- 10 great reasons to use 'the mortgage network inc.'
- 10 steps to buying a home
- 10 closing costs when buying a home
- 10 common costs of owning a home
- 10 benefits of mortgage insurance
- 10 things to consider before your mortgage renews
- 10 steps to mortgage approval
- Mortgage Terms
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10 great reasons to use
'the mortgage network inc.'
1 Get independent advice on your financial options.
As independent mortgage brokers and mortgage agents, we’re not tied to any one lender or range of products. Our goal is to help you successfully finance your home or property. We’ll start by getting to know you and your homeownership goals. We’ll make a recommendation, drawing from available mortgage products that match your needs, and we will decide together on what’s right for you.
2 Save time with one-stop shopping.
It could take weeks for you to organize appointments with competing mortgage lenders — and we know you’d probably rather spend your time house-hunting! We work directly with dozens of lenders, and can quickly narrow down a list of those that suit you best. It makes comparison-shopping fast, easy, and convenient.
3 We negotiate on your behalf.
Many people are uncertain or uncomfortable negotiating mortgages directly with their bank. Brokers negotiate mortgages each and every day on behalf of Canadian homebuyers. You can count on our market knowledge to secure competitive rates and terms that benefit you.
4 More choice means more competitive rates.
We have access to a network of major lenders in Canada, so your options are extensive. In addition to traditional lenders, we also know what’s being offered by credit unions, trust companies, and other sources. And we can help you take care of other requirements before your closing date, such as sourcing mortgage default insurance if your down payment is less than 20% of the purchase price.
5 Ensure that you’re getting the best rates and terms.
Even if you’ve already been pre-approved for a mortgage by your bank or another financial institution, you’re not obliged to stop shopping! Let us investigate to see if there is an alternative to better suit your needs.
6 Get access to special deals and add-ons.
Many financial institutions would love to have you as a client, which is why they often offer incentives to attract creditworthy customers. These can include retail points programs, discounts on appliances, shopping clubs, and more. We do the math on which offers might be worth your attention when it comes to financing or mortgage insurance — so you get the perks you deserve.
7 Things move quickly!
Our job isn’t done until your closing date goes smoothly. We’ll help ensure your mortgage transaction takes place on time and to your satisfaction. We have access to the widest variety of lenders to find the right solution for you. We are experts at helping you achieve your homeownership dreams. Access your best options! Referrals Welcome. On Approved Credit.
8 Get expert advice.
When it comes to mortgages, rates, and the housing market, we’ll speak to you in plain language. We can explain the various mortgage terms and conditions so you can choose confidently.
9 No cost to you.
There’s absolutely no charge for our services on typical residential mortgage transactions. How can we afford to do that? Like many other professional services, such as insurance, mortgage brokers are generally paid a finder’s fee when we introduce trustworthy, dependable customers to a financial institution. These fees are quite standard and nearly industry-wide so that the focus remains on you, the customer.
10 Ongoing support and consultation.
Even once your mortgage is signed and paperwork is complete, we are here if you need any advice. We are happy to be of assistance when you need it, anytime.
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10 steps to buying a home
1 Determine how much you can afford.
Based on your down payment, income, existing debt, regular expenditures, and other key financial information, we can help you determine how much you can afford to pay every month and the price range that works within your budget.
2 Team up with a real estate agent.
Finding a real estate agent to help you search for your dream home is important to the home buying process. The best real estate agent will be a combination of a personal advisor, consultant, and negotiator. This expert will show you homes that match your criteria, guide you through the home buying process, and negotiate the best possible price for your home.
3 Make an offer.
When you’ve found a place that you’d like to call your own, your real estate agent will help you draw up an Offer to Purchase to present to the seller. This legal document specifies the price, the closing date, and any conditions.
4 Retain a lawyer.
It’s important to hire a lawyer who specializes in real estate. You could find yourself in a bidding war for the home you want, and you may want a lawyer to look over any offer to purchase before you submit.
5 Arrange the home inspection.
Many buyers consider including a home inspection as one of the conditions on their Offer to Purchase. A professional inspection is a good way to uncover major problems with the home. If the home doesn’t pass the inspection, you can adjust or withdraw your conditional offer.
