Definition of Closing Date

Closing Date

The date on which the sale of a property becomes final and the new owner usually takes possession.

Interim Financing

Short-term financing to help a buyer bridge the gap between the closing date on the purchase of a new home and the closing date on the sale of the current home.

Closing

The meeting at which the sale of a property is finalized. The buyer signs the lender agreement for the mortgage and pays closing costs and escrow amounts. The buyer and seller sign documents to transfer ownership of the property. Also known as the settlement.

Closing Costs

Various expenses associated with purchasing a home. These costs can include, but are not limited to, legal/notary fees and disbursements, property land transfer taxes, as well as adjustments for prepaid property taxes or condominium common expenses, if any.

Issue Date

date on which a policy is approved.

Maturity Date

Last day of the term of the mortgage agreement.

Policy Date

date on which the insurance company assumes responsibilities for the obligations outlined in a policy.

Valuation Date

date on which valuation occurs.

Refinancing

Renegotiating your existing mortgage agreement. May include increasing the principal or paying out the mortgage in full.

Refinancing (Credit Insurance)

Extending the maturity date or increasing the amount of existing debt or both. Also, revising a payment schedule, usually to reduce the monthly payments and often to modify interest charges.

Agreement of Purchase and Sale

A legal agreement that offers a certain price for a home. The offer may be firm (no conditions attached), or conditional (certain conditions must be fulfilled before the deal can be closed).

Assignment

This is the legal transfer on one person's interest in an insurance policy to another person or entity, such as to a bank to qualify for a loan

Buy/Sell Agreement

This is an agreement entered into by the owners of a business to define the conditions under which the interests of each shareholder will be bought and sold. The agreement sets the value of each shareholders interest and stipulates what happens when one of the owners wishes to dispose of his/her interest during his/her lifetime as well as disposal of interest upon death or disability. Life insurance, critical illness coverage and disability insurance are major considerations to help fund this type of agreement.

Canada Mortgage and Housing Corporation (CMHC)

The National Housing Act (NHA) authorized Canada mortgage and Housing Corporation (CMHC) to operate a mortgage Insurance Fund which protects NHA Approved lenders from losses resulting from borrower default.

Closed Mortgage

A mortgage agreement that cannot be prepaid, renegotiated or refinanced before maturity, except according to its terms.

Closing Costs

Various expenses associated with purchasing a home. These costs can include, but are not limited to, legal/notary fees and disbursements, property land transfer taxes, as well as adjustments for prepaid property taxes or condominium common expenses, if any.

Coach home

One of a group of homes in a two-story building, with own garage and entrance.

Construction Documents

All drawings, specifications and addenda associated with a specific construction project.

Contingent Owner

This is the person designated to become the new owner of a life insurance policy if the original owner dies before the life insured.

Conventional Mortgage

A mortgage that does not exceed 80% of the purchase price of the home. mortgages that exceed this limit must be insured against default, and are referred to as high-ratio mortgages (see below).

Courtyard home

A home with a courtyard as its main entrance.

Deed (Certificate of Ownership)

The document signed by the seller transferring ownership of the home to the purchaser. This document is then registered against the title to the property as evidence of the purchaser's ownership of the property.

Escrow account

Most lenders set up this account that receives monthly payments from home buyers to pay for obligations such as insurance, taxes and assessments.

Fixed-Rate Mortgage

A mortgage for which the rate of interest is fixed for a specific period of time (the term).

GFI -See Ground Fault Current Interrupter

Ground Fault Current Interrupter

An electrical device used to prevent injury from contact with faulty electrical appliances and faulty wiring
electrical shocks. GFIs should not be confused with AFIs, the later are designed to prevent electrical fires. GFIs are required in new home bathrooms, kitchen, garage, out of doors and in other locations where one might be in contact with a grounded surface or body of water and an electrical appliance. Most GFI's are located in the receptacle itself or a curcuit breaker and can be identified by the presence of a 'test' and a 'reset' button.

Guaranteed Renewal

A promise that a life insurance policy will be renewed without penalty or medical examination after the term has expired. The renewal rate can Also be guaranteed.

High Ratio Mortgage

If you don't have 20% of the lesser of the purchase price or appraised value of the property, your mortgage must be insured against payment default by a mortgage Insurer, such as CMHC.

Home Equity

The difference between the price for which a home could be sold (market value) and the total debts registered against it.

Home warranty

Like any other warranty, this guarantees the property against failure of mechanical systems, such as plumbing, electrical, heating and installed appliances.

Insured Mortgage

An insured mortgage protects only the mortgage lender in case you do not make your mortgage payments. This coverage is provided by CMHC [Canada mortgage and Housing Corporation] and is required if a person has a high-ratio mortgage. [A mortgage is high-ratio if the amount borrowed is more than 75% of the purchase price or appraised value, whichever is less.]

