|Gross Household Income|
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Definition of Gross Household Income
Gross Household Income
gross household income is the total salary, wages, commissions and other assured income, before deductions, by all household members who are co-applicants for the mortgage.
income that has been earned but not yet received. For instance, if you have a non-registered Guaranteed Investment Certificate (GIC), Mutual Fund or Segregated Equity Fund, growth accrues annually or semi-annually and is taxable annually even though the gain is only paid at maturity of your investment.
This is a tax planning strategy of arranging for income to be transferred to family members who are in lower tax brackets than the one earning the income, thus reducing taxes. Even though attribution rules limit income splitting, there are still a number of legitimate ways to do so, such as through the use of spousal RRSPs.
Life Income Fund
Commonly known as a LIF, this is one of the options available to locked in Registered Pension Plan (RPP) holders for income payout as opposed to Registered Retirement Savings Plan (RRSP) holders choice of payout through Registered Retirement income Funds (RRIF). A LIF must be converted to a unisex annuity by the time the holder reaches age 80.
Registered Retirement Income Fund (Canada)
Commonly referred to as a RRIF, this is one of the options available to RRSP holders to convert their tax sheltered savings into taxable income.
Gross Debt Service (GDS) Ratio
The percentage of gross income required to cover monthly payments associated with housing costs. Most lenders recommend that the GDS ratio be no more than 32% of your gross (before tax) monthly income.
Legislation under which interest, dividends, or capital gains earned on assets you transfer to your spouse will be treated as your own for tax purposes. Interest or dividends relating to property transferred to children under 18 also will be attributed back to you. The exception to This rule is that capital gains relating to property transferred to children under 18 will not be attributed back to you.
Canadian Deposit Insurance Corporation
Better known as CDIC, This is an organization which insures qualifying deposits and GICs at savings institutions, mainly banks and trust companys, which belong to the CDIC for amounts up to $60,000 and for terms of up to five years. Many types of deposits are not insured, such as mortgage-backed deposits, annuities of duration of more than five years, and Mutual Funds.
In medical insurance, the insured person and the insurer sometimes share the cost of services under a policy in a specified ratio, for example 80% by the insurer and 20% by the insured. By This means, the cost of coverage to the insured is reduced.
Interest earned on an investment at periodic intervals and added to principal and previous interest earned. Each time new interest earned is calculated it is on a combined total of principal and previous interest earned. Essentially, interest is paid on top of interest.
This is the person designated to receive the death benefit of a life insurance policy if the primary beneficiary dies before the life insured. This is a consideration when husband and wife make each other the beneficiary of their coverage. Should they both die in the same car accident or plane crash, the death benefits would go to each others estate and creditor claims could be made against them. Particularly if minor children could be survivors, then a trustee contingent beneficiary should be named.
This is the person designated to become the new owner of a life insurance policy if the original owner dies before the life insured.
Term life insurance products are offered as non-convertible or convertible to a certain time in the future. The coversion right has a time limit, usually to the policy holder's age 60 or possibly Even age 70. This right means that the policy holder has the right to convert their existing policy to another specific different plan of permanent insurance within the specified time period, without providing evidence of insurability. there is a slightly higher cost for a term policy with the conversion priviledge but it is a valuable feature should a policy holder's health change for the worst and continued insurance coverage becomes a necessity.
Dollar Cost Averaging
A way of smoothing out your investment deposits by investing regularly. Instead of making one large deposit a year into your RRSP, you make smaller regular monthly deposits. If you are buying units in a Mutual Fund or Segregated Equity Fund, you would end up buying more units in the month that values were low and less units in the month that values were higher. By spreading out your purchases, you don't have to worry about buying at the right time.
Life insurance payable to the policyholder, if living on the maturity date stated in the policy, or to a beneficiary if the insured dies before that date. For example, some Term to age 100 policies offer the option of taking the face amount of the policy as a cash payout at age 100 if the policyholder is still alive and paying all required income taxes on the amount received or leaving the policy to pay out upon death whereupon the payout is tax free.