6 Get the mortgage approved.
With a copy of the signed Offer to Purchase and the necessary financial information, we’ll submit your application to the mortgage lender that we have selected. The lender will qualify the application and complete a valuation on the property you have purchased. Mortgage insurance gives you the ability to buy a home with a down payment of less than 20% of the purchase price.
7 Get property insurance.
Apart from the mortgage, you’ll need to purchase property home against fire and other damages. Once you have a policy in place, forward a copy to your lawyer and your lender.
8 Check the legal details.
With the deal finalized and the financing in place, your lawyer can now search the title and check whether there are any unpaid property taxes outstanding. Your lawyer will arrange for a survey to be completed, if necessary.
9 Complete the paperwork.
A few days before the deal is set to close, you’ll meet with your lawyer to review, sign, and get copies of all the documentation. At this time, you’ll also provide the remainder of your down payment and pay legal fees and any additional costs, such as prepaid utility expenses for which the seller should be reimbursed, that are due on closing.
10 Pick up the keys.
On the closing day, your lawyer and the seller’s lawyer will exchange documents and cheques. Your lawyer will also register your new home in your name. When these tasks are complete, you’ll get the deed and your keys to your new home, and you can move in.
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10 closing costs when buying a home
1 Land transfer tax.When a home changes hands, many provinces and a few municipalities charge a property transfer tax or title transfer fee. Rates are usually on a scale of 0.5% to 2% of the home’s value and can add thousands to your purchase price. First-time homebuyers qualify for rebates or exemptions in some provinces.
2 Appraisal fee.
Your lender may ask you to have a home appraised to confirm its market value. Fees vary depending on a property’s value and complexity, but are typically around $250.
3 Legal fees.
A lawyer will help protect your interests by reviewing your purchase agreement, searching the property title, and ensuring that all documents are completed properly. Basic legal fees start between $500 and $800, plus disbursements, with added services as needed.
4 Home inspection.
An inspection can help make you aware of issues related to a house’s structure and systems, such as plumbing and electrical, and recommended or necessary repairs. Fees range from about $350 to $450.
5 Home/fire insurance.
Your lender will require proof that the property is insured in case of fire and other damage. Insurance costs vary, depending on the coverage needed, but budget for at least $500 a year.
6 Costs for newly constructed homes.
If you’re buying a brand-new home, be prepared to settle any items not quoted in the original price, including upgrades or paving and landscaping fees. New homes are also subject to 5% GST or 13% HST, although this is often included in your purchase price. A federal rebate reduces the GST or the federal part of the HST to about 3.5% for homes valued at $350,000 or less.
7 Prepaid costs.
If the seller has paid property taxes, water bills, or utilities in advance, you’ll need to reimburse these at closing. This can add hundreds to your upfront costs, but means these bills will be paid for your first months in your new home.
8 Tax on mortgage insurance.
If you have less than a 20% down payment, your lender will require that you obtain mortgage default insurance. You can roll the cost into your mortgage payments, but the PST is due at closing. For example, if your mortgage insurance is $5,000 and the PST is 8%, you’ll pay $400.
9 Title insurance.
Title insurance can safeguard you against fraud and problems with your property title or survey. Fees range from $150 to $350.
10 Moving-in costs.
Before the big day, budget for all those last minute things: $100 or more to rent a van or a few hundred for professional movers, $50 to $60 for a locksmith to rekey your locks, and cleaning supplies. Such incidentals can easily come to $500 or more.
As a mortgage professional, I’m here to help you feel financially prepared for owning a home.
I’m always available to answer your questions.
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10 common costs of owning a home
1 Property tax.Many of the services you’ll enjoy in your new neighborhood, from parks and recreation facilities to road maintenance and schools, are funded in part by municipal property taxes. Rates vary widely, from region to region and home to home. Annual taxes can top several thousand dollars in urban centers, so some homeowners opt to pay in installments — your lender may provide an option to combine these with your mortgage payments.
2 Energy costs.
If you’re used to keeping the lights on and the thermostat up because utilities are included in your rent, you’ll now have to pay for these costs. Budget to cover monthly gas, electric, or oil bills, which fluctuate with the seasons. Your real estate agent can ask a home’s seller to confirm past costs.
