Canadian Financial, Real Estate and Mortgage Glossary

Words categorized under Mortgages

escrow agent — Definition (Mortgages, Real-estate, Financial-banking, Legal-contracts)

A neutral third party who holds the documents and money in a real-estate transfer until all conditions are met.

exchange — Definition (Mortgages, Real-estate, Taxation, Financial-banking)

A trade of property for other property or services. Like-kind property exchanges are a popular tax-deferral strategy.

Experian (XP) — Company, Canada

One of the Big Three credit bureaus, along with Equifax and Trans Union, Experian not normally used in Canada.

Finance Canada — Company, Canada-wide

Federal department responsible for Canada's economic performance and regulation of financial institutions.

finance charge — Definition (Mortgages, Financial-banking)

Charges that include all of the interest expected to be earned over the life of a loan, in addition to the service charges, mortgage insurance premiums, and other loan-related charges.

finder fee — Definition (Investments, Mortgages, Real-estate, Insurance, Financial-banking)

A fee paid by a party to another for services rendered.

firm commitment — Definition (Mortgages, Financial-banking)

A lender's promise to lend money to a specific borrower on specified terms at a certain time.

first lien — Definition (Mortgages, Legal-contracts)

Primary claim by the lender for satisfaction of outstanding debt. A first mortgage creates a first lien.

first mortgage — Definition (Mortgages, Legal-contracts)

A mortgage that is the primary lien against a property.

fixed instalment — Definition (Mortgages, Financial-banking)

Periodic (usually monthly) payment on a loan whose sum does not vary.

fixed rate mortgage (FRM) — Definition (Mortgages)

A loan in which the interest rate and payments remain the same for the entire life of the loan. The interest rate and payment amounts are set at the time of loan origination.

flat fee — Definition (Investments, Mortgages, Real-estate, Insurance, Financial-banking)

A fixed charge that a broker requests instead of a commission.

forbearance — Definition (Mortgages, Financial-banking, Legal-contracts)

Delaying foreclosure, usually because the borrower has arranged to pay the amount in arrears.

foreclosure — Definition (Mortgages, Financial-banking, Legal-contracts)

The legal process by which a borrower in default under a mortgage is deprived of his or her interest in the mortgaged property. This usually involves a forced sale of the property at public auction with the proceeds of the sale being applied to the mortgage debt.

full income verification — Definition (Mortgages, Financial-banking)

A requirement for fully documented proof of income; loans of this type usually offer lower interest rates than no-income or "no-doc" verification loans.

GE Capital — Company

GE Capital is the new CMHC alternative in the Canadian Mortgage Market place. GE Capital like CMHC provides banks/lenders with mortgage insurance. Not to be confused with life or property insurance. In the event of default or foreclosure GE Capital assumes responsibility of the property and reimburses the bank/lender the entire mortgage amount. This insurance is required generally when you have less than 25% equity or down payment. This insurance is paid by the property owner in advance but usually added to the mortgage amount. See also "CMHC."

  ➥  Also offers commercial financing.

gift from a family member — Definition (Mortgages)

A gift of cash, to a mortgage applicant from a relative by blood or marriage, which the applicant is not required to repay. In some instances it is necessary to provide a written statement to that repayment is not required.

good credit — Definition (Mortgages, Financial-banking)

Someone who carries little credit risk.

goods and services tax (GS, GST) — Canada

A sales tax that applies in all Canadian provinces charged at 5% (as of 2012).

  ➥  Bank account transaction code.

gross debt service (GDS) — Definition (Mortgages)

The total monthly mortgage (or rent) payments, property taxes, utilities and maintenance fees as a percentage of gross monthly income.

  ➥  Used by mortgage lender underwriters to determine one's ability to qualify for a mortgage loan.

guarantor — Definition (Mortgages, Real-estate, Legal-contracts)

Someone who guarantees something.

guaranty — Definition (Mortgages, Financial-banking)

A promise to assume responsibility for a debt if the borrower defaults.

harmonized sales tax (HST) — Canada

A sales tax used in some provinces to merge the GST and PST.

