Learn the Language of a Mortgage Broker
The amortization is the amount of years it will take to pay off your mortgage in full.
If the mortgage is insured with ( CMHC, GENWORTH or CANADA GUARANTY) in Canada
Then the maximum amortization is 25 years and up to 35 years for conventional mortgages
Accelerated Bi-Weekly Mortgage Payment
They take the monthly mortgage payment, they divide it by two and then they withdraw the amount
From your account every two weeks. In the end you will make 26 payments in the entire year. The payment is a bit higher than the regular bi-weekly mortgage payment.
Accelerated Weekly Mortgage Payment
They take your monthly mortgage payment, then they divide it in four and they withdraw the amount each week from your account. In 1 year you will make 52 mortgage payments. Since it’s an accelerated weekly mortgage payment each week the amount will be a bit higher than the regular weekly mortgage payment would be
Agreement of Purchase and Sale
A binding contract between the buyer and the seller for the purchase and sale of a home.
The promise to purchase indicates the terms and conditions that both the buyer and seller must
Follow. It will include the price agreed upon, what will be included in the offer and the closing date.
We suggest that you speak to a real estate agent to get more information on this matter.
Some mortgages in Canada are transferable from the seller to the buyer, the buyer still needs to qualify to assume the mortgage and the buyer still needs to pay the seller the difference between
The purchase price and mortgage they will assume.
When you are in purchasing a home, looking to take out equity from a property, if you are selling or refinancing then you will need an appraisal done on the property. This is used to determine the value of the property
Bi-Weekly Mortgage Payment
They take the monthly mortgage payment, multiply it by 12 and then they divide it by 26 payments in a year. The amount is taken out of your account every 2 weeks and in 1 years you will make 26 payments.
When you have a fixed mortgage and you decide to sell or change lenders and you break the mortgage term you have a penalty to pay. The penalty can be saved with most lenders if you take the new mortgage with them and you take a blended rate. They will take the existing mortgage rate
And the new mortgage rate and they will blend the two rates into a new rate in between.
Your lender will be equipped to provide you with the proper calculations when its time.
You are selling your existing home and purchasing a new home, the down payment for the new home is coming from the sale of your existing home, but the date to sign for the new home is before the notary date of your sale of your existing home, so you technically don’t have the down payment yet, this is why you would take a bridge loan. There is a small initial fee with most lenders plus interest rates per day.
Bank of Canada
In 1934 The Bank of Canada was founded and within a few years by 1938 it became a Crown Corporation. It is responsible in determining monetary policy and setting the overnight lending rate.
Cash Back Mortgage
Some lenders offer cash back mortgages, the amounts are usually 1%-7% of the principal amount borrowed. The client receives this amount at the notary.
If you are purchasing, selling or refinance there will be closing costs involved and each case is different. Some of the closing cost may be adjustments for property taxes, land transfer taxes, deposit, a mortgage penalty that needs to be paid back to the lender, legal fees, notary fees, utilities, etc. Your lawyer or Notary can help you with the closing costs.
You can have a fixed or variable closed mortgage. You are responsible to finish out your closed term
Or else there will be a penalty to pay for breaking the term before its due date.
A conventional mortgage is when the client will not use one of the 3 insurers in Canada (CMHC, GENWORTH or CANADA GUARANTY) for the sale or refinance of a property. Typically for a purchase the buyer needs to put 20% as a down payment to have a conventional mortgage.
A number that is assigned to a person based on their credit history over the years, the lender will use this number to determining if the client can qualify for a mortgage.
The date that was set in the Promise to purchase, usually the closing date is set a few weeks after the
Accepted offer. The lawyer or Notary makes sure that everything is worked out with both the seller and the buyer and that the funds are in order from the lender. Both parties sign and ownership is transferred from the sellers to the buyer.
Debt Service Ratios
Within the Debt service ratio there is two calculations that lenders use to determine the maximum mortgage capacity. There is the (GDS) this is the gross debt service ratio this is used to see if the client is already in too much debt. Then there is the (TDS) Total debt service ratio, this shows the portion of the client gross income that is being used for housing related and or similar payments.
