HOW ARE YOUR COMMERCIAL MORTGAGES DIFFERENT FROM THE BANKS?

Banks approve commercial mortgages based on two major factors: 1: Your credit score. 2: Your net income. If your credit score is below 680 and your income is not high enough to service your mortgage and other credit facilities, you will NOT get approved for a commercial mortgage in Canada. At Freedom Capital, you are not a ‘number’ to us! We use a common-sense approach while approving your mortgage. No red tape, no waiting for weeks. We simply require the equity and will provide you with a viable, no-obligation option with minimal documentation.

ARE PRIVATE COMMERCIAL MORTGAGES MORE EXPENSIVE?

Let’s compare apples to apples. If you were declined from the bank, then NO, private commercial mortgages are not more expensive. We work hard to get the best possible terms in the market and provide you with the solutions that you need. Since these mortgages are riskier for lenders, they have higher interest rates. However, at Freedom Capital, we don’t get paid on rate, we obtain terms that make sense for our borrower. If you are looking for the best rate and you have a good income and strong credit, we strongly recommend you contact your local bank and see if you can get approved for commercial financing. However, if for any reason you get declined, we may be able to help! We are a solutions provider and take pride in providing viable options for your commercial mortgage. If you were not approved by your local bank, Freedom Capital can help get you some options to get you started in the real estate industry.

Canadian Mortgage Glossary

Mortgage Glossary

Abstract of title

Registry System: A condensed history of the title to a parcel of land. The abstract consists of a synopsis of every recorded instrument affecting the title to that land arranged in chronological order of recording.

Accelerated Bi-weekly mortgage payments

Mortgage payments which are made every 2 weeks for a total of 26 payments per year. Not to be confused with semi-monthly mortgage payments. Read Article for more information.

Amortization period

The actual number of years it will take to pay back your mortgage loan. In Canada the amortization does not generally exceed 25 years.

Appraised Value

An estimate of the value of the property, conducted for the purpose of mortgage lending by a certified appraiser. This appraisal is not to be confused with a building inspection.

Arms Length

A transaction between unrelated entities where a willing seller (the seller is not compelled to sell) transacts with a willing buyer (the buyer is not compelled to buy).

Assumability

Allows the buyer to take over the seller’s mortgage on the property.

Closed Mortgage

A mortgage that locks you into a specific payment schedule. A penalty usually applies if you repay the loan in full before the end of a closed term.

Compound Period

The number of times per year in which the interest rate is compounded. In Canada, mortgages are generally compounded semi-annual, which is twice per year.

Condominium Fee

A common payment among owners which is allocated to pay expenses associated with the development.

Conventional Mortgage

A mortgage loan issued for up to 80% of the property’s appraised value or purchase price, whichever is less.

Down Payment

The buyer’s cash payment toward the property. The difference between the purchase price and the amount of the mortgage loan.

Effective Interest Rate

This is the actual interest rate paid on a loan or mortgage. In Canada, mortgages typically have a higher effective interest rate because of the fact that interest rates are compounded semi-annually or twice per year.

Equity

The difference between the price for which a property could be sold less the total debt registered against the property.

First Mortgage

The first mortgage in the mortgage agreement that is considered to be in first place and will have first claim on assets in the event of default.

Fixed Rate Mortgage

A mortgage in which the rate of interest has been fixed for a specific period of time. This specific period of time is generally known as the term.

GDS Ratio (Gross Debt Service Ratio)

The percentage of gross annual income required to cover payments associated with housing. Payments include mortgage principal, interest, property taxes and sometimes include secondary financing, heating, condominium fees or pad rent.

High Ratio Mortgage

A mortgage that exceeds 75% of the home’s appraised value or purchase price, whichever is lower. These mortgages must be insured for payment.

Interest Rate

The value charged by the lender for the use of the lender’s money. Expressed as a percentage.

Land Transfer Tax, Deed Tax, Property Purchase Tax

A Land Transfer tax is fee paid to the municipal and/or provincial government for the transferring of property from seller to buyer.

Loan to Value Ratio

The ratio of the loan to the appraised value or purchase price of the property, whichever is lower.

Maturity Age

The end of the term, at which time you can pay off the mortgage or renew it.

Mortgage Insurance

Applies to high-ratio mortgages. It protects the lender against loss if the borrower is unable to repay the mortgage. Read more about mortgage insurance.

Mortgage Life Insurance

Pays off the mortgage if the borrower dies.

Mortgagee

The party who advances the funds for a mortgage loan. The lender.

Mortgagor

One who gives a mortgage as security for a loan. The borrower.

Nominal Interest Rate

An interest rate which does not necessarily correspond to the effective interest rate. In Canada, these two rates do not correspond.

Open Mortgage

Allows partial or full payment of the principal at any time, without penalty.

OSB (Outstanding Balance)

The amount of principal which is still outstanding at the end of the term.

Portability

A portable mortgage option that enables borrowers to take their current mortgage with them to another property, without penalty.

Pre-Approved Mortgage

Qualifies you for a mortgage before you start shopping. You know exactly how much you can spend and are free to make a “firm” offer when you find the right home.

Prepayment Privileges

Voluntary payments in addition to regular mortgage payments. Read more about mortgage prepayment privileges.

Principal

The amount borrowed or still owing on a mortgage loan. Interest is paid on the principal amount.

Refinancing

Refinancing is Paying off the existing mortgage and arranging a new one or re-negotiating the terms and conditions of an existing mortgage.

Renewal

Re-negotiation of a mortgage loan or renewal of a mortgage at the end of a term for a new term.

Second Mortgage

Second Mortgage is Additional financing. Usually has a shorter term and higher interest rate than the first mortgage.

Semi-Monthly Mortgage Payments

Mortgage payments which are made on the 1st and 15th of the month, or twice per month, 24 payments per year. Not to be confused with bi-weekly mortgage payments (26 payments per year).

TDS Ratio (Total Debt Service Ratio)

The percentage of gross annual income required to cover payments associated with housing and all other debts and obligations, such as car loans and credit cards.

Term

The length of time the interest rate is fixed. It also indicates when the principal balance becomes due and payable to the lender.

Title

Legal ownership in a property.

Variable Rate Mortgage

A mortgage with fixed payments, but fluctuates with interest rates. The changing interest rate determines how much of the payment goes towards the principal.

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Canadian Mortgage Glossary

Mortgage Glossary

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