  ➥  Canadian consumption tax.

hazard insurance — Definition (Mortgages, Insurance)

Insurance that covers hazards that are considered risky enough not to be covered by a standard insurance policy.

high-ratio mortgage — Definition (Mortgages)

A mortgage in which a borrower places a down payment of less than 20% of the purchase price.

holdback — Definition (Mortgages, Real-estate)

A dollar amount that is withheld by the lender during construction of a home to ensure construction is satisfactory at every stage. The amount of hold-back is typically equivalent to the estimated cost to complete the construction.

Home Buyers' Plan (HBP) — Canada

A way for a homebuyer to use part of his or her RRSP as a down payment on a mortgage.

  ➥  Government assistance for first-time homebuyers.

home equity (HE) — Definition (Mortgages, Financial-banking)

The part of a home's value that the mortgage borrower owns outright; the difference between the fair market value of the home and the principal balances of all mortgage loans.

home equity debt — Definition (Mortgages, Financial-banking)

Debt secured by your home.

home equity line of credit (HELOC) — Definition (Mortgages, Financial-banking)

An open-ended loan, paid as revolving debt, that is backed by the equity in the property.

  ➥  Also known as a Home Line of Credit.

home equity loan (HEL) — Definition (Mortgages, Financial-banking)

A loan that can replace or be an addition to the first mortgage. Typically used as a home improvement loan.

  ➥  Also known as an Equity Take Out (ETO).

home inspector — Definition (Mortgages, Real-estate)

A person who has a broad general knowledge relating to basic home construction, common household problems and methods for their correction.

home loan — Definition (Mortgages, Financial-banking)

A loan used to buy a home is referred to as a "mortgage."

housing-equity partnership — Definition (Investments, Mortgages, Financial-banking)

An arrangement in which one buyer lives in a home and the other has an ownership stake as an investment. The partners split the capital gain after the property is sold.

hybrid mortgage — Definition (Mortgages)

A mortgage split into different components in order to better manage risks and costs.

income approach — Definition (Investments, Mortgages, Real-estate, Taxation, Financial-banking)

A step in the valuation process of an income property. The value is reached by estimating the annual income minus an allowance for vacancies and bad debts and then subtracting annual operating expenses, real estate taxes, and insurance premiums to obtain the net operating income. This is then converted by capitalization into a capital value.

index — Definition (Investments, Mortgages, Real-estate, Insurance, Financial-banking, Legal-contracts)

A table of yields or interest rates being paid on debt (such as Treasury notes or bank deposits) that is used to determine interest-rate changes.

initial interest rate — Definition (Mortgages)

The introductory interest rate on an adjustable-rate mortgage (ARM), which usually changes at a predetermined time.

instalment — Definition (Mortgages, Financial-banking)

The regular periodic payment that a borrower agrees to make the lender.

interest (IN, int) — Definition (Investments, Mortgages, Financial-banking, Abbreviation, Bank Statements)

Money paid for the use of borrowed funds, usually expressed as an annual percentage.

interest adjustment date — Definition (Mortgages, Financial-banking)

The date one month prior to the beginning of amortization when accrued interest computed on the monies advanced becomes due.

interest factor — Definition (Mortgages, Financial-banking)

The decimal equivalent for an interest rate on a unit amount for a period of time. Computed by interest rate divided by number of days in a basic year times the number of days accrued.

interest only payments — Definition (Mortgages, Financial-banking)

A payment plan where only the interest is paid off.

interest rate (IR) — Definition (Investments, Mortgages, Financial-banking)

The rate a lender charges an individual to borrow money.

interest rate cap — Definition (Mortgages, Legal-contracts)

A limit to the interest rate increases and decreases on an adjustable rate loan; either from one adjustment period to the next or over the life of the loan.

interest rate differential (IRD) — Definition (Mortgages, Financial-banking, Legal-contracts)

The penalty one pays for breaking a mortgage.

interim financing — Definition (Mortgages, Financial-banking)

The availability of funds on a daily basis to assist a developer with financing for a construction project between advances made by the lender of the construction loan.

International Organization for Standardization (ISO) — Company Est.1946, Geneva, Switzerland

An international organization created to promote standardization around the world.

investment property — Definition (Investments, Mortgages, Real-estate, Financial-banking)

Property bought with the hope of it making money.

joint credit — Definition (Mortgages, Financial-banking)

Credit that is issued to two people based their credit reports and their combined assets and incomes. The repayment of joint credit is the responsibility of both parties.