3 Phone, cable, and Internet services.
The costs of being “connected” can easily add up to a couple of hundred dollars a month. Moving into a new home might be a good time to consider whether you need both a land line and a wireless line, for instance, or if you can bundle services for a discount.
4 Home insurance.
Protect your home, its contents, and your property against damage or liability. Prices can vary, depending on your home and neighborhood, but plan for costs that typically start at a minimum of $500 per year. Keep in mind that a lower cost policy may not offer the comprehensive coverage you may want. You can keep costs down by choosing a higher deductible.
5 Municipal services.
Some municipalities charge fees for services like water or garbage removal. For example, homeowners in some larger urban centers pay $150 to $235 a year for curbside collection of garbage, recycling, and compost.
6 Fuel or transit costs.
If you’ll be commuting a longer distance to work, consider whether you will face higher fuel or public transit costs or whether you’ll have to pay for parking.
7 Monitored security.
If you opt for home protection, monitoring can cost anywhere from $20 to $40 or more per month, depending on the plan.
8 Home maintenance.
Plan to cover all the occasional costs to keep your house in working order, such as changing furnace filters, carpet cleaning, clearing your eaves troughs, and touching up interior or exterior paint. You’ll find it easy to spend $30 or more a month on such home maintenance items and services.
9 Property upkeep.
Consider outdoor areas that may need tending to, such as wooden decks, fences, gardens, and lawns. Even when you do the work yourself, budget at least a few hundred dollars seasonally for items like wood sealant, landscaping supplies, and plants.
10 Repairs.
These are larger, less frequent expenses like replacing the roof, furnace, air-conditioning units, or appliances. Housing experts recommend setting aside 1% to 3% of the value of your house each year — a minimum $1,000 for every $100,000.
While the ongoing costs of owning a home can add up to hundreds of dollars every month,
I can help you plan ahead to manage these expenses and be comfortable with your financing.
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10 benefits of mortgage insurance
1 Homeownership on your terms.With the right preparation and resources, you can buy a home that best suits your lifestyle. Mortgage insurance provides you with innovative options to help get you into homeownership.
2 Be eligible for a better interest rate.
Mortgage insurance provides a lender with the flexibility to offer you the same competitive mortgage interest rates available to homebuyers with a larger down payment.
3 More down payment options.
Don’t let the down payment be the barrier to your homeownership dreams. There are many mortgage insurance products that will help you to achieve homeownership. Let’s discuss the options that suit your situation best.
4 Buy, instead of renting.
If you’re paying rent right now, it can be a good move to consider buying a home that has similar monthly carrying costs. You’ll enjoy the freedom of making your living space into your own home with your personal touch.
5 Overcome traditional barriers to financing.
More and more homebuyers who may not have qualified for a mortgage are benefiting from mortgage insurance — for example, those who are self-employed or work on commission. With mortgage insurance, people who have good credit but might not meet conventional lending criteria can qualify for the financing they need.
6 Own and enjoy a vacation property.
If your financial situation is in good standing and you are thinking about buying a vacation property, there are mortgage insurance options that will allow you to do so. Be sure to ask us about what will work best for you.
7 Get money back on an energy-efficient home.
If you purchase an energy efficient home or refinance an existing home to make energy-saving renovations, you could be eligible to receive a 10% refund on your mortgage insurance premium if your mortgage is insured with Genworth Financial Canada.
8 Save on household purchases.
When buying your first home, you’ll find expenses can add up quickly. When insured with Genworth Financial Canada, you can take advantage of the Homebuyer PrivilegesTM program, which offers savings on appliances, truck rentals, home-improvement materials, moving supplies, and more.
9 Take it with you when you move.
If you have a mortgage that’s portable, you can transfer its terms to a new property in the future. This same option is available when you buy mortgage insurance, which can save you premiums when you move.
10 Get help when you need it.
Whether from a job loss, a serious illness, or a marriage breakup, financial difficulties can arise when you least expect them. You can be sure to get the help you need to keep you in your home. Be sure to inquire about the benefits of this program.
