Amortization: the process of paying off a loan by periodic payments of blended principal and interest
Amortization period: the length of time it takes to fully pay off a loan, given the required periodic payments
Annual Percentage Rate (APR): the contractual interest rate PLUS any non-interest finance charges
Appraisal: the estimated value of a legal interest in land
Borrower Qualification: the process of determining the maximum amount that can be lent to a potential borrower given their income and the Lending Value of the property purchased
Brokerage Fee: a fee charged by a mortgage broker for arranging a loan, common in alternate lending options
Closed Mortgage: a mortgage which cannot be fully paid out before expiry of its terms
Compound Interest: Interest which, during the life of the loan, is charged or calculated at regular intervals and if not immediately paid (as in an interest only loan) will, in subsequent periods, earn interest itself
Compounding frequency: indicates the number of times compound interest is charged or calculated per year (for example, semi-annually or monthly)
Credit Analysis: an investigation of a loan applicant’s ability to repay
Credit Report: a record identifying an applicant’s habitats regarding his or her financial commitments
Debt Service: the making of a mortgage payment by the borrower, as arranged by the lender
Early Renewal: renewing a mortgage early, before the end of its term
Face Value: the amount of money the borrower promises to repay (at the contract rate of interest)
Face Value of a Loan: the loan amount which must be repaid at a stated rate of interest according to the contract terms
Financial Statement: A numerical presentation of particular aspects of a business. Common financial statements include the Balance Sheet and Income Statement.
Fully Amortized Mortgage: Loan which is repaid completely by the series of payments over the full duration of the amortization period
Gross Debt Service Ratio: the percentage of gross income which is the maximum amount a borrower is allowed to pay annually in principle, interest and property taxes.
Gross Income: The amount earned through employment or investment before taking taxes or other deductions into consideration. This amount may or may not be the same as gross income for purposes of mortgage lending.
Insurable Value: the estimated value of property for insurance purposes.
Insured Mortgage: a mortgage whereby an insurance company guarantees that the lender can recover all of the funds loaned in case of default.
Interest: the dollar value which represents the cost of borrowing or the benefit of lending money.
Interest-Only Loan: a loan which is serviced by interest-only payments. At the end of the term the full principle plus interest for the last payment period of the loan is still owing.
Interest Rate: The percentage rate that represents the cost of borrowing or the benefit of lending money.
Lending Value: the estimated value of 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 Sales Price.
Loan-to-Value Ratio: the percentage of lending value which determines the maximum loan available to a borrower.
Market Value (of a property): in appraisal, the expected or forecasted sales price.
Maturity: The date on which the balancing owing on a mortgage becomes due; the final day of the term of a mortgage.
Monoline Lender: A mortgage loan company that only focuses on mortgage loans.
Mortgagee: the lender.
Mortgagor: the borrower.
Net Proceeds: The face value of a loan less all brokerage fees, appraisal costs and other charges.
Open Mortgage: a mortgage loan in which a borrower is allowed to prepay a portion of their mortgage or the entire amount at any time (with a small administrative fee).
Portable Mortgage: a borrower can transfer the terms, conditions and interest rate of their current mortgage to the home the borrower would like to purchase.
Prepayment: the act of fully or partially paying off the outstanding balance of a loan at any point during the term of the loan at a time earlier than set out in the contract.
Principal: That portion of the original amount borrowed which still has to be paid back to the lender.
Sale Price: Value in exchange; the price obtained in an actual transaction.
Stress-Testing: The sensitivity analysis of how a person will be able to manage certain variances.
Term: With respect to mortgages, a time period at the end of which the outstanding balance of a mortgage is due and payable; it represents the duration of the mortgage contract.
Total Debt Service Ratio: The percentage of gross income which is the maximum amount that a mortgagor is allowed to pay annually in principal, interest and property taxes on all debts.
Variable Rate Mortgage: A loan being repaid by payments which change as the market interest rate changes.
Vendor Take-Back Mortgage: A mortgage taken back by the seller from the buyer to facilitate a sale, whereby the seller becomes the mortgagee and the buyer becomes the mortgagor.
