"Amortization period" refers to the time required to repay all mortgage principal and interest based on the monthly mortgage payment. In practice, however, the "amortization period" is often determined in advance and then used to calculate the monthly payment amount. The longer the amortization period, the lower the monthly payment. The main factors that determine the "amortization period" are:
(Real Estate) Appraisal:
Professional appraisers in Canada generally have two licenses:
See "Amortization Period" and "Mortgage Payment". Blended payment is mortgage repayment that is made up of part principal and part interest. It is calculated by the lending institution based on three data:
There are many mortgage repayment calculators available online.
It is, when the borrower increases the loan amount, the interest rate obtained by the weighted average of the original loan interest rate and the new loan interest rate. The benefits of doing this are:
A "bridge loan", or interim financing, is a loan required to fill the gap between the repayment of an old loan and the issuance of a new loan.
Cap Rate (Capitalization Rate):
It can also be interpreted as the rate of return of investment (in real estate), which is the ratio of the net income that commercial real estate can bring up to its market value. It is another important concept of commercial real estate valuation and one of the important concepts that commercial real estate investors need to master. Comparing the capitalization rates of the same type of commercial real estate in the same market can give you a rough idea of whether the seller's asking price is reasonable.
It refers to the type of real estate loan in which the loan balance cannot be repaid in full at one time before the loan matures. It is opposite to "Open Mortgage". The majority of real estate loans are closed.
Refers to the various expenses required to complete a real estate transaction (as well as a loan), such as title transfer taxes, attorney fees, appraisal fees, etc.
Closing Date/Completion Date:
This is the most important day for real estate transactions. On this day, the real estate loan needs to be released and paid to the seller (the lawyer), and the real estate title is transferred (the next day in some provinces), which means the completion of the entire real estate transaction.
Collateral Charge/Collateral Mortgage:
See "Conventional Mortgage". It is a way of registering a mortgage on a real estate title, it allows one registration to cover multiple mortgages, and it also allows the registered loan amount to be significantly higher than the actual loan amount. Ostensibly, it could leave room for additional loans later on with simple approvals. In fact, it could also allow lenders to increase the amount of possible future claims and introduce more hassle and higher fees for on-lending at maturity. Therefore, the real estate registered with Collateral Mortgage is generally not eligible for "secondary loan".
It is a real estate loan issued against commercial real estate, which is opposite to a Residential Mortgage.
Construction Mortgage / Construction Loan:
See "Draw Mortgage". It refers to loans issued for construction projects, including residential and commercial real estate. Because the collateral is a construction project and the market value of a construction project is incomplete, construction loans are issued in progress based on the (land and) construction costs already invested.
See "High Ratio Mortgage" and "Collateral Mortgage". The meaning of a "conventional mortgage" can be different:
Delinquency: It refers to the failure of the borrower to make repayments on time, worst of which could lead the lender to foreclosure process.
Default: Refers to the borrower's failure to fulfill the relevant terms of the mortgage contract, including the above-mentioned "default (failure to repay on time)".
Deposit: This word is usually interpreted as "savings", but in real estate transactions and loan approval processes, it refers to "prepaid money", such as deposit on purchase, good faith deposit, etc. in order to secure or continue a deal.
Disbursement: Usually refers to the fees paid by the trustee (such as brokers, lawyers, etc.) to the third parties on behalf of the client/borrower, such as the property right registration fee paid by the lawyer to the government when handling property rights registration, etc. These fees are then reimbursed to the trustee by the client.
Down Payment: When a mortgage lender approves a loan, it requires the borrower to come up with a portion of the purchase price, which is called "Down Payment". Therefore, the lending institution requires that the down payment cannot be borrowed money (occasionally it is allowed to come from a gift, that is, a gift), and due to the compliance requirements of the "Anti-Money Laundering (AML: Anti-Money Laundry) Law", the mortgage lender needs to make sure the source for down payment is from own resources.