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10 things to consider before your mortgage renews
1 Have you explored all your options?
Once you receive your mortgage renewal statement, there’s nothing easier than simply signing on for another term.
But while this may make sense in many cases, your family or financial situation may have changed over time. We can look for opportunities that could better meet your needs right now.
2 Are you comfortable with your payments?
If you’ve been feeling financially strapped each month making your mortgage payments, this could be the time to reduce them to a more easily managed level. On the other hand, if you’re earning more, why not pay down your mortgage faster and save thousands of dollars in interest over time?
3 Do you need cash flow for other things?
Your priorities may have shifted since you first bought your home, and your cash flow needs can shift too. Things like paying for a child’s university education, planning a career change, or a major purchase such as a vacation property may call for spending money on things other than your home. You may be able to refinance your mortgage to take this into account.
4 Can you handle fluctuating rates?
Some homeowners are nervous about any hikes in interest rates, while others are comfortable to go with the flow. Rates are tough to predict. It’s best to base your decision on your personal situation, not what you read in the news, and tailor your mortgage renewal around your needs. We can help you decide whether to opt for fixed or variable rates — and we don’t want you to lose any sleep over your decision!
5 Will you sell soon?
If you are likely to sell soon, consider a shorter-term mortgage or one that has flexible terms so you’re not penalized if you sell your house before the mortgage comes due.
6 Are you thinking about a major renovation?
You know that projects such as a new kitchen or an addition can make your home more valuable. But the cost of having the work done can tie up a lot of money. Before you renew, look at all your financing options, which may include getting an additional line of credit or keeping your monthly mortgage payments low so you have money on hand to finance the renos.
7 When do you want to be “mortgage-free”?
If you’re planning extended time away from work or perhaps an early retirement, it may make sense to pay down your mortgage sooner rather than later. While increasing your payments will raise your monthly costs now, you’ll ultimately save on interest in the long term and can prepare for that fabulous, mortgage-free lifestyle.
8 Could you use your home equity to fulfill other goals?
Refinancing a mortgage can be one way to free up cash you need for other things, which could even include buying another property. Mortgage renewal time is an ideal occasion to review all your options.
9 Have your insurance needs changed?
If your financial situation has changed since you first took out your mortgage, review whether you need the same level of insurance in place to cover mortgage obligations.
10 Are you getting the best rates and terms?
In a competitive mortgage environment, your good credit history can make refinancing work to your advantage. We analyze mortgage markets daily to ensure you don’t miss any money-saving opportunities.
With unbiased advice, fast, flexible service, competitive rates, and access to many lending sources, I can make sure you get the mortgage that meets YOUR needs.
Call me today and SAVE!
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10 steps to mortgage approval
1 To start the process we obtain and prepare your credit application. Information you will need to provide includes, social insurance numbers, gross income figures, a list of assets and liabilities including monthly payment obligations.With your authorization we retrieve your credit bureau report and address any issues that the lender may have questions about as a result of the credit report.
2 Verification of income. We will provide you with the details of what the lender will require for documentation and this will depend upon whether you are a salaried employee, commissioned income or self-employed.
3 Minimum down payment required is 5% of the purchase price, this can be from accumulated savings, RRSP’s, a gift from an immediate family member or equity in your current home. Documentation of the down payment will have to be provided.
4 Revenue Canada will allow you to convert RRSP’s [first time buyers only] to use towards your down payment. For each person on title they can fund up to $25,000 from RRSP’s.
5 A down payment of less than 20% will require mortgage insurance. This fee varies based on the amount borrowed. The insurer requires that you have available 1.5% of the purchase price for closing costs.
6 A deposit is required with your offer to purchase. These funds must be immediately accessible. The balance of your down payment and closing costs must be available approximatly two weeks prior to possession.
7 Closing costs include legal fees, disbursements, searches, tax adjustments, CMHC/Genworth application fee, appraisal fee and so on. Your broker and lawyer can supply you with this information.
8 Prior to signing ensure that you understand all Terms and Conditions of the Real Estate Contract. Have your Realtor or a third party explain the contract to your satisfaction.
