Glossary

Blanket Mortgage
A blanket mortgage is a single mortgage that covers two or more real estate properties, often used by real estate investors and developers. This type of mortgage lacks a 'due on sale' clause, which means the blanket loan will survive the sale of one or more of the properties by which it is secured. This product also typically comes with higher rates compared to a traditional mortgage.

For security purposes, a blanket mortgage allows a lender to foreclose on all the properties registered on the mortgage to recoup losses in the event of borrower default.

Closed Mortgage
A closed mortgage term is one that cannot be prepaid or renegotiated for a set period of time without penalties and fees.

Credit Score
A number assigned between 300 and 900 by credit bureaus. It is calculated from a system that assesses a borrower on a number of items and assigns points to represent creditworthiness. A credit score is used by lenders to assess or approve you for borrowing. In Canada, a credit score is provided by either Equifax or TransUnion.

Equifax identifies good to excellent credit scores as between 660 to 900.

Diversified Investment Portfolio
A collection of investments in various assets that seeks to earn the highest possible return while reducing likely risks. A mixture of different types of assets, including ones geared towards short, medium and long-term investment horizons, can help offset losses in other assets when others gain, depending on the state of the economy

Guaranteed Investment Certificate (GIC)
A Guaranteed Investment Certificate is a Canadian Government-secured savings product. It offers a guaranteed rate and fixed returns over a specified period. With a low-risk profile (generally considered safe since these products are backed by the government), the investment returns on GICs are often modest, especially in low-interest-rate environments.

High-Yield Mortgage
A high-yield mortgage is an uninsured mortgage with a higher-than-average interest rate that caters to borrowers who may not qualify for traditional bank financing, often due to lower credit scores or unconventional income sources. Also commonly referred to as a subprime mortgage.

High-yield mortgages typically have increased borrower risk for default, which is why higher interest rates are charged. The perceived risk level can vary depending on borrower details and the lender's qualification requirements. The Morcado™ investment platform does not offer mortgages that are considered a high risk for default.

Insured Mortgages
An insured mortgage, also referred to as a high-ratio mortgage, is legally required to carry mortgage default insurance due to a loan-to-value (LTV) greater than 80%. This type of mortgage is backed by the Canadian government, making it a low-risk mortgage investment prospect. 

Liquidity
The amount of money an investor has on hand, and the ability to quickly convert assets into cash.

LIRA (Locked-In Retirement Account)
A type of government-registered retirement account used to hold locked-in pension funds from an employer or former employer. The funds are tax-deferred and intended for retirement income, with strict rules on withdrawals.

Long-Term Investment Horizon
A long-term investment horizon is for investments that one expects to hold for ten or twenty years, or even longer — building gains typically considered for use as retirement savings.

LTV (Loan-to-Value)
The Loan-to-Value (LTV) is a ratio that compares the size of the mortgage loan to the value of the property being purchased (loan divided by property value).

The LTV is used to help assess the risk of a mortgage loan to the lender. The lower the equity in the home, the higher the perceived risk — as the lender will have a lower likelihood of recovering full repayment in a foreclosure process.

Medium-Term Investment Horizon
A medium-term investment horizon generally ranges from three to ten years. Working within this time frame, investors often take on slightly more risk, as there is more time to recover from market fluctuations.

Mortgage Charge Position
The mortgage charge position refers to the order in which a lender will be paid from the proceeds of the sale of the property. The lender with first charge position will be paid first, followed by the lender in the second charge position, and so on. The charge position is determined by the date of registration of the mortgage.

For the Moracdo mortgage investment platform, the 'security' detail is the charge position of the mortgage offered, which can inform of higher risk if not in first position.

Mortgage Default Insurance
Default insurance is provided by three insurers in Canada: CMHC (Canadian Mortgage and Housing Corporation) a Crown corporation, and two private companies, Sagen and Canada Guaranty.

This insurance is automatically applied to mortgages with less than 20% down payment of the home purchase price (Loan-to-Value of 80% or higher) and protects the lender from potential borrower default on the mortgage loan.