When you are ready to make an offer on a property, usually the real estate agent will request a deposit from the buyer once offer is presented, this is to prove good faith and it shows the seller that the buyer is serious.
When purchasing a home in Canada you need to put a minimum down payment that is 5% of the purchase price. A down payment of less than 20% will require the buyer to take mortgage default insurance with (CMHC, GENWORTH or CANADA GUARANTY). If the buyer has a down payment of 20% or more they will have a conventional mortgage and they do not need mortgage default insurance.
Once you have a mortgage you must make your mortgage payment, if you stop making your payment you defaulted on your mortgage payment.
Early Mortgage Renewal
A mortgage is always taken with a term, once the term is due you can take a new term with the same lender for the remaining mortgage balance. Most lenders will allow the client to renew their mortgage with them anytime in the last final 120 days before the term is due.
First-Time Home Buyers’ Tax Credit (HBTC)
The $5,000 non-refundable HBTC amount applies to qualifying homes acquired after January 27, 2009, and provides up to $750 in federal tax relief. An individual is considered a first-time home buyer if neither the individual nor the individual’s spouse or common-law partner owned and lived in another home in the year of the home purchase or in any of the four preceding calendar years
Click the link http://actionplan.gc.ca/en/initiative/first-time-home-buyers-tax-credit.
Once you take a mortgage the lender will secure a firm rank mortgage lean on the property, this means that they are first in line to collect back the amount they borrowed you if you default on your loan.
Fixed Mortgage Rate
A fixed mortgage rate will be the same mortgage rate for the entire term of the mortgage, it will not increase or decrease and the client will have the same mortgage payment each month until the end of the term.
The total personal income of an individual before taxes and deductions.
Gross Debt Service Ratio (GDS)
This is a way of estimating the maximum home-related expenses you can afford to pay each month. To qualify for CMHC insurance, the total should not exceed 32% of your gross monthly household income.
GST/HST (on a New Home Purchase)
If a client is purchasing or building a new home, there is GTS or HST on the purchase price, they may vary from province to province.
Home Buyers’ Plan (HBP)
The Home Buyers' Plan (HBP) is a program that allows you to withdraw up to $25,000 in a calendar year from your registered retirement savings plans (RRSPs) to buy or build a qualifying home for yourself or for a related person with a disability.
Click the link: http://www.cra-arc.gc.ca/hbp/
When purchasing a home it is a good idea to do a building inspection. Not all client will do a full inspection this is the client’s choice. The home inspector will do a visual inspection of the interior and exterior and will provide a written report within a few days. The report will tell the buyer of there is anything that needs to be done to the property
Home Equity Line of Credit (HELOC)
A home equity line of credit (often called HELOC) is a loan in which the lender agrees to lend up to 80% of the value of the home. The lender could give you up to 65% in a line of credit and the 15% in a form of a mortgage term. Because a home often is a consumer's most valuable asset, many homeowners use home equity credit lines only for major items, such as education, home improvements, or medical bills, and choose not to use them for day-to-day expenses
Land Transfer Tax Rebate
Ontario, British Columbia, Prince Edward island and the city of Toronto offer land transfer tax rebates to first time homebuyers.
Land Transfer Tax
Land Transfer tax is an amount charged when a property is transferred from one homeowner to another. Each province has a land transfer taxes and it’s calculated differently. Toronto Homebuyers
Have an additional municipal land transfer tax on top of the provincial land transfer tax they pay.
Lump Sum Payment
Most lenders allow you to make a lump sum payment amount each year to reduce your capital.
Market value is the price you can sell your home in the current marketplace. The market value can be determined with an appraisal report.
