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  Victoria, British Columbia
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Mortgage Definitions

The mortgage industry seems to come with its own set of buzzwords, phrases and language.  Here are some common terms you will hear when discussing a mortgage but feel free to let The Mortgage Centre - Island Properties help you sort your way through the mortgage maze.

Amortization
The period of time it takes to pay off your mortgage in full.

Appraisal
The market value of property, usually determined by a professional appraiser.

Assumable
If a mortgage is assumable, a buyer may take over the seller's existing mortgage. Approval must be obtained from the lender prior to the assumption.

Blended Payment:
Mortgage payments that include both interest and principal repayment. The payment remains constant while the amount of interest taken from each payment reduces, and the amount applied to principal increases with each payment.

Commitment letter
Written notification from the lender to the borrower that approves the mortgage request and should state the amount of the mortgage, interest rate, payment and all terms and conditions.

Completion Date
Date the purchase will complete (money will be advanced by the lender).

Gross Debt Service Ratio (GDS)
The percentage of your gross income divided by the total amount of your mortgage payments including principal, interest and taxes. The industry standard is a maximum of 35% however some exceptions may apply.

Interest Adjustment Date
Date when the lender starts collecting interest. The lender will collect an "interest adjustment" which is a calculation of interest from the completion date to the interest adjustment date. Your regular payments will commence one payment period after this date. For example, if you have chosen to make bi-weekly payments, your first payment will come due two weeks after the interest adjustment date.

Loan to Value Ratio
The amount of the mortgage expressed as a percentage of the value of the home. For example, if you wish to borrow $175,000 on a home you are buying for $250,000, the Loan to Value Ratio is 70%. If your LTVR exceeds 80%, you will probably have to insure the mortgage against default.

Maturity Date
Date the mortgage must be paid in full (end of term). You may pay the mortgage out in full, renegotiate with your existing lender or transfer the mortgage to another lender. Contact Terry to discuss your best options.

Mortgage
A mortgage is actually a charge registered in the Land Titles Office and provides evidence that you have given your home as collateral to a lender to secure a loan.

Mortgagor
The borrowor(s) who obtain(s) a loan secured by a mortgage.

Mortgage Term
The interest rate is set for a pre-determined period or term, i.e., 1 - 10 years. At the end of the term this mortgage rate will expire & the mortgage will come up for renewal. at this time the interest rate is re-negotiated.

Net Worth
The difference between what you own (assets) and what you owe (liabilities) is called your Net Worth.

Portable Mortgage
A portable mortgage is a mortgage that can be transferred from one property to another, usually with qualification. This is particularly useful if you sell one home and buy another.

Pre-Payment Penalty
A closed mortgage usually cannot be paid off before the maturity date without paying a pre-payment penalty. The calculation of the penalty amount can be complex and should be discussed in detail with Terry Martin. Some mortgages cannot be paid off before the Maturity Date and should be avoided if possible (See Locked-in Mortgages).

Prepayment Privileges
When you negotiate a closed mortgage, you are entering into an agreement with the lender that you will not pay off the mortgage during the term. In return the lender agrees to maintain the same interest rate throughout the term. However, most mortgages allow certain prepayment privileges, such as an annual prepayment of a certain percentage of the mortgage amount or an annual increase in the mortgage payment.

Principal
The amount of money actually borrowed.

Survey Certificate
Certificate showing the home and other buildings in relationship with the property boundaries.

Total Debt Service Ratio
The percentage of your gross annual income divided by the total amount of your mortgage payments, including principal, interest, and taxes, PLUS the total amount paid to service all other debts including credit cards, loans, lines of credit, etc. The industry standard is a maximum of 42%, however, some exceptions may apply.
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