Draw Mortgage: See "Construction Mortgage". Some mortgage loans are not drawn (disbursed) all at once, but are drawn in progress, such as the construction loan mentioned earlier, and some of renovation loans. After approved, the borrower needs to request for funding at numerous stages, and the lender has to review the progress and expenses. once satisfied, it then orders the lawyer to release the fund to the borrower.
EGI (Effective Gross Income):See "GPI". It is the income level after deducting necessary vacancy, bad debts, concessions and other factors on the basis of potential gross income. Of course, there are times when other incomes need to be added, such as income from parking spaces. Commercial real estate (Income Producing Properties) investors should understand these concepts.
Equity: In the field of investment and financing, "Equity" refers to funding from own resources, as oppose to "Debt or Liability", which is funding from other source on the obligation to repay later. In real estate, it is the difference between the market value and the loan balance. Therefore, it is often interpreted as "net worth".
First Mortgage: On the real estate title certificate, the earliest registered loan is ranked first and called "first mortgage".
Fixed Rate Mortgage: It refers to a mortgage loan with a fixed interest rate. To be clear, the rate is fixed only after the loan contract takes effect and will not change during the term. Whereas in the market, fixed mortgage rates are changing even more frequently than variable rates, since it follows the movement of rates on bond markets. Another term that is opposite to this is "Variable Rate Mortgage", which is "variable rate mortgage loan". The "variable rate" here means that the interest rate of the mortgage loan may change during the contract term, and the basis for the change is the "Prime Rate" of the commercial banks.
Foreclosure: It refers to the lender to exercise its mortgage or to cancel the borrower's right to redeem the property and remove the legal obstacles for the lender to auction the real estate as collateral.
GDS (Gross Debt Service Ratio): GDS is one of the main indicators used for home mortgage loan approval is the percentage of the applicant's income that is used as collateral for real estate-related expenses (including mortgage payments, tax credits, management fees, etc.). Government regulators usually set an upper limit on this indicator, such as 35%, as an economic means to regulate the housing market. Used together with this, there is another indicator, namely TDS (Total Debt Service Ratio), the total debt service ratio, which is based on GDS and takes into account the borrower's other liabilities, even including contingent liabilities. The upper limit of TDS is generally 40%.
GPI (Gross Potential Income): See "EGI". The highest possible level of income that commercial real estate can generate.
High Ratio Mortgage: See "Conventional Mortgage", "Down Payment", and "LTV". According to the regulatory requirements of the Canadian federal government, a high-ratio mortgage loan is a mortgage loan with a "down payment" of less than 20%, which requires the purchase of default insurance.
Home Buyers' Plan: A program launched by the federal government to help potential homebuyers save for a down payment, mainly through tax deductions. Specifically, it allows qualified individuals to withdraw up to $35,000 from a registered retirement account as a down payment on a home. As long as the buyer can re-deposit the withdrawn money into a registered retirement account over the next 15 years, and the deposit amount is not less than $2,333 per year, the home buyer does not need to pay tax on this amount. Eligible individuals are those who: first-time homebuyers; Spouse, or ex-spouse separated for less than 4 years
Home Equity: See "Equity".
ICI stands for "Income Producing, Commercial, and Industrial".
There is no doubt that "Commercial" in the middle is commercial real estate in a narrow sense, mainly street-front storefronts, retail units, shopping malls and other real estate;
"Income Producing Properties" is income-producing real estate, such as rental apartment buildings, which are designated as residential real estate in urban land use. It is not considered as residential but commercial real estate when it comes to financing;
"Industrial Properties" oftentimes refer to industrial and warehousing buildings, plus owner-occupied real estate in various industries.
It is a way of repaying the loan. Many loans are essentially "Instalment", while the vast majority of "Instalment" are "Blended Payment", such as car loans, home loans, etc. The balance of such loans will become lower and lower, and finally get to zero. If you take out and need to increase or restore the original loan amount, you must re-apply (Refinance), which is the essential difference from "Revolving".
