Mortgages Glossary G
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Gag Rules
Contract provision that does not allow home buyers to publicly state complaints about a building.
Garnishment
Money withheld from the paycheck to be paid to another party. For example, George received a paycheck for $2000. $500 from that paycheck will be withheld from him in order to pay alimony to his ex-wife.
Garnishment is fully taxable, since the withheld amount is considered to be received by that person.
Gazumping
When seller accepts an offer, but then changes his mind and accepts another offer. Gazumping is only possible before both seller and buyer enter into a contract agreement.
GE Capital
GE Capital is owned by an American company – General Electric. Primary purpose of GE Capital is to provide mortgage insurance to mortgage lenders throughout Canada. When borrowers take a mortgages with less than 20% down payment they are bound to take mortgage insurance. In case borrowers default(fail not pay) on a mortgage, insurance will pay out that mortgage to the lender, in full. Borrowers pay for the insurance in their monthly payments. Once borrowers pay down 20% or more of the mortgage, lenders are bound by law to take it away.
GE Capital is an alternative to Canadian Mortgage and Housing Corporation(CMHC), as they both serve the same purpose.
General Contractor
Person who takes care of a construction project. General Contractor will hire other contractors to perform various tasks, keep an eye on the development, manage staff, purchase needed materials, etc. For example, Ron was hired as General Contractor. It is going to be his task and his responsibility to manage and to complete the project, from start to finish. He may require other subcontractors and staff to achieve it and he is granted both the authority and budget to do so.
General Partnership
A partnership, where each partner is equally responsible for the actions of the company, regardless who carried out the actions or what effects those actions had. In general partnership, partners a liable for the company with their private assets.
Gift From a Family Member
Monetary gift given to a mortgagor by a relative.
Gift of Equity
When seller of the property, sells the property at less than the market value. The difference between real value and the price paid is called gift of equity. For example, Ron is buying a house from his relatives. The house costs $300.000, but they sell it to Ron for $220.000. In that case gift of equity is $80.000.
Many lenders consider gift of equity as a down payment. It is a common practice between friends and relatives.
Good Faith Deposit
A specific amount of money that is given by a buyer to a seller to prove that the buyer is serious about buying that property. For example Ron is buying a house from Alex for $100.000. To prove that Ron is serious about buying that house, he can give Alex $1000 as a good faith deposit.
Good Fairy Syndrome
Borrowers who believe there are agencies and people who will solve all of their financial problems.
Grace Period
A number of days, when credit card debt can be repaid without any interest. Grace period is usually around 20-30 days. It is only given to people who have no balance on their credit card. For example, I have $2000 credit card, with no balance on it. I purchase a $500 item. Since I had no balance on it, I have around 20-30(depends on a card) to repay $500 without any interest.
Grantor
One who transfers property ownership rights.
Grantee
One who receives property ownership rights.
Graduated Payment Mortgage / GPM
A mortgage with rising payments, for a specific period of time. For example, a payment may increase by 4% every 6 months for 45 months. After 45 months payments will stay fixed and will not change until the end of a mortgage term.
Graduation period
The interval of time between which the payment rises in a graduated payment mortgage.
Graduated Payment Mortgage: A mortgage with rising payments, for a specific period of time. For example, a payment may increase by 4% every 6 months for 45 months. After 45 months payments will stay fixed and will not change until the end of a mortgage term.
Graduation Rate
The percentage by which payments rise in a graduated payment mortgage
Graduated Payment Mortgage: A mortgage with rising payments, for a specific period of time. For example, a payment may increase by 4% every 6 months for 45 months. After 45 months payments will stay fixed and will not change until the end of a mortgage term.
Greenbelt
Natural park or any other land in a community that is natural.
Gross Debt Ratio / Gross Debt Service / GDS
Ratio used by lenders to calculate total amount that an individual is eligible for.
Gross Debt Ratio represents percentage of monthly income that goes towards paying off debt. The formula:
So if you earn $5000 per month and have mortgage and car payments totaling $2000, your gross debt ratio will be: 2000/5000 * 100 = 40. Meaning that 40% of your income goes towards paying off debt.
Lenders usually do not give out loans that require borrowers to pay more than 36% of their income towards the mortgage.
Gross Dividends
Total amount of dividends received in a year.
Dividend: payment made by a company to its shareholders. When a company makes a profit, it must share that profit with its shareholders. Portion of the profit that goes to a single share holder is called dividend.
Gross Income
Total annual income without taxes.
Gross National Product
Total annual value of all goods produced in Canada.
Gross Overtime
Total annual overtime, without taxes.
Overtime: voluntary time worked, exceeding 40 hours per week. Overtime counts as every hour after 40 hours per week mark has been reached. For example, Ron works in a construction company. He worked 5 days a week, 8 hours a day – a total of 40 hours. He may work on weekends if he wants to, getting overtime.
Gross Profit Margin
Difference between the cost of goods and profit made from the goods. For example, Ron sells wooden tables. Each table costs Ron $40 to purchase. He sells $65 each. The difference is $25. Total amount of tables sold by Ron is 60 tables.
60 times $25 gives us $1500. Ron’s gross profit margin is $1500.
Ground Rent
Money paid to rent a piece of land(no buildings). That land may be used for agricultural or other purposes.
Groundsman
Person who takes care of the land in a park, garden, front yard, etc.
Growing Equity Mortgage
A Growing equity mortgage is a mortgage where payments increase over time. The increased payments go towards paying off principal, while the interest stays the same. Growing equity mortgage helps to pay less in interest rates and pay out mortgage faster, by gradually increasing payments according to predetermined schedule.
GST / Good & Services Tax / RST / Retail Sales Tax
National Canadian tax, charged to most of the goods and services sold in Canada. GST was introduced in 1991 as a replacement to Manufacturers Sales Tax. It is currently 5%. GST is also called RST – Retail Sales Tax.
Guarantee / Guaranty
Written and signed promise made by the borrower to the lender, which states that in a case borrower does not pay for the mortgage, lender has a right to take away borrowers property.
Guaranteed Investment Certificate
An investment sold by Canadian Banks, which provides a guaranteed fixed amount of profit from an investment.
Guaranteed Mortgage
Term used to describe a mortgage with Private Mortgage Insurance(PMI). PMI protects lenders in case borrowers do not pay out their mortgage. PMI is required for all mortgages with less than 20% down payment. Once 20% is paid, lenders are required by law to take PMI off.
Canadian Mortgage and Housing Corporation(CMHC) and GE Capital provide PMI in Canada.
Guarantor / Covenanter
Person responsible for repayment of a mortgage.