Fiat Money is paper currency made legal tender by law or fiat. It is not backed by gold or silver and is not necessarily redeemable in coin. This practice has had widespread use for about the last 70 years. If governments produce too much of it, there is a loss of confidence. Even so, governments print it routinely when they need it. The value of fiat money is dependent upon the performance of the economy of the country which issued it. Canada's currency falls into This category.
First To Die Coverage
This means that there are two or more life insured on the same policy but the death benefit is paid out on the first death only. If two or more persons at the same address are purchasing life insurance at the same time, it is wise to compare the cost of This kind of coverage with individual policies having a multiple policy discount.
This clause in regular life insurance policy provides for voiding the contract of insurance for up to two years from the date of issue of the coverage if the life insured has failed to disclose important information or if there has been a misrepresentation of a material fact which would have prEvented the coverage from being issued in the first place. After the end of two years from issue, a misrepresentation of smoking habits or age can still void or change the policy.
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.]
Last To Die Coverage
This means that there are two or more life insured on the same policy but the death benefit is paid out on the last person to die. The cost of This type of coverage is much less than a first to die policy and it is generally used to protect estate value for children where there might be substantial capital gains taxes due upon the death of the last parent. This kind of policy is also valuable when one of two people covered has health problems which would prohibit obtaining individual coverage.
Life Income Fund
commonly known as a LIF, This is one of the options available to locked in registered Pension Plan (RPP) holders for income payout as opposed to registered Retirement Savings Plan (RRSP) holders choice of payout through registered Retirement income Funds (RRIF). A LIF must be converted to a unisex annuity by the time the holder reaches age 80.
This is the process by which "dirty money" generated by criminal activities is converted through legitimate businesses into assets that cannot be easily traced back to their illegal origins.
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.
In October 1996 it was announced in the international news that scientists had finally located the link between cigarette smoking and lung cancer. In the early 1980's, some Canadian Life Insurance companies had already started recognizing that non-smokers had a better life expectancy than smokers so commenced offering premium discounts for life insurance to new applicants who have been non-smokers for at least 12 months before applying for coverage. Today, most life insurance companies offer these discounts.
This is the maximum value of a policy that an insurance company will issue without the applicant taking a medical examination, although medical questions are invariably asked during the application process. When a non-medical issue is made through group insurance, in most cases, medical data is not requested at all.
Registered Pension Plan
commonly referred to as an RPP This is a tax sheltered employee group plan approved by Federal and Provincial governments allowing employees to have deductions made directly from their wages by their employer with a resulting reduction of income taxes at source. These plans are easy to implement but difficult to dissolve should the group have a change of heart. Employer contributions are usually a percentage of the employee's salary, typically from 3% to 5%, with a maximum of the lessor of 20% or $3,500 per annum. The employee has the same right of contribution. Vesting is generally set at 2 years, which means that the employee has right of ownership of both his/her and his/her employers contributions to the plan after 2 years. It also means that all contributions are locked in after 2 years and cannot be cashed in for use by the employee in a low income year. Should the employee change jobs, these Funds can only be transferred to the RPP of a new employer or the Funds can be transferred to an individual RRSP (or any number of RRSPs) but in either scenario, the Funds are locked in and cannot be accessed until at least age 60. The only choices available to access locked in RPP Funds after age 60 are the conversion to a Life income Fund or a Unisex Annuity.
Registered Retirement Savings Plan (Canada)
commonly referred to as an RRSP, This is a tax sheltered and tax deferred savings plan recognized by the Federal and Provincial tax authorities, whereby deposits are fully tax deductable in the year of deposit and fully taxable in the year of receipt. The ability to defer taxes on RRSP earnings allows one to save much faster than is ordinarily possible. The new rules which apply to RRSP's are that the holder of such a plan must convert it into income by the end of the year in which the holder turns age 69. The choices for conversion are to simply cash it in an pay full tax in the year of receipt, convert it to a RRIF and take a varying stream of income, paying tax on the amount received annually until the income is exhausted, or converting it into an annuity with Guaranteed payments for a chosen number of years, again paying tax each year on moneys received.
