Frequently Asked Questions

Agreement for Sale
Amortization
Appraisal
Assumable Mortgage
Balance due on completion
Balance Sheet
Balloon Payment
Blanket Mortgage
Blended Payments
BookValue (of a mortgage)
Borrower Qualification
Borrowing
Brokerage Fee
Closing Statement
Closed Mortgage
Completion Date
Compound Interest
Compounding Frequency
Credit Analysis
Creditor
Debt Coverage Ratio
Debt Financing
Debtor
Deposit
Depreciation
Disclosure Statement
Equitable Mortgage
Equity (in Mortgage)
Face Value of a Loan
Final Payment
Foreclosure
Fully Amortized Mortgage
Graduated Payment Mtg
Gross Debt Service Ratio
Gross Income
Gurantor
Income Tax
Interest
Interest Accruing Loan
Interest Adjustment
Interest-Only Loan
Interest Rate
Lending Value
Lien
Loan to Value Ratio
Maturity
Mortgage
Mortgagee
Mortgagor
Partial Amortization
Payment
Portable Mortgage
Prepayment
Principal
Reverse Annuity Mortgage
Term
Variable Rate Mortgage
Vendor Take Back Mtg.
Wrap-Around Mortgage

 


Agreement for Sale:

A contract by which the owner of land (vendor) agrees to sell land to another (purchaser) who agrees to purchase it.

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Amortization:

The process of paying off the loan by periodic payments of blended principle and interest.

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Appraisal:

The estimation of the value of a legal interest in land.

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Assumable Mortgage:

A Mortgage that allows a purchaser to assume or take over the responsibilities and liabilities under the Mortgage from the vendor.

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Balance due on completion:

The amount of money the purchaser will be required to pay to the vendor to complete the purchase, after all adjustments have been made.

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Balance Sheet:

A financial statement listing Assets, Liabilities, and Owner’s Equity at a point of time.  Also known as Statement of Financial Position or Statement of Assets & Liabilities.

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Ballon Payment:

Any payment of principal over and above the regular payment.

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Blanket Mortgage:

A single mortgage registered against two or more individual parcels of real property.

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Blended Payments:

A loan which is repaid by equal and consecutive instalments that include principle and interest.

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BookValue (of a mortgage):

The original face value of the mortgage less the amount of principle repayment, or the mortgage amount outstanding at a particular point in time.  At origination, the book value and face value are the same.

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Borrower Qualification:

The process of determing the maximum amount that can be lent to a potential borrower, given his or her income and the Lenidng Value of the property to be purchased.

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Borrowing:

Incurring an obligation to repay a debt in order to invest or consume more than one currently owns.

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Brokerage Fee:

A fee charged by a Mortgage broker for arranging a loan.

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Closing Statement:

A statement prepared for a purchaser or vendor, showing the amounts to be received and paid out.  The difference either the balance payable (by the purchaser) or the cash proceeds from sale (to the vendor) upon completion of the transaction.

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Closed Mortgage:

A mortgage which cannot be fully paid out before expiry of its term.

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Completion Date:

Date on which the purchaser’s solicitor undertakes to the vendor (or his solicitor) that he will pay the balance owing to the vendor upon the Transfer of Title being accepted for registration.

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Compound Interest:

Interest which, during the life of the loan, is charged or calculated at regular intervals and if not immediately paid (as in an interest only loan) will, in subsequent periods, earn interest itself (as in an interest accruing loan).

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Compounding Frequency:

Indicates the number of times compound interest is charged or calculated per year ( for example, semi-annually or monthly).

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Credit Analysis:

An investigation of a loan applicant’s ability to repay.

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Creditor:

A person to whom a debt is owed.

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Debt Coverage Ratio:

The number of times net operating income must cover the annual mortgage payments (principle and interest).

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Debt Financing:

Incurring an obligation to repay a debt in order to invest or consume more than one currently owns.

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Debtor:

One who owes a debt.

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Deposit:

An amount deposited with the agent by the purchaser when an offer to purchase is made.

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Depreciation:

The amount by which the value of improvements has decreased over time as a result of wear and tear or changes in taste.

