Homebuying Step by Step: Your Guide to Buying a Home in Canada
Insurance broker: A professional who can help homeowners choose and buy different types of insurance, including property insurance, life and disability insurance and mortgage loan insurance. Interest: The cost of borrowing money. Interest is usually paid to the lender in regular installments along with repayment of the principal (that is, the amount of the original loan). Interest rate: The rate used to calculate how much a borrower has to pay a lender for the use of the money being loaned to them. Land registration: A system to record legal interests in land, including ownership and disposition of land. Land surveyor: A professional who surveys a property in order to provide a land survey (or “certificate of location”). If the seller doesn’t have a survey, or if it’s more than five years old, the buyer will likely need to hire a surveyor before they can get a mortgage. A real estate agent usually helps coordinate the survey with the seller. Land transfer tax: A tax charged by many provinces and municipalities (usually a percentage of the purchase price) that the buyer must pay upon closing. Lawyer: A legal advisor (usually replaced by a notary in Quebec) who is licensed to practice law and who will protect legal interests and review any contracts. Leasehold: A form of homeownership where the homeowner buys the right to have full and exclusive ownership of a home and the land it sits on for a defined period. Leasehold is in contrast to freehold ownership, which gives the homeowner the right to use and occupy the land and building for an indefinite period. Lender: A bank, trust company, credit union, caisse populaire, pension fund, insurance company, finance company or other institution that loans people money to buy a home. Lien: A claim against a property by another person or company for money owed by the owner or previous owner. Lump sum pre-payment: An extra payment that is made to reduce the principal balance of a mortgage, with or without a penalty. Lump sum payments can help borrowers save on interest costs and pay off their mortgage sooner. Manufactured home: A single-family home that is built in a factory and then transported to a chosen location and placed onto a foundation. Maturity date: The last day of the term of a mortgage. The mortgage loan must either be paid in full, renegotiated or renewed on this day.
Mobile home: A home that is built in a factory and transported to the place where it will be occupied. While mobile homes are usually placed permanently in one location, they can be moved again later if desired. Modular home: A single-family home that is built in a factory and typically shipped to a location in two or more sections (or “modules”) to be assembled onsite. Mortgage: A loan given by a lender to a buyer to help with the purchase of a home or property. The mortgage loan is usually repaid in regular payments that generally include both the principal and interest. Mortgage approval (or “commitment letter”): 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. Mortgage broker: A professional who works with many different lenders to find a mortgage that best suits the needs of the borrower. Mortgage life insurance: Insurance that protects the family of a borrower by paying off the mortgage if the borrower dies. Mortgage loan insurance: Insurance that protects a lender against default on a mortgage. Mortgage loan insurance is provided by CMHC or a private company and is usually required for any mortgage where the down payment is less than 20% of the purchase price or lending value of a home. Mortgage loan insurance helps Canadians purchase homes earlier and at interest rates that are comparable to buyers with a larger down payment. Mortgage loan insurance premium: The amount homebuyers have to pay to CMHC or another insurer to insure their mortgage against default if their down payment is less than 20% of the purchase price. The CMHC premium is calculated as a percentage of the mortgage loan and is based on factors like the size and source of the down payment. In general, the smaller the down payment is, the higher the insurance premiums will be. Premiums can typically be paid separately or included in the regular mortgage payments to the lender. Mortgage payment: A regularly scheduled payment that usually includes both the loan principal and the interest. Mortgage term: The length of time that the conditions of a mortgage, such as the interest rate and payment schedule, are in effect. Terms are usually between 6 months and 10 years. At the end of the term, the mortgage loan must either be paid in full, renewed or renegotiated, usually with new conditions.
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