Issue Date

date on which a policy is approved.

Lender (Credit Insurance)

Individual or firm that extends money to a borrower with the expectation of being repaid, usually with interest. lenders create debt in the form of loans. lenders include financial institutions, leasing companies government lending agencies and automobile dealers.

Maturity Date

Last day of the term of the mortgage agreement.

Mortgage broker

An independent individual (or company) who brings together borrowers and lenders together. Unlike a mortgage banker, a mortgage broker does not fund the loan. Instead, the broker originates and processes the loan, and places it with a funding source, such as a bank or thrift. Brokers typically require a fee or a commission for their services.

Mortgage (Credit Insurance)

An agreement between a creditor and a borrower, where the creditor has loaned an amount to the borrower for purposes of purchasing a loan secured by a home.

Mortgage Critical Illness Insurance

mortgage Critical Illness Insurance is available as an enhancement to mortgage Life Insurance. It is usually underwritten by the Assurance Company. Complete details of benefits, exclusions and limitations are contained in the Certificate of Insurance. It is recommended for all mortgagors. It can pay off your mortgage -- up predefined limit -- if you are diagnosed with life-threatening cancer, heart attack or stroke.

Mortgage Insurance

Commonly sold in the form of reducing term life insurance by lending institutions, this is life insurance with a death benefit reducing to zero over a specific period of time, usually 20 to 25 years. In most instances, the cost of coverage remains level, while the death benefit continues to decline. Re-stated, the cost of this kind of insurance is actually increasing since less death benefit is paid as the outstanding mortgage balance decreases while the cost remains the same. Lending institutions are the most popular sources for this kind of coverage because it is usually sold during the purchase of a new mortgage. The untrained institution mortgage sales person often gives the impression that this is the only place mortgage insurance can be purchased but it is more efficiently purchased at a lower cost and with more flexibility, directly from traditional life insurance companies. No matter where it is purchased, the reducing term insurance death benefit reduces over a set period of years. Most consumers are up-sizing their residences, not down-sizing, so it is likely that more coverage is required as years pass, rather than less coverage.
The cost of mortgage lender's insurance group coverage is based on a blended non-smoker/smoker rate, not having any advantage to either male or female. mortgage lender's group insurance certificate specifies that it [the lender] is the sole beneficiary entitled to receive the death benefit. mortgage lender's group insurance is not portable and is not guaranteed. Generally speaking, your coverage is void if you do not occupy the house for a period of time, rent the home, fall into arrears on the mortgage, and there are a few others which vary by institution. If, for example, you sell your home and buy another, your current mortgage insurance coverage ends and you will have to qualify for new coverage when you purchase your next home. Maybe you won't be able to qualify. Not being guaranteed means that it is possible for the lending institution's group insurance carrier to cancel all policy holder's coverages if they are experiencing too many death benefit claims.
mortgage insurance purchased from a life insurance company, is priced, based on gender, smoking status, health and lifestyle of the purchaser. Once obtained, it is a unilateral contract in your favour, which cannot be cancelled by the insurance company unless you say so or unless you stop paying for it. It pays upon the death of the life insured to any "named beneficiary" you choose, tax free. If, instead of reducing term life insurance, you have purchased enough level or increasing life insurance coverage based on your projection of future need, you can buy as many new homes in the future as you want and you won't have to worry about coverage you might loose by renewing or increasing your mortgage.
It is worth mentioning mortgage creditor protection insurance since it is many times mistakenly referred to simply as mortgage insurance. If a home buyer has a limited amount of down payment towards a substantial home purchase price, he/she may qualify for a high ratio mortgage on a home purchase if a lump sum fee is paid for mortgage creditor protection insurance. The only Canadian mortgage lenders currently known to offer this option through the distribution system of banks and trust companies, are General Electric Capital [GE Capital] and Central mortgage and Housing Corporation [CMHC]. The lump sum fee is mandatory when the mortgage is more than 75% of the value of the property being purchased. The lump sum fee is usually added onto the mortgage. It's important to realize that the only beneficiary of this type of coverage is the morgage lender, which is the bank or trust company through which the buyer arranged their mortgage. If the buyer for some reason defaults on this kind of high ratio mortgage and the value of the property has dropped since being purchased, the mortgage creditor protection insurance makes certain that the bank or trust company gets paid. However, this is not the end of the story, because whatever the difference is, between the disposition value of the property and whatever sum of unpaid mortgage money is outstanding to either GE Capital or CMHC will be the subject of collection procedures against the defaulting home buyer. Therefore, one should conclude that this kind of insurance offers protection only to the bank or trust company and absolutely no protection to the home buyer.

Mortgage Life Insurance

A form of reducing term insurance recommended for all mortgagors. If you die, have a terminal illness, or suffer an accident, the insurance can pay the balance owing on the mortgage. The intent is to protect survivors from the loss of their homes.

