrangements are neither renewable nor transferable to the next owner.
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