Registered Retirement Income Fund (Canada)
commonly referred to as a RRIF, This is one of the options available to RRSP holders to convert their tax sheltered savings into taxable income.
Spousal Registered Retirement Savings Plan
This is an RRSP owned by the spouse of the person contributing to it. The contributor can direct up to 100% of eligible RRSP deposits into a spousal RRSP each and every year. contributing to a spouses RRSP reduces the amount one can contribute to one's own RRSP, however, if the spouse is a lower income earner, it is an excellent way in which to split income for lower taxation in retirement years.
Split Dollar Life Insurance
The split dollar concept is usually associated with cash value life insurance where there is a death benefit and an accumulation of cash value. The basic premise is the sharing of the costs and benefits of a life insurance policy by two or more parties. Usually one party owns and pays for the insurance protection and the other owns and pays for the cash accumulation. there is no single way to structure a split dollar arrangement. The possible structures are limited only by the imagination of the parties involved.
sometimes called seg Funds, Segregated Funds are the life insurance industry equivalent to a Mutual Fund with some differences.The term "Mutual Fund" is often used generically, to cover a wide variety of Funds where the investment capital from a large number of investors is "pooled" together and invested into specific stocks, bonds, mortgages, etc.
Generally, a suicide clause in a regular life insurance policy provides for voiding the contract of insurance if the life insured commits suicide within two years of the date of issue of the coverage.
The sum of all the interest options in your policy, including interest.
Canadian Life and Health Insurance Association (CLHIA)
An association of most of the life and health insurance companies in Canada that conducts research and compiles information about the life and health insurance industry in Canada.
cost of living adjustment.
Commercial Business Loan (Credit Insurance)
An agreement between a creditor and a borrower, where the creditor has loaned an amount to the borrower for business purposes.
Events that are possible, but may or may not happen. Premium rates and acceptance of certain risk are based on contingencies.
This is the principle which specifies the factors that must be taken into account when calculating dividends. At Canada Life, the key factors are: interest earnings, mortality, and operating expense.
The act of changing from one type of life insurance policy to another, without having to give evidence of insurability.
Cost of Insurance
The cost of insuring a particular individual under the policy. It is based on the amount of coverage, as well as the underwriting class, age, sex and tobacco consumption of that individual.
Life insurance or annuity product in which the cash value and benefit level fluctuate according to the performance of an Equity portfolio.
through Equity investment, investors gain part ownership of the corporation. The primary type of Equity investment is corporate stock.
An insurance program designed to provide Funds for insured's dependents upon death of the insured, and to also conserve, as much as possible, the personal assets that the insured wants to bequeath to heirs.
Guaranteed Interest Annuity (GIA)
Interest bearing investment with fixed rate and term.
Guaranteed Interest Certificate (GIC)
Interest bearing investment with fixed rate and term.
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.
The time when a policy or annuity reaches the end of its span.
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 (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.
A type of insurance policy or annuity in which the owner does not receive dividends.
A type of insurance policy or annuity in which the owner receives dividends, typically increases the death.
Assets used to pay the pensions of retirees. An investment institution established to manage the assets used to pay the pensions of retirees.
Personal Line of credit (Credit Insurance)
A bank's commitment to make loans to a borrower up to a specified maximum during a specific period, usually one year.
Pre-existing medical condition (Credit Insurance)
A medical condition that existed before you became insured. Most policies exclude benefits if the condition is related to the Event that triggers a claim if occurs within a certain period (6-12 months) after you became insured.
A pool of assets held by the insurer, to back a specific liability to a policyholder. Segregated Funds flucuate in value depending on the market value of a specific group of assets the company must maintain separately.
