Mrs. Money Baggs (TM): Mortgage Glossary

Mortgages By Nik   |  

Every industry has its own language and terms. These words and phrases can be confusing to anyone who is not part of a specific industry’s daily operations, and the mortgage business is no exception.

To help you understand the terms, acronyms, and phrases regularly used when purchasing a home, Mortgages by Nik has created this unique reference guide. Here you’ll find valuable information along with easy to understand examples allowing you to comprehend and communicate your property needs effectively.

Owner-occupied: A house or apartment used as a dwelling by the owner. 

Equity: Equity is ownership of assets that may have debts or other liabilities attached to them. Equity is measured for accounting purposes by subtracting liabilities from the value of an asset.

i.e.:

 👉🏾Property Value $500,000

 👉🏾Mortgage on property $200,000

 👉🏾Equity value $300,000

Mrs. Money Baggs™️ Mortgage Glossary 💎 

Land Transfer Tax: When you buy land or an interest in land in Ontario, you pay Ontario’s land transfer tax. Land includes, but is not limited to, any buildings, buildings to get constructed, and fixtures (such as light fixtures, built-in appliances, and cabinetry). Besides, certain land transfers within the Greater Golden Horseshoe Region, a 15% Non-Resident Speculation Tax (N.R.S.T.) may apply.

If you are a first-time homebuyer, you may be eligible for a refund of all or part of the land transfer tax.

If you are buying land in Toronto and paying the provincial land transfer tax, you will also be subject to Toronto’s Land Transfer Tax.

Mrs. Money Baggs™️ Mortgage Glossary 💎 

2nd Mortgage: A second mortgage is a loan you take out against a home that already has a mortgage.

With a second mortgage, you borrow your equity to make investments, pay off other debts, complete home improvement projects or buy something you couldn’t otherwise afford. But it’s debt. You must pay it back.

With most second mortgages, you can make as little as interest only payments, which can help with cash flow.

Mrs. Money Baggs™️ Mortgage Glossary 💎 

H.E.L.O.C.: A home equity line of credit (HELOC) is a line of credit secured by your home that gives you a revolving credit line to use for investments, large expenses, or to consolidate higher-interest rate debt on other loans such as credit cards.

Mrs. Money Baggs™️ Mortgage Glossary 💎 

Mortgage default insurance: It’s mandatory if you’re buying a home in Canada with a down payment of less than 20% from a federally regulated lender.

The minimum down payment requirement for mortgage loan insurance depends on the purchase price of the home. 

For a purchase price of $500,000 or less, the minimum down payment is 5%. When the purchase price is above $500,000, the minimum down payment is 5% for the first $500,000 and 10% for the remaining portion.

There are three default insurance providers in Canada: the Canadian Mortgage and Housing Corporation (C.M.H.C.), Sagen (formerly Genworth Canada), and Canada Guaranty.

Mrs. Money Baggs™️ Mortgage Glossary 💎 

Mortgage Protection Insurance: It’s an insurance policy that pays off your mortgage if you die prematurely. Usually, the mortgage company is the beneficiary.

Mortgage protection is not the same as home insurance or mortgage default insurance.

While we are not licensed insurance advisors, we have a fiduciary responsibility to discuss mortgage protection with clients as mortgage agents.

Mrs. Money Baggs™️ Mortgage Glossary 💎 

The loan-to-value (L.T.V.) ratio: It’s a financial term used by lenders to express a loan’s ratio to the value of an asset purchased.

i.e.:

 👉🏾Purchase Price $500,000

 👉🏾Downpayment $125,000

 👉🏾Total Loan $375,000⠀⠀⠀⠀⠀

 $375,000/$500,000 = 0.75 x 100 👉🏾 75% LTV

Mrs. Money Baggs™️ Mortgage Glossary 💎

 Refinance: Most people will seek to refinance their mortgage for the following reasons:

 👉🏾 Lower their interest rate

 👉🏾 To tap into home equity

 👉🏾 To raise funds to deal with a financial emergency

 👉🏾 Finance a large purchase

 👉🏾 To consolidate debt.

Mrs. Money Baggs™️ Mortgage Glossary 💎 

Pre-Approval: A pre-approval is when a mortgage lender looks at your finances to determine the maximum amount they will lend you and at what interest rate.

With a pre-approval, you can:

💰know the maximum amount of a mortgage you could qualify for

💰estimate your mortgage payments

💰lock in an interest rate for 60 to 120 days (depending on the lender) 

G.D.S.: The gross debt service (G.D.S.) ratio is a debt service measure that financial lenders use to assess the proportion of housing debt that a borrower is paying in comparison to their income 

T.D.S.: The term total debt service (T.D.S.) ratio refers to a debt service measurement that financial lenders use when determining the proportion of gross income that gets already spent on housing-related and other similar payments 

Amortization: The amortization period is the length of time it would take to pay off a mortgage in full, based on regular payments at a specific interest rate. An extended amortization period means you will pay more interest than if you got the same loan with a shorter amortization period.

Fixed-Rate: The term “fixed-rate mortgage” refers to a home loan with a fixed interest rate for the entire duration of the loan. It means the mortgage carries a constant interest rate from beginning to end. 

Mortgage Term: The mortgage term is the length of time the mortgage agreement at your agreed interest rate is in effect. 

If you’re looking for assistance to secure a mortgage, reach out to the experts at Mortgages by Nik. We combine our experience and passion to create customized solutions.

Our services include mortgage renewals, mortgage pre-approvals, mortgage refinancing, home equity/renovation loans, reverse mortgages, and first time home buyer mortgages. We also offer debt consolidation for clients.

We serve clients across Pickering, Ajax, Oshawa, Bowmanville, Whitby, Scarborough, and Toronto.

You can view our full list of services here, or get in touch with us here. 

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