Amortization

The length of time over which your mortgage is financed.  This may be anywhere up to 40 years, with 25 years being the traditional amortization.  Note that amortization is different than “term” which is the length of your agreement with the lender.

Appraisal

The process of determining the value of property, usually for lending purposes. This value may or may not be the same as the purchase price of the home.  A qualified appraiser physically inspects the property making note of condition, special features and then assesses the value including assessment of comparable properties.

Assumable

This means that your mortgage MAY be taken over by another party if, for example, you sold your house and the buyer wanted to take over your mortgage payments.  This may be of an advantage to a buyer if the rate on your mortgage is lower than current rates.  Even though the mortgage is assumable, the borrower MUST qualify to the satisfaction of the lender.

Blend and Extend

Taking your existing mortgage and adding to the term and combining the old and new rate into a blended rate on a weighted basis.  It can be a good way of avoiding prepayment penalties if you are moving and increasing the size of your mortgage.

CMHC

Canada Mortgage and Housing Corporation (CMHC) operates a Mortgage Insurance Fund which protects approved lenders from losses resulting from borrower default.  CMHC insurance can insure for loans where the mortgage amount is greater than 80% of the value of the property, and insures for a variety of other specialty lending situations.  A premium is charged for the insurance.  www.cmhc.ca

Co-Signer

A co-signer for a mortgage is technically a co-applicant, and the terms can be used interchangeably.  To be a co-signer on a mortgage, you have to add all your information to the mortgage application and your income, liabilities and credit strength factor into the mortgage approval process. You also have to be on the title of the property being mortgaged as a legal owner (though your percentage of ownership can be as little as 1%).

The advantage of being a co-signer is that you have legal rights to the property and your name is on the mortgage contract. You can therefore request information from the mortgage lender at your discretion, and the property cannot be sold without your permission.

The disadvantage to being a co-signer is that the mortgage debt and monthly payments count against you if you later are applying for any other borrowing (purchasing other properties, vehicle loans, etc). There are also tax implications to consider: for example, when the property is sold there can be capital gains taxes payable on the appreciation in value (based on your percentage of ownership), since you as a co-signer it is typically not your primary residence.

Being a co-signer is sometimes compared against being a guarantor on a mortgage, which is a less secure position. See Guarantor for more information.

Commitment

A mortgage commitment is a document where the lender agrees to lend the borrow money under a set of specified conditions.  The conditions usually include things like receiving income verification (employment letter, pay stubs, tax information), appraisal, copies of MLS listing, proof of down payment etc.

Conventional Mortgage

A mortgage where the mortgage amount is greater than 80% of the property value and generally requires insurance by CMHC, Genworth or Canada Guarantee.