21.3 C
London
HomeGeneralSmall mortgage glossary: ​​the vocabulary you need to know to buy a...

Small mortgage glossary: ​​the vocabulary you need to know to buy a house

Deed of sale

The deed of sale also called the title deed, is the official and notarized document that proves that the property has been sold and changed by the owner(s). It contains the date and the sale price and any other element on which the seller and the buyer have agreed.

It confirms that the said house is indeed the buyer’s property, that he has taken possession of it. When he bought, the seller’s deed proves that he was indeed the owner.

The insurance

Disability or critical illness insurance for loans or mortgage lines

In an accident or covered illness resulting in disability, mortgage disability insurance protects you by reimbursing your loan or line of mortgage payments after the elimination period (the period when the application is made but during which you receive nothing). Depending on the insurer, the duration of the waiting period can be determined or left to the insured’s choice when the time comes to contract it. Financial institutions and personal insurance representatives distribute this type of insurance. The reimbursement varies according to the amount chosen at the start.

Mortgage Critical Illness Insurance provides full or partial repayment of your loan balance or mortgage line if you are diagnosed with a covered critical illness. The reimbursement also varies according to the amount chosen at the start.

Note that you must take out life insurance with some financial institutions to obtain disability or critical illness insurance for mortgage loans.

Mortgage life insurance

This is insurance aimed at repaying the mortgage loan balance in the event of the borrower’s death (s). Thus, the beneficiaries end up with debt-free property.

Several financial institutions and personal insurance representatives distribute this type of insurance.

The insurance premium is deducted from the mortgage loan payments.

CMHC-style mortgage insurance

This is insurance that the Bank must subscribe to if you do not have a down payment equivalent to at least 20% of the property’s purchase price. It is generally offered by Canada Mortgage and Housing Corporation (CMHC) or Sagen. You must pay the premium for this insurance or add it to the amount of your mortgage. Insurance is used to protect the lender in the event of default by the borrower (also called insurance in the event of default of payment).

depreciation

This is the time needed to pay off your mortgage in full. If your loan must be insured (with mortgage loan insurance), the maximum period for it to be certified by CMHC or Sagen is 25 years and increases to 30 years for an uninsured loan, known as “conventional.”

See the mortgage loan insurance definition for more details on the insured loan.

Mortgage pre-authorization certificate

To know your borrowing capacity and prove it to the property seller, you can request a mortgage pre-authorization certificate from a financial institution. This document does not guarantee that you will get the loan, but it indicates the maximum amount you could borrow, depending on whether the loan is insured.

Co-borrower

This means the other person or entity responsible for the mortgage loan with you, who also borrows from the mortgagee (the “lender”). Remember that even if you have a co-borrower, the responsibility for payments rests with the two people. If the other does not pay their fair share, you will have to do it for them.

Divided or undivided co-ownership

A “divided” co-ownership means that each unit is independent of the others and has its cadastral number (the plan of a lot registered in a register listing the state of land ownership). As a general rule, this is a condominium that exists in buildings with many apartments.

In contrast, undivided co-ownership is a form of joint ownership, where there is only one cadastre number. This is the form of ownership chosen, for example, by the owners of a duplex who decide to convert it into a condominium. However, several people can own the entire property and occupy specific units according to the conditions determined in an agreement between them.

These two condominiums each have their particularities and meet different needs. To buy a divided co-ownership, you must have a minimum down payment of 5%. To purchase an undivided co-ownership, you must have a minimum down payment of 20%.

Note that financing in an undivided property must come from the same financial institution.

Mortgage creditor

This entity, such as a financial institution, lends you the money to buy your property. This is the “lender.”

Closing Date

It’s the day the real estate transaction is official! The papers are signed, and the money is in the seller’s hands.

Due date

This is the last day of your term in your mortgage contract. If it has not been done, your contract must be renewed (with new words: type of loan, rate, etc.) unless you have finished paying your mortgage loan.

See the mortgage renewal definition for more information.

Default of payment

If you don’t make your mortgage payments as stipulated in the contract, you will be in default. If this happens to you, contact your mortgagee (the lender), and agree with him.

Property transfer tax (“welcome” tax)

The tax that the buyer of a property will have to pay to the municipality at the acquisition time. The amount of this tax varies depending on where the property is located and the price.

Prepayment charge

This is what you have to pay the lender if you prepay more than what is allowed to be delivered free of charge under the terms of your mortgage agreement.

Start-up costs

All the fees you will have to pay to acquire your property and your down payment. For example, you will have to pay the notary (expenses that go to the buyer), property transfer taxes (the famous “welcome tax”), and moving costs.

There may also be municipal and school taxes to adjust, depending on when you take possession of the property. Take control of the property in September, for example. You will probably have to reimburse the previous owner for the taxes he has already paid for the remaining period before the year’s end.

Don’t forget to also plan for the recurring annual fees that come with purchasing a property.

Rate guarantee

When the lender guarantees (or reserves) your interest rate when you apply for financing to protect you if it should increase before signing the mortgage loan agreement, as a general rule, this guarantee is effective from 30 to 120 days.

Mortgage interest rates

The mortgage interest rate is what your loan costs you. It may vary from one financial institution to another. This rate serves to calculate the amount you will pay in interest.

There are two main categories:

The fixed-rate

This is the rate established for the duration of the chosen term and which does not vary according to market fluctuations. In other words, the borrower pays the same interest rate for the entire loan period. The payment will therefore be the same for the term.

Variable-rate

Unlike the fixed rate, the variable interest rate can vary during the term because it fluctuates according to the financial institution’s base rate (or the prime rate), itself influenced by the Bank’s key rate. from Canada.

Interest and capital

A mortgage payment is made up of two things: one part is used to pay the interest, and the other is used to repay the principal.

The principal is the amount of the mortgage loan. Interest is part of the cost of borrowing.

Home equity line of credit

A home equity line of credit is a financing product secured by your property. It makes it possible to obtain cash with an often advantageous interest rate.

To finance the purchase of your property with a margin, you must have a down payment of at least 20% of its value. If your down payment is less than 35%, an advance in a mortgage loan must be drawn from your line of credit to benefit from this type of financing.

The down payment

In English, the down payment, or “cash down,” is the portion of the purchase price that the buyer must pay himself to obtain a property. For a property of $500,000 or less, the amount must correspond to a minimum of 5% of the property’s purchase price if the loan must be insured by mortgage loan insurance and 20% in the case of an uninsured loan. Note that the rules differ when the cost of the desired property is more than $500,000, or depending on the type of property you are buying, for example, if it is a rental property.

This is the minimum amount of money you should accumulate before thinking about a housewarming. This down payment can come from personal savings, for example, and from your RRSP through the Home Buyers’ Plan (HBP).

Bid

The document contains the price and terms that a potential buyer offers to the seller of a property. The seller can accept it, reject it, or negotiate it. Often, this document is presented by the buyer’s real estate broker, if there is one.

Mortgage

A mortgage loan is a loan used to finance the purchase of a property by individuals or businesses.

Unless paying for a property in cash, most buyers will have to take out a mortgage loan from a financial institution. The borrower must repay his loan according to a predetermined schedule.

latest articles

explore more

LEAVE A REPLY

Please enter your comment!
Please enter your name here