Mortgage info
The purchase and ownership of a property is probably the single biggest investment you will make in your lifetime and involves a lot of financial questions. To figure out your financial possibilities, use this mortgage calculator and mortgage glossary to assist you.
All Inclusive Mortgage
The AIM mortgage takes care of everything automatically. For purchases, it includes: Solicitor's legal fees and standard disbursements to close the purchase and mortgage; title transfer; title insurance from Land Canada for the clients; CMHC application fee or appraisal fee; 1% cash-back to cover land transfer tax; registration of deed and mortgage.
Bridge Financing
Refers to a special, short-term loan needed to cover the time gap when two properties, both firm sales, are involved and the closing dates don't match. The property being purchased closes before the one that was sold. There is a small set-up fee charged by the lender to have the bridge loan arranged, plus the cost of the interest as now you are carrying both properties for a short time.
Conventional Mortgage
A mortgage is a loan that uses a property as security to ensure that the debt is repaid. It does not exceed 75% of the purchase price or appraised value of the home, whichever is less. The borrower is referred to as the mortgag(or), the lender as the mortgag(ee). The actual loan amount is referred to as the principal and the mortgagor is expected to repay that principal, along with interest, over the repayment period (amortization) of the mortgage. When choosing the amortization period, careful planning should be done to meet your cash flows.
A mortgage can be used for financing many different things such as:
- Purchasing or construction of a new home.
- Purchasing an existing home.
- Refinancing to consolidate debts.
- Financing a renovation.
- Financing the purchase of an investment.
- Financing the purchase of investment property.
Since a mortgage is a fully secured form of financing, the interest you pay us usually less than with most other types of financing.
Closed Mortgage
Offers the security of fixed payment for terms for 6 months to 10 years. The interest rates are considerably lower than open mortgages.
Credit Rating
Your credit rating is a measure of your credit-worthiness or in other words, your record of borrowing and repayment. Without a credit rating, few institutions will lend you money.
Credit Bureau
Governed by provincial laws, the Credit Bureau - the clearing-house of information on consumers' use of credit - provides a credit history, which is a list of facts about how you handle debt. This information is gathered from financial institutions, retailers and other lenders. Most of your credit information remains on your file for seven years. In addition to negative information, positive information is also reported on your file. You can contact me for more information regarding your credit report.
Discharge of Mortgage Penalty
There may be a penalty for example, of three months' interest, the interest differential between an old and new mortgage or a combination of the above. Check with your lending institution regarding the type of mortgage you have and the types of privileges and/or penalties you my encounter, or Geon can check with a Mortgage Verification form.
Equity Mortgages
Mortgages that are assessed on the equity of the home (market value minus the mortgage amount). They can be as high as 75% of the purchase price or value of the property.
First Mortgages
The first debt registered against a property that is secured by a first charge on the property. If a default on the mortgage occurs, the first lender has first right on the property to recover the outstanding principal and interest costs and any other costs incurred during the process.
Fixed Rate Mortgage
When the interest rate is set for the term of the mortgage so that the monthly payment of principal and interest remains the same throughout the term.
High-Ratio Mortgage - CMHC Insured/GE Capital insured
Is a loan that is above 75% and up to the 95% of the purchase price or appraised value of the home, whichever is less. These mortgages must be insured against loss either by Canada Mortgage and Housing Corporation or a Federal Government Corporation, which is a private insurer. CMHC have just reduced their premiums by 15%.
Job Loss Mortgage Insurance
Recently, insurance companies have started to offer Job Loss Mortgage Insurance. This insurance covers the mortgage payments in the event that you involuntarily lose your job.
Mortgage Application and Processing Fee
On high-ratio insured mortgage (mortgages about 75% of the purchase price), the mortgage insurer (CMC or GE Capital) charges a fee of $165-$185 for applying and processing the file, as well as appraising the property. On new homes, this fee drops to $75.
Mortgage Life Insurance
Mortgage Life Insurance (MLI) is inexpensive coverage on your life, which protects your family from beneficiaries by paying out your outstanding mortgage in the event of your death. For just pennies a day, you will have peace of mind knowing your beneficiaries will be mortgage free. MLI premiums are based on two factors, your age and mortgage amount. Your premium is added to your mortgage amount so there is no extra paperwork, and it remains the same until your mortgage is paid off. Joint coverage for spouses is also available.
Multiple Term Mortgages
A mortgage can be split in to as many as five parts, all having different terms, rates and amortizations, but one total monthly payment. Spreading the risk.
Open Mortgage
Allows you the flexibility to repay the mortgage at any time without penalty. Open mortgages are available in shorter terms, 6 months or 1 year only, and the interest rate is higher than closed mortgage. They are normally chosen if you are thinking of selling your property, or if expecting to pay off the whole mortgage from the sale of another property, or an inheritance.
Pre-Approved Mortgage
Is a Free and No-Obligation quote that lets you know before you go looking for your home or signing an Offer to Purchase, how much you can afford to borrow based on your qualification and personal credit rating. Once you are pre-approved, you can confidently negotiate an offer on a home. A seller also prefers to negotiate an offer of a purchaser who has been pre-approved.
Second Mortgages
Debt registered after a first mortgage has been registered.
Secured Lines of Credit
Use the equity in your home that you have built up to purchase investments where interest costs would be deductible against the earned income, to finance things such as home renovations or buy a car, with rates as low as prime.
Six Month Convertible Mortgage
Offers you the same short-term commitment at fixed payments, with an added advantage that while within the term, the mortgage is fully convertible to a longer term from one year to 10 years. At the end of the six-month period, the mortgage becomes fully open, where one can renew with the existing lender or transfer to another
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