Inter Alia (Blanket) Mortgage:
See "Collateral Mortgage". It means that a mortgage is registered on multiple real estate. This is usually because the lender believes that the market value or net worth of one single collateral is too low or defective in some way, there is not enough room to support the loan amount requested by the borrower. as a and other real estate in the borrower's name needs to be taken into account as co-mortgage thing.
Mortgage interest is paid at certain intervals, such as "Weekly", "Monthly", "Bi-weekly", "Semi-monthly", etc. . However, from the loan date to the first payment date, it is often not a complete time interval, so the interest payable needs to be adjusted. For example, the loan date is December 28, and the first payment date is February 1 of the following year. Then, the interest before January 1 needs to be added to the normal monthly repayment, which is the interest adjustment.
IRD(Interest Rate Differential):
See "Posted Rate". This is a term used to calculate a penalty when repaying a mortgage loan early. Generally, the penalty for a variable rate mortgage loan is 3 months of interest. The penalty for a fixed-rate mortgage loan is the higher of the following:
Land Transfer Tax:
Also known as the "Housing Transaction Tax". This is a local tax levied by the provincial government, some provinces do (eg BC) and some don't (eg AB). Some municipal governments have additional levies, and the specific calculations vary, but they are ultimately withheld by law firms.
It is a creditor's right registered on the real estate title certificate. Under normal circumstances, real estate registered with a lien cannot be sold or mortgaged without the consent of the creditor. Of course, if you must buy or sell or mortgage, you can also make corresponding arrangements, provided that the relevant parties agree or protect their interests from being harmed.
Line of Credit:
See "Revolving". It is a recyclable loan product, similar to a credit card, except that the interest rate is lower and the amount is higher. It can be unsecured or secured, such as on home equity, called a "HELOC". A HELOC is closer to a home loan, except that it is more flexible and can be repaid as you use it. The minimum repayment amount is the interest of the current month.
The full name of LTV is "Loan to Value Ratio". This is an important indicator to be considered in the approval of real estate loans, specifically the proportion of the loan amount (Loan) in the real estate value (Value). It should be pointed out that the real estate value used by the lender is not necessarily the price on the purchase contract or the appraiser's assessed price, but the relatively lower of the two. In general, the higher the LTV, the higher the risk. For housing loans, if the LTV is higher than 80%, it is necessary to purchase Mortgage Default Insurance, but commercial loans are not mandatory, but are determined by the lender.
This term is often associated with "prepayment". For closed mortgage loans, especially housing mortgage loans, some lending institutions will give borrowers a certain amount of Prepayment, which can speed up the repayment of the loan. Some prepayment is to increase a certain percentage, such as 20%, on the basis of the monthly repayment amount. Others allow borrowers to have an annual "Lump Sum Payment" amount, such as 20% of the mortgage balance.
See "Renewal" and "Transfer". Every mortgage loan contract has a term, and the day the contract ends is the maturity date of the loan. On the due date of the mortgage, the borrower either pays off the balance in one lump sum, renews the loan contract, or transfers the loan to another lender.
See "Appraisal". The market value of real estate refers to the transaction price reached by unrelated buyers and sellers voluntarily in an ideal perfectly competitive market environment. Strictly speaking, the purchase price (Purchase Price) in the purchase contract is not a reflection of market value, because the real real estate market is far from a perfectly competitive market environment. The "assessed price" of a professional appraiser is considered to be the closest to the "market value" because it is estimated by the appraiser in a simulated perfectly competitive market environment.
Mortgage Loan / Mortgage Loan / Home Loan / Real Estate Loan Refers to loans issued with real estate as collateral.
Mortgage Transferee Often it's a lender that takes the mortgage on the real estate at the same time that they issue the mortgage.
