A type of financing arrangement in which the outstanding mortgage
and its terms can be transferred from the current owner to
a buyer. By assuming the previous owner's remaining debt,
the buyer can avoid having to obtain his or her own mortgage.
Canadian Mortgage and Housing Corporation - CMHC
A division of the Government of Canada that acts as Canada's
national housing agency. The CMHC's mandate is to help Canadians
access a variety of affordable housing options. It also researches
housing and real estate trends in Canada and around the world,
providing research to consumers, businesses and other government
divisions. The major activity of the CMHC, and the one for
which it is best known, is mortgage loan insurance, which
insures approved lenders (such as Canada's chartered banks)
against borrower default. Mortgage loan insurance provides
approved borrowers access to low-cost mortgage rates. CMHC
approved buyers may purchase property with as little as 5%
down payment.
Collateral
Properties or assets that are offered to secure a loan or
other credit. Collateral becomes subject to seizure on default.
Conventional Mortgage
A mortgage that does not exceed 75% of the purchase price
of the home. Mortgages that exceed this limit must be insured
against default, and are referred to as high-ratio mortgages.
Dept To Income Ration
A ratio that indicates what portion of a person's monthly
income goes toward paying debts. It is calculated as an individual's
total monthly debt, divided by gross monthly income and expressed
as a percentage. Total monthly debt includes such expenses
as mortgage payments (made up of PITI), credit-card payments,
child support and other loan payments. Lenders use this ratio
in conjunction with the front-end ratio to approve mortgages.
High Ratio Mortgage
If you don't have 25% of the lesser of the purchase price
or appraised value of the property, your mortgage must be
insured against payment default by a Mortgage Insurer, such
as CMHC.
Front-End Ratio
A ratio that indicates what portion of an individual's income
is used to make mortgage payments. It is calculated as an
individual's monthly housing expenses, divided by his or her
monthly gross income, and then expressed as a percentage.
Monthly housing expenses include the mortgage principal, interest,
taxes and insurance payments - collectively known as PITI.
Monthly gross income is simply annual income divided by 12
(months). Lenders use the front-end ratio in conjunction with
the back-end ratio to approve mortgages.
Interest Rate Ceiling
The absolute maximum rate of interest that a financial institution
can charge for an adjustable rate mortgage or loan.
Mortgage
A debt instrument, secured by the collateral of specified
real estate property, that the borrower is obliged to pay
back with a predetermined set of payments. Mortgages are used
by individuals and businesses wishing to make large value
purchases of real estate without paying the entire value of
the purchase up front.
Mortgages are also known as liens against property, or claims
on property.
Mortgage Banker
A company, individual or institution that originates, sells
and services mortgage loans.
Mortgage Broker
The matchmaker between a homebuyer and a lender whose goal
is to originate a mortgage loan. The broker draws from a pool
of various lenders to find the right match.
Mortgagee
An entity that lends money to a borrower for the purpose of
purchasing a piece of real property. By accepting a mortgage
on the real property, the lender creates security in the full
repayment of the loan in the future.
Mortgagor
An individual or company who borrows money to purchase a
piece of real property. By granting the lender an interest
in the property, which allows it to lend the funds with
an accurate assessment of risk, the mortgagor provides the
lender with a guarantee for the full repayment of the loan.
Also known as a "chargor".