Premiums paid for coverage not yet provided.
component that provides life coverage during the insured's life.
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).
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.
Certificate of Location or Survey
A document specifying the exact location of the building on the property and describing the type and size of the building including additions, if any.
Certificate of Search or Abstract of Title
A document setting out instruments registered against the title to the property, e.g. deed, mortgages, etc.
A mortgage agreement that cannot be prepaid, renegotiated or refinanced before maturity, except according to its terms.
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.
CMHC or GEMICO Insurance Premium
mortgage insurance insures the lender against loss in case of default by the borrower. mortgage insurance is provided to the lender by CMHC or GEMIco and the premium is paid by the borrower.
An offer to purchase subject to conditions. These conditions may relate to financing, or the sale of an existing home. Usually a time limit in which the specified conditions must be satisfied is stipulated.
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).
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.
The interest of the owner in a property over and above all claims against the property. It is usually the difference between the market value of the property and any outstanding encumbrances.
A mortgage for which the rate of interest is fixed for a specific period of time (the term).
Gross Debt Service (GDS) Ratio
The percentage of Gross income required to cover monthly payments associated with housing costs. Most lenders recommend that the GDS ratio be no more than 32% of your Gross (before tax) monthly income.
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.
The difference between the price for which a home could be sold (market value) and the total debts registered against it.
Last day of the term of the mortgage agreement.
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.
Mortgagee and Mortgagor
The lender is the mortgagee and the borrower is the mortgagor.
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.
The number of years or months over which you pay a specified interest rate. Terms usually range from six months to 10 years.
A mortgage which can be prepaid at any time, without penalty.
Total Debt Service (TDS) Ratio
The percentage of Gross income needed to cover monthly payments for housing and all other debts and financing obligations. The total should generally not exceed 37% of Gross monthly income.
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.
one of a group of homes in a two-story building, with own garage and entrance.
A condition that must be satisfied before a contract is binding. Inspection and obtaining financing are the two most common.
A home with a courtyard as its main entrance.
The value of a homeowner's unencumbered interest in real estate. Equity is the difference between the home's fair market value and the unpaid balance of the mortgage and any outstanding liens. Equity increases as the mortgage is paid down or as the property appreciates.
A deposit made by potential home buyers during negotiations with the seller. The sum shows a seller that a buyer is serious about purchasing the property. The money usually is counted toward the down payment.
Most lenders set up This account that receives monthly payments from home buyers to pay for obligations such as insurance, taxes and assessments.
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.
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.
A charge from the city or county for recording the transfer of the property.
A detached house.
one of a row of houses connected with common side walls.
The outside fan unit of the air conditioning system. It removes the heat from the freon gas, "turns" the gas back into a liquid, and pumps the liquid back to the coil in the furnace.
The main electrical ON-OFF switch near the A/C condenser.
A sum of money set aside in the construction contract for items which have not been selected and specified in the construction contract. For example, selection of tile as a flooring may require an allowance for an underlayment material, or an electrical allowance which sets aside an amount of money to be spent on electrical fixtures.
corrugated metal or concrete barrier walls installed around a basement window to hold back the earth.
Single level windows that tilt outward and up.
A transformer that steps up the voltage in a florescent lamp.
A loan that has a series of monthly payments with the remaining balance due in a large lump sum payment at the end.
Balloon Framed Wall
Framed walls (generally over 10' tall) that run the entire vertical length from the floor sill plate to the roof. This is done to eliminate the need for a gable end truss.
A window that projects outward in a curve.
A comprehensive set of laws that controls the construction or remodeling of a home or other structure.
Bull Nose Drywall
Rounded drywall corners.
Central Air Conditioning
A system which uses ducts to distribute cooling and/or dehumidified air to more than one room or uses pipes to distribute chilled water to heat exchangers in more than one room, and which is not plugged into an electrical convenience outlet.
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