Mortgage Grantor Usually it is the borrower/property owner who sells the mortgage on the property in order to obtain a mortgage loan. The real estate owner, borrower, and mortgage lender are all three in one, pointing to the same market entity, but in different contexts and occasions.
Insurance products targeting real estate loans have many sub-categories, and the triggering conditions for claims are different, but they all use insurance companies to pay the mortgage repayment for a certain period of time on behalf of the borrower, or part or all of the mortgage balance as the target. Mortgage Discharge: Release of mortgage (mortgage) See "Foreclosure". Usually after the borrower repays the entire loan balance, the lender will issue a release letter, whereby the borrower cancels the mortgage loan registered on the title certificate. The real estate title is fully reverted to the real estate owner (the original borrower).
See "Amortization Period", "Blended Payment". Here mainly refers to the regular monthly (week, month) mortgage repayment. For some real estate loans, only interest is paid each period, and the principal is repaid in one lump sum on the due date. In this case, the mortgage repayment is the interest payable for each period. But in most cases, each repayment calculated by the lender based on the loan amount, loan interest rate, and amortization period is a mixture of interest and principal, which is called "Blended Payment".
Mortgage Prepayment Privilege:
See "Closed Mortgage". Closed mortgages cannot be repaid early, otherwise a penalty will be incurred. But most lenders will allow borrowers to pay a certain amount more than their normal repayments each year without penalty. This kind of offer is the "early repayment privilege".
Refers to the initial loan amount and the subsequent loan balance.
See "Fixed Rate Mortgage" and "Variable Rate Mortgage". The interest rate is the market price of funds, and the mortgage rate is the price a borrower needs to pay for using a mortgage loan. Home loan interest rates are relatively standardized and depend on the loan program rather than the applicant. However, commercial loans pay more attention to the specific circumstances of the applicant and indicators such as the loan ratio. In Canada's financial system, there are two main types of mortgage rates:
Both have their own advantages and disadvantages, which need to be selected according to the borrower's own conditions and plans.
At the beginning of each year, lenders provide borrowers with a mortgage repayment document for free, called a "mortgage statement," which contains all the complete information about the mortgage, such as:
Mortgage Term: Mortgage Duration It can also be understood as "mortgage contract period". In Canada, mortgage loan contracts are mainly 1-5 years, of course, there are six-month, seven-year and 10-year terms. The existence of the contract period, on the one hand, is related to the level of interest rates; on the other hand, it is necessary for both the lender and the borrower to make a new choice after a period of time.
NOI (Net Operating Income):
See "EGI", "GPI", and "Cap Rate". It is the income level after deducting various operating expenses, depreciation, and capital expenditures on the basis of effective gross income. It is the most important concept for understanding commercial real estate valuation, and real estate investors should focus on mastering it.
See "Closed Mortgage". This type of mortgage loan can be repaid in one lump sum anytime before the contract expires. Because of this advantage, its interest rate is generally higher than that of a closed mortgage.
It is the interest rate for overnight lending between financial institutions and is determined by the central bank. It is a policy interest rate and a policy tool for the central bank to regulate economic operation and control inflation.
Prepayment Penalty/Prepayment Charge:
See "Mortgage Prepayment", "Closed Mortgage", and "IRD". Penalties for early repayment of a closed mortgage.
Mortgage Renewal Move a mortgage on one real estate to another. This usually occurs when changing homes, and the penalty for early loan repayment can be waived.
See "IRD". Lenders advertise the public mortgage rate, and the interest rate that the borrower actually receives is the interest rate discounted from the advertised rate. However, when calculating the penalty for early repayment, it is based on the announced interest rate.
