Maturity date
The Maturity Date is the date when your current Mortgage Term ends. On this date you will either renew your mortgage for a new term, if your lender agrees, or pay it off completely. Lenders will notify you a couple of months before the Maturity Date of the need to either renew or pay off your mortgage on the Maturity Date.
Mortgage Default Insurance
Mortgage Default Insurance is required by Lenders if you’re buying a home with less than a 20% down payment or attempting to finance your home with a mortgage greater than 80% of the property’s value. (i.e. a High-Ratio Mortgage).
This insurance compensates mortgage lenders for losses they may incur if you were to stop making payments and default on your Mortgage (see Mortgage Default).
Who provides this insurance? Mortgage Default Insurance is offered by a number of mortgage insurers, primarily CMHC, Sagan, and Canada Guaranty. While this insurance protects your lender from losing money if you default, it also has benefits to you as the borrower because it allows you to buy a home with a down payment as low as 5%.
There are a few things that are important for you to know when it comes to Mortgage Default Insurance:
It is only available on residential homes valued under $1,000,000.
It does not cover your mortgage payment if you are unable to pay.
It only provides protection to the Lender. It does not provide any protection for the Borrower.
When a Borrower has a Down Payment of less than 20%, the premium for the insurance is paid by the Borrower.
To be eligible for Mortgage Default Insurance you must have a Down Payment of at least 5% of the home’s value.
The insurance premium can be added to your Mortgage Principal, so you do not have to pay it in full upfront. This way, it is paid monthly over the amortization term of your mortgage. You will pay interest on the premium over time at the Mortgage Rate.
To be eligible for Mortgage Default Insurance, a Borrower will have to meet their lender’s Underwriting qualifications as well as the Underwriting qualifications of the insurer.
Mortgage Discharge
When you pay off your mortgage in full, you need your lender to remove the lien they have placed on your property. In order to do this, your lender will provide you with a Mortgage Discharge Statement that gets registered on title to your property. It certifies the property is completely free from that mortgage debt. Time to celebrate!
Mortgage Pre-Qualification
Preparing to buy a home quickly? A mortgage pre-qualification can be provided after an expedited assessment process. The assessment looks at your financial information, including debt, income and assets. Upon completion, you receive an estimate on the mortgage amount you may be approved for as well as a rate that you may qualify for. Typically, the Rate Hold Period is between 60 and 120 days. After the Rate Hold Period ends your Pre-Qualification will expire.
It’s important to note that a pre-qualification is not an official mortgage approval. Rather, it is a preliminary assessment of your qualifications. To receive an official mortgage approval, known as a Commitment Letter, a completed Agreement of Purchase and Sale for your property is required. An appraisal may be required and the approval is subject to a thorough Underwriting review of your income, employment, property details, purchase agreement and Down Payment. You will be required to provide documents and more financial details before getting a final approval for a mortgage.
Mortgage Principal
Your Mortgage Principal is the amount borrowed from your lender that must be repaid. At any point in time your outstanding Mortgage Principal can be calculated by subtracting the amounts paid to the lender from the original amount borrowed. As monthly mortgage payments are made, the mortgage principal is reduced. So keep it up! You’ve got this!
Mortgage Rate
The rate of interest charged by a mortgage Lender to the Borrower. The Mortgage Rate can be either fixed or variable (see Fixed-Rate Mortgage and Variable-Rate Mortgage).
Mortgage Refinancing
You can refinance your mortgage by replacing it with a new mortgage that has different terms than the original mortgage. Why would a Borrower be motivated to do this? It is often done to get a lower Mortgage rate or to increase the amount borrowed. You should be aware that Borrowers will usually need to pay a Prepayment Penalty for breaking the original mortgage but this can often be incorporated into the balance of the new mortgage.
Mortgage Renewal
When the mortgage term has concluded, your mortgage is up for renewal unless you repay the remaining balance in full. If your mortgage contract is with a federally regulated financial institution, such as a bank, the lender must provide you with a renewal statement at least 21 days before the Maturity Date. Your lender must also notify you 21 days before the Maturity Date if they have decided that they will not renew your mortgage. Unregulated lenders tend to follow the same practice.
There are pros and cons to renewing with your existing Lender but Borrowers should be prepared to look around for alternatives for their renewal mortgage in order to negotiate the best rate. Be sure to compare the renewal offer from your existing Lender to what is available in the market. One advantage of renewing with your existing Lender is a simplified Underwriting process. If you renew with a new Lender, that Lender will need to conduct a full Underwriting to approve you as a new Mortgage customer.
Mortgage Statement
A mortgage statement is a document prepared by your Lender that they provide to a Borrower typically once per year. It should show the current mortgage balance, current interest rate, payment history, amount remaining on the mortgage term and amortization and contact information. Be sure that you are checking these statements and cross-referencing with your own documents to ensure they are accurate.
Mortgage Term (sometimes referred to as Mortgage Tenor)
This is the length of time covered under the financing contract whereby you commit to a specific mortgage rate and conditions with a lender. The most common is 5 years, but other terms are available, typically ranging from a 1-year term to a 25-year term.