There are currently 35 names in this directory
“A” Mortgage Lenders
These lenders provide mortgages to traditional clients that meet all the most stringent government and institutional covenant requirements of the 5 “Cs” of Credit which is: Character, Collateral, Capital, Credit and Capacity. These lenders typically have the lowest mortgage rates but are not just brand recognizable, traditional banks. Lenders can also be Mono lenders, Banks, Credit Unions, Insurance companies, Trust Companies etc.
Alternate Mortgage Lenders
These lenders are often called “B” lenders and are still regulated by federal and/or provincial mortgage rules. They lend money against prime real estate, in select geographical areas, at slightly higher than A lender interest rates, to borrowers that don’t meet the classic or traditional covenant requirements of A mortgage lenders. Alternate lenders may also charge the borrower an up-front lending fee and can be Banks, Mono Lenders, Trust Companies etc
This is the time it will take a borrower to pay off their entire mortgage + interest if the interest rate and payments were kept the same for the entire period. The maximum amortization period is typically determined by law and currently, it is 25 years for mortgages with less than 20% down payment and 30 years for mortgages with more than 205 down payment
The appraised value of a property is the evaluation of a property’s value based on market conditions at a given point in time, for a specific lender, for mortgage finance purposes and performed by a professional, licensed appraiser accredited by that specific lender. The appraisal is usually paid for by the borrower. The appraised value of a property can be lower, the same or higher than the purchase price of a property and determines the amount of mortgage that a lender is prepared to loan against the property. Canadian lenders will always lend against the lower of the appraised value or the purchase price.
Cash flow is the difference in cash available at the end of a period vs the beginning of the period. If there is more cash at the end than there was at the beginning the cash flow is deemed “positive” and if there is less cash available at the end the cash flow is “negative”. Or, simply put, if income exceeds expenses there is “positive” cash flow and if expenses exceed income over a period of time, there is “negative” cash flow. Positive cash flow is desirable and prolonged negative cash flow can cause financial hardship and should be avoided. Cash flow can only be improved by either increasing income and/or reducing expenses.
This is the final step in executing a mortgage transaction. The closing date is determined as follows:
- Purchase: Determined during the negotiation phase of a purchase transaction.
- Refinance: Decided by the borrower
- Renewal: The closing date is the mortgage renewal date.
There are two ways that a mortgage lender can register a mortgage loan with the land title or registry office at your local city:
- Mortgage Charge – The mortgage is registered at the exact mortgage balance on the closing date.
- Collateral Charge – This is registered under the Personal Property Security Act (PPSA) of Canada and can only be registered or discharged from that lender. It cannot be transferred to a different lender, not even on the maturity date of the mortgage. Some lenders will register a collateral charge at 100% or even higher against a property. Lenders often use collateral mortgages to “force” loyalty on borrowers and these products can have dire financial, legal and other consequences. Collateral mortgages are complex mortgage products and although re-advanceable for future borrowing they also have significant risks and should be thoroughly investigated to make sure the specific product is suitable before entering into a mortgage agreement with a lender.
Construction is far more complex and involves a lot more than renovations on a property. Work on a property is normally deemed to be construction if one or all of the following occurs: 1. The square footage of the home is changed 2. The shape of the home is changed through remodeling 3. The roof is lifted 4. Substantial structural changes Financing for construction work is fundamentally different and more risky than all other mortgage financing and has to be approved by a mortgage lender before the project is started. It is essential that borrowers thoroughly understand all the aspects of construction and construction financing before starting a project.
These are mortgages where the borrower has a down payment equal to or more than 20% of the property’s financed value. These mortgages can be divided into two groups:
- Insurable Conventional Mortgages – These are mortgage defined to be insurable by the Canadian federal government. The criteria for a mortgage to be insurable include, but are not limited to: max 25-year amortizations, principal and secondary residences below $1M in value, switches and purchases only etc.
- Uninsurable Conventional Mortgages - These are mortgage defined to be uninsurable by the Canadian federal government. The criteria for a mortgage to be uninsurable include, but are not limited to: amortization periods of more than 25 years, single-family rental properties, principal and secondary residences above $1M in value, refinances etc.
Discounted Mortgage Interest Rates
Unlike posted rates, the discounted rate is the contract rate that will be used to calculate the mortgage interest payable by the borrower.
