Mortgage Glossary

Amortization: 

Amortization usually refers to the process of writing down the value of either a loan or an intangible asset. Amortization schedules are used by lenders, such as financial institutions(banks or credit unions), to present a loan repayment schedule based on a amortization period.

Amortization Period: 

Amortization Period is the length of time it will take you to pay off your mortgage in full. It can vary between 5 and 25 years.

Amortization Schedule: 

An Amortization Schedule gives you an overview of your monthly payments into principal and interests.

Appraisal Report: 

An Appraisal Report indicates an estimated market value of an asset (home/property)

Appraiser: 

An Appraiser is a professional who determines the market value of an asset

Assessment (Assessed Value): 

An Assessment (or Assessed Value) is the value of a property to measure applicable tax. The assessment is estimated by a public tax assesor.

Assets: 

An asset is a resource with economic value that an individual, corporation, or country owns or controls with the expectation that it will provide a future benefit.

Assumption of Mortgage: 

Mortgage assumption is the conveyance of the terms and balance of an existing mortgage to the purchaser of a financed property, commonly requiring that the assuming party is qualified under lender or guarantor guidelines.

Beacon Score: 

Beacon Scores are credit scores, which are determined through a complex algorithm. These numbers give the lender insight on a borrower’s credit history and potential ability to be able to repay the debt for which they are applying.

Blended Payments: 

Blended payments are a way of repaying a loan that sets equal monthly payments of principal and interest (blended) over an agreed-upon amortization period. By contrast, in a principal + interest arrangement, the borrower pays back the same amount of principal each month, plus a steadily decreasing interest payment.

Blended Rate: 

A blended rate is an interest rate charged on a loan that represents the combination of a previous rate and a new rate. Blended rates are usually offered through the refinancing of existing loans that are charged a rate of interest that is higher than the old loan’s rate, but lower than the rate on a brand-new loan.

Bridge Financing: 

Bridge financing is a form of temporary financing intended to cover a company’s short-term costs until the moment when regular long-term financing is secured. Thus, it is named as bridge financing since it is like a bridge that connects a company to debt capital through short-term borrowings.

Bridge Loan: 

A bridge loan is a short-term loan used until a person or company secures permanent financing or removes an existing obligation. It allows the user to meet current obligations by providing immediate cash flow. Bridge loans are short term, up to one year, have relatively high interest rates, and are usually backed by some form of collateral, such as real estate or inventory.

Brokerage: 

A brokerage provides intermediary services in various areas, e.g., investing, obtaining a loan, or purchasing real estate. A broker is an intermediary who connects a seller and a buyer to facilitate a transaction. Individuals or legal entities can act as brokers.

Builder’s Loan: 

A construction loan is a short-term loan used to finance the building of a home or another real estate project. The builder or home buyer takes out a construction loan to cover the costs of the project before obtaining long-term funding.

Buy Down: 

A buydown is a mortgage financing technique that allows you to temporarily lower your mortgage’s interest rate by paying discount points at closing.

Canada Mortgage and Housing Corporation (CMHC): 

The Canada Mortgage and Housing Corporation is Canada’s national housing agency which provide support for Canadians in housing need and offers housing research.

Capacity (5 Cs of Credit): 

A borrower must have the capacity to repay the loan based on the proposed amount and terms. Capacity is determined by a number of factors:
– Stability of income: your current job stability and how long have you been at your job
– Debt Service Ratio: calculated by adding together your mortgage, property taxes and other debt payments (credit cards, loans, lines of credit etc.)

Capital (5 Cs of Credit): 

Represents the borrower’s personnal investment and assets to see that he’s committed enough to contribute some of his own funds. A large contribution by the borrower decreases the chance of default.

Capped Rate Variable Mortgage: 

By taking a capped rate variable mortgage, you can protect yourself against rate increases. The rate will fluctuate depending on the market, but the rate will never exceed a threshold established when you take out a mortgage.

Cash Back: 

When you purchase a home, you may find that you need some extra cash. With a cash back mortgage, you can get a certain amount of money back from your lender when your mortgage closes.

Character (5 Cs of Credit): 

Lenders evaluate the borrower’s overall trustworthiness, his personality and credibility of paying on-time his debts. Lenders may look at the applicant’s credit history, criminal record and past interactions with lenders.

Chattel Mortgage: 

A chattel mortgage is different from a traditional mortgage you might have on a house. A chattel mortgage is a loan used to purchase an item of movable personal property like a car or a piece of contruction equipment and that you must put up property as collateral.