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Glossary - T

Mortgage Brokers Glossary - T

Tax Certificate:

At the time of a sale, the lawyer for the buyer must confirm that local taxes have been paid up to date. If they are, a Tax Certificate is issued, from which any adjustments can be made - usually requiring the buyer to compensate the seller for any prepaid taxes. If they are not up to date, the municipality requires that the seller pay them off from the proceeds of the sale. If there are insufficient proceeds, then it may fall upon the buyer to pay them.

Title Insurance:

Insurance offered by Title Companies to protect a landowner, and thus the mortgage lender against any "clouds" or legal questions on the title to the real estate, or of legal priority of the mortgagee. This is usually considerably less expensive than the labour-intensive and liability-fraught process of having to have a lawyer search title, and certify it as "clear" -- a process known as "certifying title" or giving an "opinion of title."

Total Debt Service ratio (TDS):

The percentage arrived at by dividing your monthly shelter costs (principal, interest, property taxes, heating and half of condo fees) PLUS all other monthly debt obligations by your gross monthly income and multiplying by 100. This is used by all lenders as the "upper limit" yardstick by which to measure the ability of a borrower (or borrowers) to make mortgage payments. For example, most lenders require that this ratio be no more than 40% for a particular application, with some as low as 37%. 40% is also the maximum qualifying TDS in most applications for default insurance.

Transfer/Switch:

This is the term almost universally applied to changing lenders at the end of a term, when the mortgage becomes "open". Most lenders will now pay all of the costs of a "switch/transfer." (as well as giving them a reduced rate to lure them away from a competitor)