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Disclosure Statement:

A schedule showing the face value of the loan, all costs associated with issuing the loan to the borrower , and the effective annual rate as required by the B.C. Mortgage Broker’s Act.

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Equitable Mortgage:

The transfer of equity in property as security for a debt.  Technically, any mortgage registered on title subsequent to the first mortgage (i.e., second or third mortgage).

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Equity (in Mortgage):

The difference between a property’s market value or purchase price and the debt incurred to purchase the property.

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Face Value of a Loan:

The loan amount which must be repaid at a stated rate of interest according to the contract terms.

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Final Payment:

The last instalment that is made on a fully amortized loan.  It is usually smaller than the preceding periodic payments.

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Foreclosure:

A legal action taken by a mortgagee to obtain possession of a property, by reason of the mortgagor’s default in payment of the principal and/or interest of the mortgage debt.

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Fully Amortized Mortgage:

Loan which is repaid completely by a series of payments over the full duration of the amortization period.

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Graduated Payment Mtg:

An innovative loan arrangement in which the periodic payments made by the borrower increase in size over all, or a portion of, the term of the mortgage contract.

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Gross Debt Service Ratio:

The percentage of gross income which is the maximum amount a mortgagor is allowed to pay annually in principle, interest, and property taxes.

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Gross Income:

The amount earned through employment or investment before taking taxes or other deductions into consideration.  This amount may or may not be the same as gross income for purposes of mortgage lending.

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Gurantor:

One who becomes contingently or secondarily liable for another’s debt or performance.

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Income Tax:

That part of taxable income which a person or corporation is required to forward to Revenue Canada periodically.

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Interest:

The dollar value which represents the cost of borrowing or the benefit of lending money.

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Interest Accruing Loan:

Debt which is paid off as one lump sum, including principle plus accumulated compound interest.

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Interest Adjustment:

The process of calculating compound interest payable on the amount borrowed between the day the monies are advanced and the day the amortization period starts.

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Interest-Only Loan:

A loan which is serviced by interest-only payments.  At the end of the term the full principle plus interest for the last payment period of the loan is still owing.

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Interest Rate:  
                     
The percentage rate that represents the cost of borrowing or the benefit of lending money.

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Lending Value:

The estimate value of a property for lending purposes.

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Lien:

A claim or charge on real personal property for payment of some debt, lien obligation or duty.

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Loan to Value Ratio:

The percentage of lending value which determines the maximum loan available.

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Maturity:

The date on which the balance owing on a mortgage becomes due: the final day of the term of a mortgage.

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Mortgage:

A document evidence a debt owed by the borrower(mortgagor) to the lender (mortgagee).

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Mortgagee:

The lender

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Mortgagor:

The borrower.

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Partial Amortization:

A loan repayment scheme in which the term is shorter than the amortization period.

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Payment:

A periodic instalment that is made to service a debt.

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Portable Mortgage:

A borrower can transfer the terms, conditions and interest rate of his or her current mortgage to the home the borrower would like to purchase.

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Prepayment:

The act of fully or partially paying off the outstanding balance of a loan at any point during the term of the loan at a time earlier than set out in the contract.

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Principal:

That portion of the original amount borrowed which still has to be paid back to the lender.

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Reverse Annuity Mortgage:

An innovative loan arrangement in which the lender makes periodic payments to the borrower during the loan term.  At the end of the term, the borrower will have to repay the balance owing by refinancing or selling the property.

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Term:

With respect to mortgages, a time period at the end of which the outstanding balance is due and payable: it represents the duration of the mortgage contract.

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Variable Rate Mortgage:

A loan being repaid by payments which change as the market interest rate changes.

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Vendor Take Back Mtg.:

A mortgage taken back by the vendor from the purchaser to facilitate a sale, whereby the vendor becomes the mortgagee and the purchaser becomes the mortgagor.

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Wrap-Around Mortgage:

A second mortgage, registered on title, which includes a prior existing mortgage.  It may be written for an amount equal to the outstanding balance of the first mortgage or may also add additional funds for a larger loan balance than currently exists.  Payments under the new mortgage include the payments under the original mortgage and the new mortgagee undertakes the responsibilities as mortgagor under the original mortgage.

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