Text by Christina Poirier
As members, we can all relate to “banker’s mumbo jumbo”. I can remember being on the signing end as a member, and not fully understanding what the lender was saying. They seemed confident in their terminology; however I’m sure I looked like a deer in the headlights.
Now the table has turned a little, as a lender I find myself using that same mumbo jumbo.
To help you, the member, better understand what it is we are speaking of, here’s a crash course on terminology often used by lenders.
Amending Agreement: An agreement between the lender and borrower that may be registered on title by the lender, where any of the terms of the present registered mortgage are changed.
Blended payments: Regular equal payments combining interest and principal components.
Bridge Financing: A loan provided to the borrower to provide financing for purchase pending closing of the sale of their existing property.
Chattel Mortgage: A mortgage given on chattels (any movable possessions). Usually given as collateral security to a mortgage on real estate. (These loans are usually given for mobile home purchases.)
Closed Mortgage: A mortgage, which may or may not have prepayment privileges. This varies according to institution policies.
Conventional Mortgage: An uninsured mortgage usually granted by a financial institution. The loan is based on the value of real estate as security and usually does not exceed 75% of appraised value.
CMHC Mortgage: An insured mortgage loan approved through the Canadian Mortgage and Housing Corporation of Canada. Premiums are paid for any mortgage approved through CMHC, but this option gives the lender a higher percentage of lending value. For purchases, the members can go as low as 5% down, and to refinance, can use up to 90% of its equity.
Builder’s or construction lien: A claim against the estate or interest of the owner in a property for labor, services, or material supplied to it and not paid for. It must be registered on title to the property in question to be perfected.
As a member, you are sure to have heard that in order to disburse from your mortgage, a 3 o’clock search needs to be done. As builders only have until 3 o’clock to submit a lien on the property, the search is done after 3 o’clock to ensure there have been no liens put against your property.
Co-signor: One who promises to pay a debt or perform an obligation contracted by another in the event that the original obligor fails to perform as contracted.
Default: Failure to fulfill contractual obligations. This is one who usually falls behind in payments.
Disbursal: Any monies being transferred out from the loan or mortgage.
Equity: In mortgaging, the difference between the market value and indebtedness.
Extension Agreement: An agreement extending a loan past the original maturity date.
Floating rate/Variable rate: An interest rate that will change on a periodic basis during the term of the loan, usually tied to the fluctuation of the Prime lending rate of the Bank of Canada.
Fixed Rate: An interest rate that will not vary or change for the full term chosen.
Open Mortgage: Allows the member to prepay all or part of the principal amount at anytime without any