Mortgage Investment Corporation (MIC)
A Mortgage Investment Corporation is typically a company that pools capital from investors to lend to property owners (versus allowing direct investment in a mortgage, as Morcado does). A MIC typically focuses on residential or commercial mortgages and is governed by Canada's Income Tax Act.

MICs offer investors a share in a diversified mortgage portfolio, indirectly participating in a pool of various mortgages. Shareholders are entitled to dividends, primarily generated from mortgage interest. Management fees and operational expenses can affect net returns to investors, lowering returns compared to direct mortgage investment.

Mortgage Lifecycle
A mortgage lifecycle starts upon loan funding and continues for the mortgage term. A mortgage's lifecycle can be extended if the mortgage is renewed with the same lender, which can continue until the mortgage maturity date (full amortization of the mortgage).

Mortgage Maturity Date
The last day of a mortgage term when the borrower is expected to pay off the remaining balance of the loan and becomes the property owner free of mortgage-related debt.

Mortgage Renewal
When you get a mortgage with a lender, your contract is in effect for a specific period of time. This mortgage 'term' can range from a few months to five years or longer. Borrowers have to renew their mortgage at the end of each term, either with the same lender or switching to a different one, unless the balance is paid in full.

Open-Term Mortgage
An open-term mortgage is one that offers complete flexibility to make changes without incurring penalties, including unlimited prepayments and the ability to pay out the mortgage entirely during the term.

All of the high-yield mortgages offered by the Morcado investment platform are open terms.

Pari Passu
A common term used in the investment world to indicate when multiple investors, no matter how big or small, are considered to have 'equal footing' in the investment.

Prepayment
A prepayment privilege refers to the ability to place additional amounts toward the mortgage principal without incurring penalties.

Qualified, Syndicated Mortgage
A syndicated mortgage is a type of investment where two or more individuals participate as lenders in a mortgage that is secured by real estate.

Qualified mortgages are provincially regulated as having the following requirements:

• One mortgage, several investors
• Non-construction mortgages
• Maximum LTV of 90%
• No more than 4 units

REIT (Real Estate Investment Trust)
A real estate investment is a company that pools money from investors to buy and operate income-producing real estate, such as malls, hotels, residential and office buildings, and warehouses.

A REIT offers investors a share in their diversified property portfolio, and shareholders are entitled to dividends generated from rental income.

Registered Savings Account
A registered savings account is an investment product offered by the Canadian Government and registered with the Canada Revenue Agency (CRA) to qualify for tax benefits. Any financial institution can apply to hold these accounts for client use.

RESP (Registered Education Savings Plan)
A government-registered savings account for parents to invest in their children's post-secondary education. Contributions are not tax-deductible, but the plan offers tax-deferred growth and government grant benefits.

RRSP (Registered Retirement Savings Plan)
A government-registered savings and investment account designed for retirement savings. Contributions to an RRSP are tax-deductible, reducing your taxable income, and investments grow tax-deferred until withdrawal.

Subprime Mortgage
A subprime mortgage is a product for borrowers who typically can't meet stricter qualification requirements set by traditional banks and lenders, usually due to lower credit scores or complex income sources. These products often come with higher rates and more flexible qualification criteria.

TFSA (Tax-Free Savings Account)
A government-registered flexible savings account that allows Canadians to earn tax-free investment income. Contributions are not tax-deductible, but withdrawals, including investment gains, are tax-free.

Trust Company
A Trust company is a legal entity that acts as a trustee to hold property for such functions as executors, trustees and administrators of estates, personal trusts, pension plans and mutual funds. It can also act as a financial intermediary to attract savings and invest these funds in mortgages, securities, and loans.

Uninsured Mortgage
A mortgage that isn't eligible for default insurance and, therefore, isn't financially backed by the Canadian government. An uninsured mortgage typically has an LTV (loan-to-value) of 80% or less and is secured only by the property's value, though other qualifying factors, such as income and creditworthiness, are often considered for mortgage approval.

Weighted Loan-to-Value (LTV)
A Weighted Loan-to-Value (LTV) considers the LTVs of several properties, calculating the overall value and risk when multiple properties are involved, especially if some of these properties already have mortgages.