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REMIC > Chapter 3 Key Terms & Definitions > Flashcards

Chapter 3 Key Terms & Definitions Flashcards

1
Q

Accelerated mortgage payment

A

A mortgage payment larger than required to retire the mortgage over the contracted amortization, having the effect of repaying the amount borrowed sooner and saving the borrower interest

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2
Q

Amortization

A

The total amount of time required to fully repay a mortgage

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3
Q

Assumability options

A

This option allows a purchaser the ability to take over the current homeowner’s mortgage

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4
Q

Balloon payment

A

The amount repayable at the end of the term

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5
Q

Basis point

A

1/100 of one percent

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6
Q

Blended payment

A

A payment that includes a combination of interest and principal

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7
Q

Bundled option

A

Also referred to as a Combination Option, this option combines a mortgage and a line of credit

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8
Q

Capped variable rate mortgage

A

A variable rate mortgage that cannot exceed a preset interest rate

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9
Q

Cash back option

A

An option whereby on closing of the mortgage, a percentage of the mortgage loan is paid to the borrower by the lender

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10
Q

Closed mortgage

A

A mortgage with no option to repay the outstanding principal balance during the term unless the property is sold to an arm’s length purchaser

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11
Q

Compounding frequency

A

The number of times per year in which an interest rate is charged. Typical compounding frequencies include semi-annually and monthly

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12
Q

Constant payment

A

A payment that remains the same throughout the term of the mortgage

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13
Q

Default

A

The failure to meet the obligations of a contract. In a mortgage contract default typically refers to the failure to make the regular periodic mortgage payments

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14
Q

Equity

A

The difference, in dollars, between the value of the property and the amount of financing currently on the property. Value - Financing = Equity

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15
Q

Extended amortization

A

An amortization that exceeds the standard amortization of 25 years

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16
Q

Face value of the mortgage

A

The original amount of the mortgage repayable by the borrower

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17
Q

Fixed rate

A

An interest rate that remains the same throughout the term of the mortgage

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18
Q

Fully open mortgage

A

An option allowing early repayment of the mortgage principal without penalty or notice

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19
Q

Graduated payment mortgage

A

A mortgage payment plan whereby the mortgage payments are initially small but grow over time. The initial payments may not be enough to the principal and accrued interest for the period.

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20
Q

High ratio mortgage

A

A mortgage in excess of 80% loan to value

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21
Q

Home equity line of credit (HELOC)

A

A line of credit secured by a property

22
Q

Interest accruing mortgage

A

A mortgage with a term whereby no repayments of interest or principal are made. The principal and compound interest are repayable at the end of the term.

23
Q

Interest only mortgage

A

A mortgage with a term and a constant mortgage payment consisting of only interest payable for the payment period. At the end of the term, the principal amount is repayable.

24
Q

Interest rate differential

A

The difference between a borrower’s current contracted rate and the lender’s current available rate for a similar term

25
Q

Line of credit

A

A debt with a credit limit that allows the borrow to withdraw funds up to that credit limit. Repayments are based on a percentage of the outstanding balance and interest is charged only on the amount of the credit limit that is actually used.

26
Q

Loan to value (LTV)

A

The amount of a loan to the value of the property expressed as a percentage. Loan to Value (%) = Loan / Property Value

27
Q

Lump sum payment

A

A payment of money applied directly to the mortgage principal

28
Q

Mortgage default insurance

A

An insurance policy which compensates the insured (the lender) for losses suffered by the default of the borrower

29
Q

Mortgage rank

A

The position of a mortgage registered on title of a property in relation to the timing of other registered mortgages. The first mortgage registered on title is considered a 1st mortgage. The next mortgage registered after the 1st is considered a 2nd mortgage, and so on.

30
Q

Negative amortization

A

A scenario in which the periodic payment is not sufficient to pay the accumulated interest and the principal for the payment period. This causes the amortization to extend beyond the amount contracted.

31
Q

Open mortgage

A

A mortgage that allows the borrower to repay the entire principal balance or portion thereof without penalty (fully open mortgage) or with an interest rate differential or 3 months’ interest penalty (partially open mortgage)

32
Q

Outstanding balance

A

The amount of the mortgage remaining to be repaid at a given time

33
Q

Partially amortized

A

A mortgage contract that has a term

34
Q

Partially amortized, blended constant payment mortgage - Fixed rate

A

A mortgage with a term and a repayment plan consisting of a fixed interest rate and the same periodic payment made up of a combination of interest and principal throughout the term.

35
Q

Partially amortized, blended constant payment mortgage - Variable rate

A

A mortgage with a term and a repayment plan consisting of a variable interest rate that changes whenever the lender’s prime rate changes and the same periodic payment made up of a fluctuating combination of interest and principal throughout the term.

36
Q

Partially amortized, blended variable payment mortgage - Variable rate

A

A mortgage with a term and a repayment plan consisting of a variable interest rate and a fluctuating periodic payment that both change whenever the lender’s prime rate changes. The payment consists of a fluctuating combination of interest and principal throughout the term.

37
Q

Portability option

A

This option allows the borrower to take the mortgage with him or her to his or her new home

38
Q

Power of sale

A

A process that allows the lender to take control of a property, sell it and repay its mortgage without having to use the courts (exceptions apply). This can be a quick and fairly inexpensive remedy available to lenders upon default by the borrower.

39
Q

Prepayment options

A

Options available to the borrower to prepay a part of his or her mortgage. These options may or may not include a penalty for this right

40
Q

Prepayment penalty

A

A penalty charged by a lender to a borrower for early prepayment of the mortgage

41
Q

Principal

A

The amount of money advanced on a mortgage loan, excluding interest or any other costs

42
Q

Property insurance

A

Insurance that protects the insured against losses to the property due to fire and other covered perils

43
Q

Purchaser

A

The buyer of a property

44
Q

Quiet possession

A

The right of a borrower to enjoy the property without interference by the lender unless there is a default by the borrower

45
Q

Reverse mortgage

A

An interest accruing mortgage typically reserved for Canadians over 55 years of age. The mortgage is usually only repayable upon the death of the surviving homeowner or sale of the property.

46
Q

Straight line principal reduction mortgage

A

A mortgage repayment plan whereby equal payments of principal are made throughout the term in addition to the interest payable for that period

47
Q

Term

A

A period of time in which the mortgage contract is in force. After this period of time the mortgage must be fully repaid or renegotiated.

48
Q

Variable payment

A

A payment that changes based on a lender’s prime rate

49
Q

Variable rate

A

An interest rate that fluctuates based on a lender’s prime rate

50
Q

Vendor

A

The seller of a property

REMIC (20 decks)

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