Mortgage Jargon – Part 5
If you missed the previous article – Mortgage Jargon – Part 4
We will continue in our series of Mortgage jargon. As full time Canadian real estate investors, we need to utilize the following definitions as part of our everyday language.
This is a document that outlines the legal and financial state of a condominium corporation. When a condominium corporation is formed, and goes on for a period of years, they have certain legal outlines and an annual (if not monthly) financial statement that is created by its members. If you are getting into purchasing a condominium project, you must understand the state of it financially and legally by getting an Estopple certificate.
A guarantor is a person who will make the payments on the loan if the borrower fails to do so. So that can be considered an immediate family member, but it can also be a friend. They are a co-signer who accepts liability if the owner does not follow through with his obligations.
A portable mortgage is a mortgage that you can take with you to a new home that you are buying at your current rate. So if you are half-way through your 5-year term on a particular mortgage, you can buy another property and take that mortgage with you to your new home at the current rate of your mortgage. This is provided that the mortgage amount remains the same.
Pre-approved mortgage is one where a lender will guarantee an interest rate for up to 120 days on a fixed-term loan. The lender or mortgage broker will also help you establish a price range by which you can search for in regards to property prices. This is generally based on the amount of confirmable income that you have. It is not typically based on your credit score. By that I mean that they will often not pull your credit before telling you how much property you can buy. This may come back to bite you if your credit is poor and you have found the home that you want to purchase.
Zoning is the geographical zones in a municipality designed for a specific use. A zoning by-law will outline the types of buildings that the municipality wants in certain places. In one area it could be residential; in another it could be industrial; and in another commercial, or agricultural, etc. Applications to change zoning from one use to another use can take some time, but if you understand what the town has in mind in its 20-year plan, it may be easier to go to a particular area and get that zoning changed.
After Repair Value (ARV)
Some lenders may give loans based on what the value of the property will be once it is fixed up. They may be able to advance you loans based on your property acquisition and your repairs to the property as you increase the value of the property to its highest value.
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