Estimated Property Value
The value of a property obtained through any other means other than the value established by a licensed, professional and lender accredited appraiser, based on market conditions at a given point in time, for a specific lender, for mortgage finance purposes. The estimated value of a property is often called an opinion of value and this can be done by a realtor, the MPAC statement, Purview reports etc. Although a lender might start the mortgage process based on the subject property’s estimated value, the actual appraised value of the property will determine whether a lender will lend on a property or not and the final mortgage amount.
Home Equity Line of Credit (HELOC)
This is a line of credit secured against real estate and it can either be the primary loan, registered in 1st place or it can be postponed behind the 1st mortgage loan. A HELOC can either be from the same lender as the 1st mortgage or from a different lender. A HELOC is different from a mortgage since the entire sum of funds doesn’t have to be advanced upfront to the borrower, but uses a line of credit where the borrower can draw funds as required as long as the credit limit of the HELOC is not exceeded. HELOCs are higher risk real estate lending products and are typically interest only, at higher than mortgage variable interest rates.
These are mortgages where the borrower has a down payment of less 20% of the property financed value. Such mortgages are insured by lenders with one of Canada’s three mortgage insurers; CMHC, Genworth or Canada Guaranty. Although the insurance is usually added to the mortgage, the borrower is responsible to pay for the mandatory mortgage insurance. To qualify for mortgage insurance coverage in case of borrower default a lender is obligated to meet or exceed mortgage insurer rules. Since a lender is afforded protection against borrower default, insured mortgages are typically offered at the lowest discounted mortgage rates to borrowers.
Sometimes also called the “Mortgage Rate” or just the “Rate” and it is the contract rate of interest that the lender charges the borrower on a mortgage. The interest rate can either be fixed or variable and compounded in various ways including, but not limited to Annual, semi-annual, monthly etc.
Land Transfer Costs
Provincial and/or Municipal Land Transfer taxes are typically calculated as a percentage of the property value and are payable by the property owner to the relevant authority at the time of the property title transfer. Not all municipalities charge a land transfer tax and some borrowers such as first-time homeowners sometimes qualify for a land transfer tax rebate. The lawyer acting for the borrower at the closing date is usually responsible to calculate accurate land transfer taxes due by the borrower and eligibility for any land transfer tax rebates.
A mortgage lender can be a financial institution, group or person, regulated or non-regulated, that provides financing for the purposes of owning real estate. The mortgage lender uses a mortgage as security for lending the money. The lender provides the funds to the buyer/owner and holds the mortgage on the property. There are many types of lenders; AAA, alternative, private lenders etc.
This is cash on hand or an asset that can be easily be converted into cash itself with little or no impact on its value. Examples of liquid assets are: Stocks, mutual funds, non-registered funds etc. Examples of illiquid assets: real estate, cars, household goods, registered funds etc.
Market Interest Rates
The mortgage interest rates offered in the market at a specific, relevant point in time.
The last day of a current mortgage’s term. This is sometimes also called the mortgage Renewal Date.
This is a legal agreement by which a lender lends money in exchange for taking title of the borrower’s property, with the condition that the conveyance of title becomes void once the loan has been paid in full.
This is the mortgage insurance paid by a mortgage lender, on behalf of the borrower, to one of Canada’s mortgage insurers to protect itself against borrower mortgage default. Only insurable, conventional mortgages are eligible for lenders to back-insure.These mortgages are insured, but unlike mortgages where the borrower has less than 20% down payment, the lender pays the mortgage insurance premium and not the borrower. Lenders typically choose to back-insure all eligible mortgages since it affords them bigger protection against borrower default.
Canada currently has three federally regulated mortgage loan insurers; The Canadian Mortgage and Housing Corporation, Genworth Canada and Canada Guaranty. Their mandate is to make homeownership possible for a borrower with less than 20% down payment at competitive interest rates and insure eligible mortgage lenders against borrower default.
When breaking your mortgage for any reason, prior to the mortgage term maturity date, the borrower pays the lender a penalty for breaking the contract; these penalties are called pre-payment penalties. Mortgage penalties are defined in the lender’s mortgage Standard Charge Terms and are typically determined by the interest rate type, mortgage type, posted rates and the mortgage type. Pre-payment penalties can be exorbitant and should be understood and investigated by every borrower prior to entering into a mortgage.