9 THE MORTGAGE NETWORK INC. will always obtain a ‘Mortgage Pre-Approval’ not a ‘Pre-Qualification’. These terms are not interchangeable. Obtaining a Mortgage Pre-Approval will lock in an interest rate with no obligation to you. With a pre-approval you know with certainty you can obtain the mortgage you require.
10 Ask us about special "zero" down payment programs.
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Mortgage Terms
Use our Mortgage Terms Glossary to learn more about mortgages and the process you’ll go through to obtain one.
Adjustments on Closing: 
There are two types of adjustments for which a buyer can be charged on closing;Prepaid services. Where the sellers have prepaid property taxes or certain utilities, the buyers can be charged for the amount of prepayment on a pro-rata basis, depending on the date of occupancy. For example, if the sellers have paid the property taxes to the end of the year, and the sale closes on October 15th, the purchasers will be charged with an adjustment of 77 / 365’ths (the number of days remaining in the year) of the total paid for the year.
Interest. This is the amount of interest required to be prepaid up to the Interest Adjustment Date (IAD). IAD is the point at which the mortgage interest starts accumulating “in arrears”. In Canada all mortgage interest is calculated and paid after the period to which it applies. This differs from the way in which rental and lease payments are calculated, which is “in advance”. The good news on this one is that if you prepay for say 3 weeks you won’t have to make your first payment for almost two months. Also, if you take a biweekly payment term, the longest interest adjustment period is less than two weeks, by definition.
Amortization:
Paying off the principal balance of the mortgage, usually by a combination of equal periodic payments and extra payments of principal at irregular intervals. Usually associated with a target period (the standard being 25 years) over which the initial blended payment is calculated. The maximum amortization available in Canada is 30 years.
Appraisal:
This is an estimate of the current value of the property (the ‘subject property’), using one or both of the following techniques;- The majority of residential appraisals use the market value comparison approach, comparing recent sales of similar properties (‘comparables’ or ‘comps’ in real estate jargon) and adding and subtracting the differences in value of the same features in the subject property. For example, if a house of the same size on the same street and in the same condition as the subject property recently sold for $200,000, but this ‘comparable’ had a triple garage and a finished basement and the ‘subject’ does not; the appraiser calculates the market value of these features (say, $12,000 in total) and deducts this amount from $200,000, giving an ‘adjusted value’ of $188,000. This is usually done with at least three ‘comparables’ and either averaged or the middle (‘median’) value used.
- A supporting measurement of value used by many appraisers is the “depreciated cost” approach, whereby the land value is estimated and added to an estimate of the depreciated building value. Where there are few comparables available, relatively more weight might be given to this method.
Assessment:
The “assessed” value of a property is a historical, static estimate of the value of your property used by a municipal (local) government as a basis for calculating annual property taxes. An “assessment notice” from the municipality contains the “assessed value” and when multiplied by the current “mill rate” the property taxes for the year can be calculated. In some municipalities, the mill rate is provided on the assessment notice and in others it is provided separately.
Assignment of Interest:
Most Provinces allow a legal assignment of interest in a mortgage to have full legal effect without having to discharge and re-register the existing one. This is particularly useful in:• Switch situations, where the costs of transferring lenders would otherwise be very high.
• Second mortgage situations where a postponement may be difficult to obtain.
Assumable Mortgage:
A mortgage which a qualified buyer can take over from the current owner of a property upon its sale. Assuming a mortgage can provide a buyer with a below market interest rate, (if rates are now higher), as well as saving on the legal costs of creating and registering a whole new mortgage. “Assumption” entails a simple amendment to the mortgage document registered on title (see “switch”).
Blend & Extend:
A closed mortgage can often be “opened” for the purpose of extending the term. Most lenders will blend the penalty for breaking (usually an Interest Rate Differential) with the rate for the new extended term. The idea is to get a lower rate and protect against rate increases in the future.
Buy Down:
“Paying down” the mortgage rate by paying the lender a premium at time of funding. This is often used as a marketing feature by new home builders, particularly on high ratio second mortgages.