See "Overnight Rate". The original intention is to refer to the preferential interest rate that customers with good credit can enjoy from the lending institution, but it is actually used by the lending institution (commercial bank) as the benchmark interest rate for determining the floating interest rate. Therefore, the floating interest rate is expressed in the form of adding or subtracting a certain amount of the dominant interest rate. basis point. It itself is also floating, based on the central bank's overnight lending rate.
he interest rate used by lenders to approve mortgage loans and calculate the debt service ratio. In Canada, it is a policy rate that regulates demand for mortgage loans, determined by the federal government commissioned by the CMHC, and must be followed by federally regulated financial institutions when approving mortgage loans.
Rank: See "First Mortgage" and "Second Mortgage". When multiple mortgages are registered on a property, there is a "sequence" issue between the different mortgages. The "rank" is generally determined according to the registration time: the earlier the registration time, the higher the ranking. Mortgages that are in the top priority will also be repaid first in the event of a claim. "Order" is the most important concept for investors who are engaged in mortgage investment (Mortgage Investment), and it is not one of them.
Remortgage/Refinancing: It is the act of a borrower applying for a new mortgage to replace an existing one, possibly motivated by lowering the existing interest rate or increasing the loan amount.
Renewal: It is the act of renegotiating the interest rate and contract term without increasing the loan amount when the mortgage expires.
Reverse Mortgage: A normal mortgage is that the lender first gives the borrower a sum of money, and the borrower repays it in installments. The reverse mortgage is a loan institution that provides the borrower with money in installments, and the principal and interest are repaid in one go when the house is sold, or the real estate is owned by the lender after the borrower dies. This generally applies to older borrowers who own property but lack a source of income.
Revolving: It is a feature of some loan products when it comes to repay, which is oppose to "Instalment" in that "Revolving" feature allows the loan balance to be repaid any time, in full or in part, and then to be reused any time, in full or in part, as long as the balance doesn't exceed the maximum limit. One thing to point out is that loan products with "Revolving" features sometimes have a negative impact on borrowers applying for mortgages. Because these loan products are usually treated as "contingent liabilities" when the lender approves the mortgage, they will calculate the borrower's debt service obligation with the maximum limit instead of your actual balance, thus reducing the applicant's borrowing power.
Second Mortgage: See "First Mortgage" and "Rank". It refers to the mortgage registered on a real estate that already had a mortgage registration. Generally speaking, its risk is higher than the first mortgage. So, its interest rate is also higher than the first mortgage.
Survey: It is a lot plan that reflects information such as the boundary, plot area, and building location of a real estate.
Tax Deductible: Mortgage loans are generally tax deductible as long as they are not used to buy an owner occupied home. For details, please click here
Title Certificate: A certificate of real estate ownership. Oftentimes it is also registered with various rights & claims and their holders. That being said, property rights are a bundle of rights, or, in other words, constituted by a group of rights. Moreover, each individual right can be separated from ownership, thus providing a legal basis for many economic activities. For example, the separation of use rights and ownership has established the fundamental system of the rental market; while the separation of mortgage rights and ownership is the institutional prerequisite for the survival of the housing loan market.
Title Insurance: it is an insurance product that protects policyholders and lenders from various title disputes and title fraud. In other words, in the event of a title dispute or title fraud, the insurance company will pay the claim. For example, if your rental property is loaned by a tenant, if you buy title insurance, the insurance company will pay you for the loss.
Title Search: It is the act of confirming property rights records to ensure that the property rights are intact and will not affect the smooth progress of real estate transactions.
TDS (Total Debt Service): See "GDS".
Transfer/Switch: On-lending When the mortgage loan matures, the borrower transfers it to another lender without changing the loan balance. But some mortgage loans cannot be transferred directly, such as Collateral Mortgage.
Variable Rate Mortgage: See "Fixed Rate Mortgage".
Commercial Mortgage, Construction Mortgage
Vancouver, Richmond, Burnaby, Surrey, Victoria, Kelowna, Kamloops, Maple Ridge, Langley, Coquitlam, Nanaimo, Sunshine Coast, and more
Copyright © 2017 U Wealth Financial Ltd. - All Rights Reserved.