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RealEstate Glossary of Terms

Amortization - The period of time, often a maximum of 25 years, required to reduce the mortgage debt to zero when all regular blended payments are made on time and provided the terms remain the same.

Appraisal - A process for estimating the market value of a particular property.

Closed Mortgage - A mortgage that cannot be prepaid or renegotiated before the term's end unless the lender agrees and the borrower is willing to pay an interst penalty many closed mortgages limit prepayment options such as increasing our mortgage payment or lump sum prepayment.

Closing Date - The date at which the sale of a property becomes final and the new owner takes possession.

Commitment Letter / Mortgage Approval - Written notification from the mortgage lender to the borrower that approves the advancement of a specified amount of mortgage funds under specified conditions.

Conventional Mortgage - A mortgage loan up to amaximum of 75% of the lending value of the property. Typcially, the lending value is the lesser of the purchase price and market value of the property. Mortgage loan insurance is usually not required for this type of mortgage.

Deposit - Money placed in trust by the purchaser when an Offer to Purchase is made. The sum is held by the real estate representative or lawyer/notary until the sale is closed and then it is paid to the vendor.

Down Payment - The portion of the home price that is not financed by the mortgage loan. The buyer must pay the down payment from his/her own fundds or other eligible sources before securing a mortgage. It generally ranges form 5% to 25% of the purchase price but can be more.

Equity - The difference between the price for which a home could be sold and the total debts registered against it. Equity usually increases as the mortgage is reduced through regular payments. market values and improvements to the property may also affect equity.

High-Ratio Mortgage - A mortgage loan higher than 75% of the lending value of the property. This type of mortgage may have to be insured.

Interest - The cost of borrowing money. Interest is usually paid to the lender in regular payments along with repayment of the principal.

Maturity Date - The last day of the term of the mortgage. On this day, the mortgage loan must either be paid in full or the agreement renewed.

Mortgage - A mortgage is a security for a loan on the property you own. It is repaid in regular mortgage payments, which are usually blended payments. This means that the payment incldues the principal plus the interest. The payment may also include a portion of the property taxes.

Mortgage Life Insurance - Mortgage life insurance provides coverage for yoru family should you die before your mortgage is paid off. This insurance can be purchased through your lender and the premium added to yor mortgage payments. However, you may want to compare rates for equivalen products from an insurance broker.

Mortgage Loan Insurance - If you have a high-ratio mortgage, your lender will probably require mortgage laon insurance, which is available form CMHC or a private company.

Open Mortgage - A mortgage that can be prepaid or paid off or renegotiated at any time and in any amount without interest penalty. The interest rate on an open mortgage is usually higher than a closed mortgage with an equivalent term.

Principal - The amount that you borrow for a loan. Each monthly mortgage payment consists of a portion of the principal that must be repaid plus the interest that the lender is charging you on the outstanding loan balance. During the early years of yoru mortgage, the interest portion is usually larger than the principal portion.

Term - The term of a mortgage is the length of time that the mortgage conditions, including the interest reate you pay, are carried out. Terms are usually between 6 months and 10 years. At the end of the term, you either pay off the mortgage or renew it, possibly renegotiating its terms and conditions.

Title - A freehold title gives the holder full and exclusive ownersip of the land and building ofr an indefinite period. A leasehold title gives the holder the right to use and occupy the land and building for a definied period.

Title Insurance - Insurance agains loss or damage caused by a matter affecting the title to immoveable property, in particular by a defect in the title or by the existence of a lien, encumbrance or servitude.

Vendor Take Back Mortgage - This is where the vendor rather than a financial institiution finances the mortgage. The title of the property is transferred to the buyer who makes mortgage payments directly to the seller. These types of mortgages, sometimes referred to as take-back mortgages, can be helpful if you need a second mortgage to by a home.

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