Buyer Agent:
A Realtor who acts contractually on behalf of the buyer. Traditionally, and still in most cases, the Realtor is the Agent of the Sellers and is paid by them out of the proceeds of the sale. A Buyer’s Agency Agreement allows a Realtor (with full disclosure to the sellers or their agent) to negotiate on behalf of the buyer, with no legal conflict of interest. The seller still pays the Buyer’s Agent fees, but this is always spelled out and acknowledged in the Offer to Purchase.
Canada Mortgage & Housing Corporation (CMHC):
A federal crown corporation which administers the “National Housing Act” (NHA), and through which all federal housing policies and programs are implemented.
Cap Rate:
The highest rate that a borrower will pay within a defined time period. Examples are; the rate committed on a commitment letter or a mortgage pre-qualification (also known as a “rate hold”); or the maximum rate that will be paid by the borrower during the term of a “protected variable rate mortgage”. A lender will usually have to incur a cost to insure against rate increases during the capping period. This insurance is called a “hedge”.
Closed Mortgage:
A mortgage whose terms state that it cannot be paid out, even with a penalty, unless the lender agrees. In some cases, a closed mortgage may be discharged at a defined cost, usually Interest Rate Differential (IRD), but sometimes with a punitive penalty such as full interest to maturity.
Closing:
The final exchange of consideration and legal completion of a transaction, involving either a house purchase, a mortgage registration, or both.
Commitment Letter:
A written commitment from a lender to lend mortgage funds to specific borrowers as long as certain conditions are met within a specified time period before closing. A key component of the commitment, particularly in a period of volatile interest rates, is the “rate hold”, where a lender may “cap” a rate for a defined period, such as 60 days or 90 days. Commitments on financing for new homes, which usually have longer closing dates, can be negotiated between the lender and the builder and be held for as long as 6 months, and even a year.
Compliance Letter:
Required in many municipalities throughout Canada before a property transfer can take place. This is an acknowledgement from the building department that the property either has, or is clear of outstanding work-orders. Work-orders are specific clean-up or fix-up requirements that the owner must complete, particularly before a transfer of ownership.
Connection Charges:
Some local utility companies (hydro, gas, oil) charge a fee on closing to connect new buyers up to their service. More normal, however, is an extra charge on the first billing.
Conventional Mortgage:
A mortgage usually amounting to 80% (Loan to Value ratio) or less of the value of the property.
Convertible Mortgage:
This allows you to convert your mortgage to a new one of longer term while it is still in effect.
Credit Report:
A record of an individual’s payment history available at a credit bureau. Individuals can order a copy of their own report by contacting their local bureau.
Default:
Failure to make monthly mortgage payments as agreed, or to meet certain other terms of a mortgage agreement.
Double-Up:
This feature (not offered by all lenders) allows you to double up your mortgage payments anytime without penalty. This feature is often associated with the ability to “skip” an equivalent number of payments. This can be used either to accelerate the pay-off of a mortgage (as it is an enhanced prepayment privilege) or to manage a volatile cash flow. For example, commission-based individuals such as Realtors could “double-up” with each commission cheque, and “skip” during low cash flow periods.
Down Payment:
The amount of cash paid towards the purchase transaction by the buyer of a home. This is also known as the purchaser’s initial “equity” in the property, but is used by a lender to judge the personal commitment to the property. For example, a lender considers that, if a buyer saved the down payment, or received it as a gift from a loved one, they will be far more committed to maintaining the property value and making the mortgage payments than if they acquired it for “no money down”.
Equity:
The difference between the value for which you could sell your property and what is owed against it. There is an important distinction from “down payment” to a lender. For example, if a buyer purchases a home without a down payment, he/ she can have “equity” if the value of the property quickly goes up.
First Mortgage:
Gives the lender a primary lien / charge against your house and property which has precedence over all other mortgages. Priority is determined by the date and time registered, so a first mortgage was literally and legally registered “first”. A new first mortgage can therefore only be registered as a “first” mortgage upon the discharge of an existing one if the holder of a second mortgage “postpones” (i.e., “puts back in time”) to a time immediately following the registration of the new first mortgage.
Five Percent Down Program:
This allows buyers to obtain up to 95% financing on properties up to a certain value. The loan must be insured against default by one of Canada’s default insurance companies.
Genworth Financial Canada:
One of Canada’s private default mortgage insurer. For more details see Mortgage Insurance.