Monthly Mortgage Payment
This is when the lender will withdraw from your bank account the mortgage payment each month.You will make 12 mortgage payments in one year
The amount you borrow from the lender to purchase a home
Maturity date is the last day of your mortgage term
This is not a pre-approval; a mortgage approval is when the lender approves the buyer for a purchase with no conditions left. The buyer must provide the lender with the complete promise to purchase, all personal documents including the proof of document payment, once the mortgage is approved the lender will provide the buyer with a final letter of approval
You should be pre approved before they start the purchasing process. A mortgage broker will verify your work employment, review your down payment and your credit score, you will then know the maximum purchase amount, rate and payment options. With a pre approval you can also secure a Mortgage rate up to 120 days
The lender who will lend you the funds to purchase a property will charge you interest rate on the amount they lent you, this is a mortgage rate.
A mortgage term is the amount of time you are committed to a mortgage rate and lender.
A mortgage broker is someone who is accredited with multiple lenders and can offer you the best mortgage rate and service since they send a lot of volume to the lenders. They work for you the client
To help you get the best terms and conditions for your mortgage.
If you still have a balance by the end of your mortgage term you will need to renew your mortgage for another term. I advise all clients to shop around for the best mortgage rate and products before your Mortgage maturity date.
If you have an open mortgage you can pay off part or the full amount at any time throughout the mortgage term without having to pay a penalty. An open mortgage rate is usually much higher because you have the flexibility to pay it off at any time without a penalty.
Offer to Purchase
An offer to purchase or a promise to purchase is an offer made to a seller if a buyer is interested in purchase their home. The listing agent will usually ask for a deposit to show good faith from the buyer.
If you decide to sell your home and purchase a new home you would want to port your mortgage to the new home, most client do this when their existing mortgage is lower then todays rate. Once again speak to a mortgage broker for more info.
If you have a closed mortgage and you decide to break your mortgage you will have a penalty to pay. If you mortgage was a variable rate mortgage, then the penalty is 3 months’ interest. If you had a fixed rate mortgage your penalty would be the greater of three months’ interest or the interest rate differential.
A private mortgage loan is usually for a short term 6 months up to 2 years or more.
It is typically interest only and the interest rate is much higher than what you would find with a traditional lender.
This is the amount you will pay to purchase the property
This is the option that allows you to pay down your capital each year. Apart from your regular mortgage payment each month most lenders give you the option to make a lump sum each year and allow you to increase each payment by a certain percent.
A mortgage rate can be held for a client who is looking to purchase a property, the reason why we do rate holds is to allow the client to secure a rate for a period of 30 up to 120 days, while they are looking to find their home.
Real Estate Lawyer
If you are purchasing, selling or refinancing a property you will need to use the services of a real estate lawyer. The real estate lawyer will make sure all the paperwork is filled in correctly, they will do the title search if needed and will review any offers that were made and they will make sure all and any payments and paid in full, will register the title in your name.
Real Estate Agent / Realtor
A real estate agent is a professional that is licensed and who will help you to list and sell your home or who will help you find your dream home
A second mortgage is taken on the property if there is room for a second mortgage. The first mortgage will stay in place as a first rank mortgage. If the client defaults on the mortgagr the first rank mortgage will be paid off first. If there is enough after the first rank mortgage is paid off the the second mortgage will be paid off.
Statement of Adjustments
On the day you will sign at the notary, the notary will provide both the buyer and seller with a sheet of adjustments, it will indicate the amount in closing costs each party needs to pay.
Lenders give you the option to skip 1 or more monthly mortgage payments, you should speak to your mortgage broker for more information on this topic
Terms and Conditions
You should carefully take the time to read all the terms and conditions of the mortgage. You should know if your mortgage is a collateral mortgage, the repayment options, etc
Utilities are amounts a client will pay each month apart from the mortgage, they include services
Like electricity, heating, phone, TV, internet, Alarm system, etc
Variable Mortgage Rate
A Variable rate is based on the prime rate plus a percentage. If the prime rate increases then the variable rate will increase, if it decreases then the variable rate will decrease. Variable mortgage rates
Appeal to some because the rate is typically lower than the fixed rate. In most cases a variable can be close to a fixed for the remaining of the term.
Weekly Mortgage Payment
52 mortgage payments per year