Seller's Guide
Your Home's Value
Glossary of Terms
Renovating for Resale
Elements of an Offer

To make it easier to understand the process of buying a home, we've put together of list of common mortgage and home-buying terms.

If you still have questions, we're here to help you. Just call an HLC Mortgage Specialist, who will be happy to help you 24 hours a day.

The number of years that you take to fully pay off your mortgage (not the same as your mortgage term). Amortization periods are often 15, 20, or 25 years long.

The process of determining the lending value of a property. There is usually a fee to have an appraisal done.

Assuming a Mortgage
Taking over the obligations of the previous owner's (or builder's) mortgage when you buy a property.

CMHC - Canada Mortgage and Housing Corporation
A Crown corporation that administers the National Housing Act for the federal government and encourages the improvement of housing and living conditions for all Canadians. CMHC is one potential source of mortgage insurance for high-ratio mortgages.

Capped Rate
An interest rate with a pre-determined ceiling - usually associated with a variable-rate mortgage.

Closed Mortgage
A mortgage which has a fixed interest rate (usually lower than an open mortgage rate) and a set, unchangeable term. You cannot pay off a closed mortgage before the agreed end date without paying a penalty.

Closing Costs
Costs that are in addition to the purchase price of a property and which are payable on the closing date. Examples include legal fees, land transfer taxes, and disbursements.

Closing Date
The date on which the sale of a property becomes final and the buyer takes possession of the property.

Convertible Mortgage
A mortgage that you can change from short-term to long-term, depending on your financial needs.

Down Payment
The money that you pay up front for a house. Down payments typically range from 10%-25% of the total value of the home.

GEMI - GE Capital Mortgage Insurance Company of Canada
A private mortgage insurance company. One potential source of mortgage insurance for high-ratio mortgages.

High-Ratio Mortgage
The mortgage you obtain when you have less than 25% of the total purchase price to put down as your down payment. This type of mortgage must be insured (through sources such as CMHC or GEMI).

Home Insurance
Insurance to cover both your home and its contents in the event of fire, theft, vandalism etc. (also referred to as property insurance). This is different from mortgage life insurance, which pays the outstanding balance of your mortgage in full if you die.

The process of having a qualified home inspector identify potential repairs to the property you are interested in and their estimated cost.

Interest Adjustment
This is the amount of interest due between the date your mortgage starts and the date the first mortgage payment is calculated from. Sometimes there is a gap between the closing date of your home purchase and the first payment date of your mortgage. Let's say that the closing date on your new house is August 10 th - but your mortgage payments are on the 15 th of each month (so your first payment is calculated from August 15 th and paid on September 15 th ). That leaves four days (August 10 th to 14 th ) that are not accounted for in your first mortgage payment. Interest adjustment is the extra payment that makes up for these four days; the payment is generally due on your closing date. You can avoid all this by arranging to make your first mortgage payment exactly one payment period (e.g., one month) after your closing date.

Land Transfer Tax
A tax that is levied (in some provinces) on any property that changes hands.

Legal Fees and Disbursements
Some of the legal costs associated with the sale or purchase of a property. It's in your best interest to engage the services of a real estate lawyer (or a notary in Quebec).

Lump Sum Payment
An extra payment that you make to reduce the amount of your mortgage. This is the same as pre-paying, which you cannot do if you have a closed mortgage.

A loan that you take out in order to buy property. The collateral is the property itself.

Mortgage Life Insurance
This form of insurance pays the outstanding balance of your mortgage in full if you die. This is different from home or property insurance, which insures your home and its contents.

Mortgage Rate
The percentage interest that you pay on top of the loan principal. For example, you may take out a mortgage of $100,000 at a rate of 12%. Your monthly payments will consist of a portion of the original $100,000, plus 12% interest.

Moving Expenses
The cost of hiring packers, movers or renting a van.

Offer To Purchase
A legally binding agreement between you and the person who owns the house you want to buy. It includes the price you are offering, what you expect to be included with the house, and the financial conditions of sale (your financing arrangements, the closing date, etc.).

Open Mortgage
A mortgage which you can pay off, renew or refinance at any time. The interest rate for an open mortgage is usually higher than a closed mortgage rate.

Transferring an existing mortgage from one home to a new home when you move. This is known as a "portable" mortgage.

Pre-Approved Mortgage Certificate
A written agreement stating that you will get a mortgage for a set amount of money at a set interest rate. Getting a pre-approved mortgage allows you to shop for a home without worrying how you'll pay for it.

Prepaid Property Tax and Utility Adjustments
The amount you will owe if the person selling you the home has prepaid any property taxes or utility bills. The amount to reimburse them will be calculated based on the closing date.

Repaying part of your mortgage ahead of schedule. Depending on your mortgage agreement, there may be a penalty for pre-paying.

Property Survey
A legal description of your property and its location and dimensions. An up-to-date survey is usually required by your mortgage lender. If not available from the vendor, your lawyer can obtain the property survey for a fee.

Increasing the amount of your current mortgage, at a new interest rate. The term of the new mortgage must be equal to or greater than the term remaining on your current mortgage.

Once the original term of your mortgage expires, you have the option of renewing it with the original lender or paying off all of the balance outstanding.

Sales Taxes
Taxes applied to the purchase cost of a property. Some properties are exempt from sales tax (GST and/or PST), and some are not. For instance, residential resale properties are usually GST exempt, while new properties require GST. Always ask before signing an offer.

Service Charges
The extra costs incurred when hooking up hydro, gas, phone, etc. to a new address.

The length of time during which you pay a specific rate on the mortgage loan (i.e., the number of years in your mortgage contract). This is different from the amortization period. A mortgage is usually amortized over 20-25 years, with a shorter term (typically 6 months to 5 years). After the term expires, the interest rate is usually renegotiated with the lender (your bank, for example).

Variable Rate Mortgage
A mortgage with an interest rate that changes with the market. The rate changes each month, meaning that the portion of your monthly payment that goes towards interest may go up or down each month. However, your total monthly payment will probably stay the same.