Mortgage Life insurance (Credit Insurance)

Decreasing term life insurance that provides a death benefit amount corresponding to the decreasing amount owed on a mortgage.

Mortgage Term

The number of years or months over which you pay a specified interest rate. terms usually range from six months to 10 years.

Mortgagee and Mortgagor

The lender is the mortgagee and the borrower is the mortgagor.

Open Mortgage

A mortgage which can be prepaid at any time, without penalty.

Owner

This is the person who owns the insurance policy. It is usually the same person as the insured but it could be someone else who has the permission of the insured to be the owner, like a spouse, a common-law-spouse, an offspring, a parent, a corporation with insurable interest or a business partner with insurable interest. In order for someone else to be an owner of your policy, they have to have a legitimate insurable interest in you.

Patio home

Small, single-family home with a patio.

Policy Date

date on which the insurance company assumes responsibilities for the obligations outlined in a policy.

Policyowner

The person who owns and holds all rights under the policy, including the power to name and change beneficiaries, make a policy loan, assign the policy to a financial institution as collateral for a loan, withdraw funds or surrender the policy.

Private Mortgage Insurance (PMI)

Insurance that protects mortgage lenders against default on loans by providing a way for mortgage companies to recoup the costs of foreclosure. PMI is usually required if the down payment is less than 20 percent of the sale price. home buyers pay for the coverage in monthly installments. PMI should be terminated when the home buyer has built up 20 percent equity in the property.

Renewal

At the end of a mortgage term, the mortgage may "roll over" on new terms and conditions acceptable to both the lender and the borrower. This is known as renewing a mortgage. Otherwise, the lender is entitled to be repaid in full. In this case, the borrower may seek alternative financing.

Single-family home

A detached house.

Stick-Built Home

A house built without prefabricated parts. Also called conventional building.

Structured Settlement

Historically, damages paid out during settlement of personal physical injury cases were distributed in the form of a lump-sum cash payment to the plaintiff. This windfall was intended to provide for a lifetime of medical and income needs. The claimant or his/her family was then forced into the position of becoming the manager of a large sum of money.
In an effort to create a more financially stable arrangement for the claimant, the Structured settlement was developed. A Structured settlement is an alternative to a lump sum cash payment in the resolution of personal physical injury, wrongful death, or workers’ compensation cases. The settlement usually consists of two components: an up-front cash payment to provide for immediate needs and a series of future periodic payments which are funded by the defendant’s purchase of one or more annuity policies. Those payors make payments directly to the claimant. In the unfortunate event of the claimant’s death, a guaranteed portion of the settlement may be directed to a beneficiary or his/her estate.
A Structured settlement is a guaranteed source of funds paid to the claimant or his/her family on a tax-free basis.

Term

The length of the current mortgage agreement. A mortgage may be amortized over a long period (such as 40 years) with a Shorter term (six months to five years or more). After the term expires, the balance of the principal then owing on the mortgage can be repaid or a new mortgage agreement can be entered into at the then current interest rates. Visit our Renewal site.

Term

The time period during which a policy is in force, or the time it takes for a policy to reach maturity.

Term Life

A product that provides life coverage for a specified duration typically not beyond the age of 75.

Term Life Insurance

A plan of insurance which covers the insured for only a certain period of time and not necessarily for his or her entire life. The policy pays a death benefit only if the insured dies during the term.

Terminal Illness Insurance (Credit Insurance)

Coverage that provides a lump-sum payment should you become terminally ill. The payment is made to your creditors to pay off your debt owing.

Terminate

Cease all legal obligations under a contract.

Valuation Date

date on which valuation occurs.

Variable Rate Mortgage

A mortgage for which the rate of interest may change if other market conditions change. This is sometimes referred to as a floating rate mortgage.

Viatical Settlement

A dictionary meaning for the word viatica is "the eucharist as given to a dying person or to one in danger of death". In the context of Viatical settlement it means the selling of one's own life insurance policy to another in exchange for an immediate percentage of the death benefit. The person or in many cases, group of persons buying the rights to the policy have high expectation of the imminent death of the previous owner. The sooner the death of the previous owner, the higher the profit. Consumer knowledge about this subject is poor and little is known about the entities that fund the companies that purchase policies. People should be very careful when considering the sale of their policy, and they should remember a sale of their life insurance means some group of strangers now owns a contract on their life. If a senior finds it difficult to pay for an insurance policy it might be a better choice to request that current beneficiaries take over the burden of paying the premium. The practice selling personal life insurance policies common in the United States and is spilling over into Canada. It would appear to have a definite conflict with Canada's historical view of 'insurable interest'.

Yearly Renewable Term Insurance

Sometimes, simply called YRT, this is a form of term life insurance that may be renewed annually without evidence of insurability to a stated age.

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