Homebuying Step by Step: Your Guide to Buying a Home in Canada
Words to know when buying a home
Adjustable interest rate mortgage: A mortgage where both the interest rate and the monthly payments vary based on changes in the market rates. Amortization: The period of time required to completely pay off a mortgage if all conditions are met and all payments are made on time. Application: A form used to apply for a mortgage. It includes all of the relevant personal and financial information of the person applying. Appraisal: An estimate of the current market value of a home. Appraiser: A certified professional who carries out a home appraisal. Appreciation: An increase in the value of a home or other possession from the time it was purchased. Approved lender: A lending institution, such as a bank, that the Government of Canada authorizes to make loans under the terms of the National Housing Act. Only approved lenders can offer CMHC-insured mortgages. Assumption agreement: A legal document that requires a person buying a home to take over the mortgage of the builder or the previous owner. Blended payment: A regular mortgage installment that includes payments toward both the mortgage principal and the interest. Builder: A person or company that builds homes. Canada Mortgage and Housing Corporation (CMHC): As Canada’s authority on housing, CMHC contributes to the stability of the housing market and financial system, provides support for Canadians in housing need and offers objective housing research and information to Canadian governments, consumers and the housing industry. Certificate of status (or “estoppel certificate”): A certificate that outlines the financial and legal status of a condominium corporation. (This doesn’t apply in Quebec.) Certificate of location (or “survey”): A document that shows the legal boundaries and measurements of a property, specifies the location of any buildings and states whether anyone else has the right to cross over the property for a specific purpose.
Closed mortgage: A mortgage that can’t normally be paid off or renegotiated before the end of the term without the lender’s permission and a financial penalty. Some closed mortgages allow for extra or accelerated payments, but only if specified in the mortgage agreement. Closing costs: The legal fees, transfer fees, disbursements and other costs that must be paid when buying a home. These are in addition to the down payment and the GST, PST and HST if applicable. Closing costs are due on the day the buyer officially takes ownership of the home, and they usually range from 1.5% to 4% of the purchase price. Closing date: The date when the sale of the property becomes final and the new owner takes possession of the home. Commitment letter (or “mortgage approval): A written notification from a lender to a borrower that says a mortgage loan of a specific amount is approved under specific terms and conditions. Compound interest: Interest that is calculated on both the original principal and the interest that has already been earned (or “accrued”) on that principal. Conditional offer: An offer to purchase a home that includes one or more conditions (for example, a condition that the buyer is able to get a mortgage) that must be met before the sale can be officially completed. Condominium (or “strata”): A type of homeownership where people own the unit they live in and share ownership of all common areas with the other owners. Common areas can include parking facilities, hallways, elevators, lobbies, gyms, swimming pools and the grounds or landscaping. Contractor: A person who is responsible for the construction or renovation of a home, including scheduling, workmanship and managing subcontractors and suppliers. Conventional mortgage: A mortgage loan equal to or less than 80% of the value of a property. (That is, where the down payment is at least 20%.) Conventional mortgages don’t usually require mortgage loan insurance. Counteroffer: An offer made by the seller of a home after rejecting an offer by a potential buyer. The counteroffer usually changes something from the original offer, such as the price or closing date.
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