Mortgage Terminology

Mortgage Terminology

Article by Jackson Cunningham


Amortization: The number of years needed to fully repay a loan. Most mortgages are amortized over 25 years. This means that by making set monthly payments – each a blend of interest costs and repayment of the original principal – you’ll have paid back the original amount and all the interest in 25 years. You can however choose different amortization periods. A shorter amortization, 15 or 20 years for example, will mean higher monthly payments, but a significantly lower interest cost. Do not confuse amortization with term.



Assessment: Appraisal, usually for real property taxation purposes.



Balance Sheet: A financial statement listing Assets, Liabilities, and Owner’s Equity at a specific point in time. Also known as a Statement of Financial Position or Statement of Assets and Liabilities.


Brokerage Fee: Fee charged by a mortgage broker for arranging a loan. Builders Lien: A claim registered against the title to land by a contractor, Supplier of materials or workman f with respect to work done or materials supplied to improve that land.


CCA: Abbreviation of Capital Cost Allowance.



Completion Date: Date on which the purchase’s solicitor undertakes to the vender that he will pay the balance owing to the vender upon the transfer of title being accepted for registration.



Condition Precedent: Legal term for a “subject to” clause. In contract law, a condition precedent calls for the happening of some event or the performance of some act the contract shall be binding upon the parties.








Credit Analysis: An investigation of a loan applicant’s ability to repay.


Current Assets: Those assets which will be converted into cash, sold, or consumed within one year or the f normal operating cycle of a business, whichever is longer, Current Assets may include Cash, Marketable Securities, Accounts Receivable, Investments, and prepaid expenses.



Easement: A limited right of use of another’s land by a landowner for the benefit of his land. The land receiving the benefit is called the dominant tenement and the land granting the benefit is called the servient tenement.






Foreclosure: A legal action taken by a mortgagee to obtain possession of a property, by reason of the mortgagor’s default in payment of the principal and or interest of the mortgage debt.


Gross Debt: The percentage of gross income which is the maximum a mortgagor is allowed to pay annually in principal, interest, and property taxes. For example a borrower may pay 0 out of 00.00 gross income as P.I.T. payments. This ratio is usually expressed as a percentage ie P.I.T. payment can be 27% of gross income. Compare to Loan to Value Ratio.






Joint Tenancy: Where two or more persons acquire an equal undivided interest on a property. When one person dies, that person’s share automatically goes to the survivor or survivors.


Lender Value: The estimated value of a property for lending purposes. It is a long-term conservative estimate of the value of the security as determined by the lender and therefore, does not necessarily equal Market Value or Sale Price.

Liability: Monies owed by business. Contrast to Asset .

License: With respect to real property, a privilege to enter onto premises for a certain purpose. However, this privilege does not confer upon the licensee any title interest or estate in such property (e.g., exclusive right to possession of the property). Example of a license include a hotel suite where monthly rates may be available but the innkeeper has the right to enter the suite at his pleasure.



Mortgage: A document evidencing a debt owed by the borrower (mortgagor) to the lender (mortgagee). Registration of the mortgage in the Land Title Office transfers the mortgagor’s interest in land to the mortgagee as security for the repayment of the debt.

Mortgagee: The lender.

Mortgagor: The Borrower.




Nominal Rate: An interest rate quoted as a rate per annum; it is equal to the interest Of Interest rate per compounding period multiplied by the number of compounding periods.(For example, j2 = 10%; j4=12%; j12=11.5%). Offer: A proposal to so or refrain from doing some specified thing usually followed by an expected acceptance, counter-offer, return promise or act. The person who makes the offer is called the offeror. The recipient of the offer is called the offeree.



Power of Attorney: A document conferring authority to one person to act as another’s agent on his behalf.






Sub-Mortgage Broker: A defined term in the Mortgage Broker Act. Basically, An individual employed by the mortgage broker who satisfies any one of the following requirements: 1. Carries on a business of lending money secured in whole or in part of mortgages, whether the money is his own or that of another person. 2. Holds himself out as, or by an advertisement, notice or sign indicates that he is, a mortgage broker 3. Carries on a business of buying and selling mortgages or agreements of sale. 4. In any one year, receives an amount of 00.00 or more in fees or other consideration, excluding legal fees for arranging mortgages fro other persons. 5. During any one year, lends money on the security of 10 or more mortgages.

Tax Rate: The number of dollars pre 00.00 worth of actual value which is payable in property taxes Tenants Agreement: Contract between the landlord and the tenant, pertaining to the letting of residential premises.




Transaction Record Sheet: A form, prescribed by the Superintendent of Real Estate, which contains certain required information on each transaction, including every transaction where a Deposit is received and paid into the real estate agent’s trust account.



Vendor Take-Back Mortgage: A mortgage taken back by the vendor from the purchaser to facilitate a sale whereby the vendor becomes the mortgagee and the purchaser becomes mortgagor.

Yield: The income and/or value appreciation of an investment expressed in terms of the purchase price of that investment. For example, if a property that has sold for 0,000 is worth 00.00 more one year later and has generated an income of 00.00 during the year, the yield to the investor is (00 + f 00.00) 0,000 = .07 or 7%

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