Gross Debt Ratio Service (GDS):
The percentage arrived at by dividing your monthly shelter costs (principal, interest, property taxes, heating and half of condo fees) by your gross monthly income and multiplying by 100. This is used by all lenders as a yardstick by which to measure the ability of a borrower (or borrowers) to make mortgage payments. For example, most lenders require that this ratio be no more than 32% for a particular application, while others allow higher limits. This is also the maximum qualifying GDS for most default insurance applications.
Hedge:
A fairly complex money market instrument the simple purpose of which is essentially to insure a mortgage lender (or borrower, through a protected or split-term mortgage) against interest rate movements. In the lender’s case the price of this insurance will vary depending upon many political and economic factors, but will generally be lower when interest rates and the economy are less volatile. The buyer on the other hand can hedge at no cost, or at a reasonable rate premium by using specifically designed products.
High Ratio Mortgage:
A mortgage which is greater than 80% (Loan To Value ratio) of the value of the property. Normally requires insurance to be paid to protect the lender. (see Mortgage Insurance)
Home Inspection Report:
A report commissioned by a property owner or purchaser, usually to verify the condition of a property prior to the “firming up” of a Real Estate transaction. The scope and detail may vary, but most reports indicate the specific problem and the cost to repair. Unfortunately, no licensing is required, and this service is not specifically regulated other than by general consumer protection legislation. The best safeguard against inadequate work is to ask for the resume of the Inspector, and if possible check references from previous customers.
Interest Rate Differential:
A penalty for early prepayment of all or part of a mortgage outside of its normal prepayment terms. This is usually calculated as “the difference between the existing rate and the rate for the term remaining, multiplied by the principal outstanding and the balance of the term”.Example:
1. $100,000 mortgage at 9% with 24 months remaining.
2. Current 2-year rate is 6.5%.
3. Differential is 2.5% per annum.
4. IRD is $100,000 * 2 years * 2.5% p.a. = $5,000.
Land Transfer Tax (LTT):
A tax payable to the Provincial Government by the purchaser upon the transfer of title from a seller. In Ontario a simple formula applies*:• One half percent (0.5%) on the first $55,000 (minimum $275).
• One percent (1.0%) on the next $195,000 ($55 - 250,000).
• One and a half percent (1.5%) on amounts over $250,000.
Example:
• Price = $370,000: LTT = ($55,000 * 0.5%) + ($195,000 * 1%) + ($120,000 * 1.5%) = $275 + $1,950 + $1,800 = $4,025.
*Please check with your Mortgage Alliance professional as to the rates applicable in your location.
Lien:
This is a claim made against a property for the payment of a debt or obligation related to the property or its owners.
Loan-To-Value Ratio (LTV):
The percentage of the value of the property for which a mortgage is required. This ratio is important in determining whether or not default insurance is required, and if so, what the cost of that insurance will be (see “Mortgage Insurance”) For example, if the property value is $200,000, the down payment available is $20,000 and the required mortgage is $180,000. The LTV is $180,000 / $200,000 or 90%.
Mortgage Broker:
A registered agent who negotiates with lenders on behalf of a borrower to obtain the best overall mortgage for that borrower’s circumstances. Mortgage Brokers arrange financing for “A+” clients as well as financing “non-standard” situations which cannot be funded by a major national lender. This is possible because a Mortgage Broker has access to lenders who do not advertise nationally or operate retail locations.
Mortgage Insurance:
If your down payment is less than 20% of the purchase price of the property, the lender is going to require mortgage insurance. The fee is calculated as a percentage of your mortgage. This is known as default insurance.
Mortgagee:
Also known as the “lender” - the funder and holder of the mortgage.
Multiple Listing Service:
A service of a local Real Estate Board which publishes and exchanges details of properties registered with them. While this used to be for the exclusive use of registered Realtors, it is now possible for a private individual to “list” a property without committing to pay a Realtor a “listing commission” if the property sells. The majority of properties sold in Canada are sold through the local MLS.
Municipal Levies:
Special levies can be charged by municipalities to recover the cost of special services, if these services cannot, for some reason, be funded out of general revenues, or apply primarily to homebuyers. Examples: Water meter installation; road improvements, sewer improvements.