Every mortgage has privileges defined in the Mortgage Standard Charge Terms. A borrower can avoid mortgage penalties by exercising these privileges. These privileges can include but are not limited to: Portability, Assumability, Pre-payment payments etc. Not all mortgages have the same privileges and these should be thoroughly investigated and understood prior to entering into a mortgage.
At the end of a mortgage term the borrower may either keep their mortgage with their current lender but at new, mutually agreed terms and conditions, interest rate etc. or they may negotiate a new mortgage with a different lender. This is called “renewing your mortgage”. If the mortgage is not renewed, the current lender is entitled to be paid in full on the maturity date.
Posted Mortgage Rates
The mortgage rates that some lenders typically, publicly advertise. Oftentimes posted rates are higher than what a lender is willing to offer a negotiating borrower. The posted rate is typically not the mortgage contract interest rate, but it is nevertheless of paramount importance since lenders typically use posted rates to determine mortgage pre-payment penalties. Posted rates are used for mortgage penalty calculations because they could be substantially higher than the contract rate and thus they elevate the rate differential between the posted rate and contract rate. The larger rate differential, in turn, elevate the penalties payable to the lender by the borrower if a mortgage is broken mid-term, which serves as a bigger deterrent to borrowers to break their mortgages and leave that lender.
Private Mortgage Lenders
These are non-traditional mortgage lenders that are not governed by Federal or Provincial Government Rules that lend money to borrowers that cannot and/or don’t want to meet the Covenant requirements of regulated mortgage lenders. Private lenders can be individuals or companies and charge up-front lending fees together with substantially higher interest rates to reflect their perceived lending risks.
It is the difference between the market value of a property minus the mortgage loans on the property. Equity = Market Value – Mortgage Loans. Equity can be increased by growth in the real estate market, improving the property to increase its market value or it can be increased by paying down the mortgage through increased regular payment or lump sum payments. The opposites are also true.
This replaces the current mortgage(s) on a property with a new mortgage(s) either before the end or at the end of a mortgage term. Refinances at mid-term will incur the borrower mortgage penalties while no penalties will be incurred if a mortgage is refinanced at the maturity date of a mortgage term.
There are varied definitions from various people about what is considered to be a renovation vs construction. While both can mean substantial work to a property, renovations are typically limited to cosmetic changes to an existing property. Structural changes, with appropriate permits can be considered to be renovations as long as the structural changes are not deemed to be “construction”.
This is typically a residence that a borrower intends to occupy in addition to a primary residence during parts of the year. Secondary home uses can be: Vacation home (cottage), residence for an aged parent requiring additional care, residence for a child studying at a tertiary educational institution etc. A secondary home cannot be rented out or treated as an investment property.
Standard Charge Terms
These are all the terms and conditions regarding borrowing and repaying money when real estate is used as collateral. The terms define what a member agrees to when obtaining mortgage financing from a mortgage lender. The Standard Charge Terms provide definitions for the legal and banking terms, describes rules for repayment including prepayment provisions and default actions and what the borrower and lender promise to do under the agreement. It is a legal document that must be provided to all borrowers when obtaining a mortgage. If the mortgage is closed with a lawyer, the lawyer will provide the borrower with a copy. This document(s) is referenced in the Mortgage Commitment but is not provided to the borrower at the time the mortgage is approved by the lender. Since it is a legal document the borrower is to seek independent legal advice from a lawyer.
A mortgage switch or transfer is when a mortgage is either moved to a new lender or kept with the current lender on the maturity date and only the term and/or interest rate is changed. Not all mortgages and neither mortgage products from all mortgage lenders are eligible to be classified as a Switch.
“Term” is not to be confused with American mortgages that only have a term since the term is the amortization period. Canadian mortgages have a term and an amortization period and they are very different from each other. The mortgage term is the length of time you are under contract with your current lender. Your mortgage contract or commitment stipulates your mortgage interest rate, terms & conditions etc. There can be significant costs to the borrower if the contract is violated during the mortgage term. Once the term matures the borrower is able to look for a new mortgage with a different lender, terms & conditions etc or they can simply pay off their mortgage without incurring any penalties. Mortgage term lengths typically vary between 6 months to 10 years.