Open Mortgage:
This allows you to pay back the borrowed funds without notice or penalty.
Pith:
Principal, Interest, Taxes, Heating and half of Condo Fees, if applicable. Otherwise known as your “shelter expenses”. This is a basic component of the ratios used to determine whether or not you qualify.
Portable Mortgage:
A mortgage which allows you to transfer the existing amount and terms of your mortgage over to a new property without penalty. The mortgage will, of course, have to be registered on title of the new property, so strictly speaking it is not identical in all respects. While most mortgages have a portability feature, in the event you might need more money when you transfer the mortgage over to the new property, make sure you either have the right to blend in any new funds required, or can arrange the additional funds separately.
Prepayment Penalty:
If your mortgage is not fully open, you may be charged a penalty if you want to pay off all or part of your mortgage before the end of the fixed term. The normal prepayment penalty is the greater of three months’ interest or the Interest Rate Differential (IRD) on the amount to be prepaid.
Prepayment Privilege:
The right to repay periodically more than the scheduled principal payment.
Principal:
The amount of money owing on your mortgage, including accrued unpaid interest.
Refinance:
Obtaining a new mortgage on an existing property. You might be looking for more money, a better rate, or different prepayment terms.
Registration Fees:
Fees paid to the provincial government for recording a title transfer, mortgage registration or other instrument such as an Assignment or Lien with the local authorities.
Simple Interest:
Interest which is computed only on the principal balance. It is not compounded by calculating interest payable on accrued interest.
Survey:
The legal written and/ or mapped description of the location and dimensions of your land. The survey should also show the dimensions and placement on the lot of any structure, including additions such as pools, sheds and fences. An up-to-date survey is often required by a lender as part of the mortgage transaction. Lenders might allow the title insurance in lieu of a survey.
Switch:
This is the term almost universally applied to changing lenders at the end of a term, when the mortgage matures.
Tax Certificate:
At the time of a sale, the lawyer for the buyer must confirm that local taxes have been paid up to date. If they are, a Tax Certificate is issued, from which any adjustments can be made - usually requiring the buyer to compensate the seller for any prepaid taxes. If they are not up to date, the municipality requires that the seller pay them off from the proceeds of the sale. If there are insufficient proceeds, then it may fall upon the buyer to pay them.
Title Insurance:
Insurance offered by Title Companies to protect a landowner, and thus the mortgage lender against any “clouds” or legal questions on the title to the real estate, or of legal priority of the mortgagee. This is usually considerably less expensive than the labor-intensive and liability-fraught process of having to have a lawyer search title, and certify it as “clear” -- a process known as “certifying title” or giving an “opinion of title.”
Total Debt Service Ratio (TDS):
The percentage arrived at by dividing your monthly shelter costs (principal, interest, property taxes, heating and half of condo fees) PLUS all other monthly debt obligations by your gross monthly income and multiplying by 100. This is used by all lenders as the “upper limit” yardstick by which to measure the ability of a borrower (or borrowers) to make mortgage payments. For example, most lenders require that this ratio be no more than 40%.
Undertaking:
This is a promise by a Lawyer to ensure that certain conditions (usually of the lender) are met (usually after closing, due to time constraints). The best example is the undertaking to register a discharge of an old first mortgage after the new one has been registered, because there is simply not enough time to do so at closing. It also governs such closing dynamics as releasing funds before a new mortgage document is officially registered.
Underwriting:
The process of deciding whether or not to lend you money (or how much to lend you) based on all the information you have given the lender. Every lender has a different underwriting process and lending criteria which differ to some (usually small) extent from other lenders.
Variable Rate Mortgage:
The interest rate fluctuates with the prime rate at the chartered banks.
Verification of Employment:
The lender will sometimes contact an applicant’s employer in order to verify information provided in a mortgage application or a job letter; your income structure, length of employment, position, and so on.
Work Orders:
Municipal by-laws (“zoning” by-laws) require among other things that residential property be maintained in a safe and habitable condition, and that a property’s use conform to specific requirements (no illegal basement apartments, satellite antenna, etc.).