Mortgages Glossary N
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National Bank
- Banked owned by the state(government)
- Private bank that operates nationally
Needs-based Pricing / Need Based Pricing
Seller’s asking price for the property based on his/her personal needs as opposed to the market price. The price may include costs of past renovations and cost of a new home + renovations that the seller wants to buy. Needs-based pricing takes long time to sell and isn’t always successful.
Negative Amortization / Negative Amortization Mortgage / Skip Payment Mortgage
To understand negative amortization you must understand interest only mortgage payments.
Interest Only Payment: Paying only interest every month, with no money going towards reducing principal (total amount borrowed).
Negative amortization: Negative amortization is identical to interest only payments, but it offers the option of coming short on payments. For example: Interest only payment is $500. You have the option of paying less than $500, for example – $300. A $200 which you missed goes on top of your principal. So if your balance was $100.000 and you missed a $200 it will be $100.200
Negative Amortization Cap
The amount of negative amortization allowed. For example 115%. Once 115% is reached, mortgage switches to regular adjustable rate mortgage, which requires both interest and principal payments.
Negative amortization: Negative amortization is identical to interest only payments, but it offers the option of coming short on payments. For example: Interest only payment is $500. You have the option of paying less than $500, for example – $300. A $200 which you missed goes on top of your principal. So if your balance was $100.000 and you missed a $200 it will be $100.200
Negative Homeowners Equity / Negative Equity
Mortgage bigger than the cost of the property. For example, my house costs $100.000, but my mortgage is $120.000. Negative equity may happen due to decline in real estate prices, negative amortization or careless home equity refinance.
Neighborhood Center
Center including shopping mall, convenience store, supermarket, drugstore, etc.
Net Branch
Options offered to mortgage brokers by lenders, whereby brokers become employed by lenders, but still maintain a degree of independence. Once broker is listed in a net branch, he is not bound to disclose his commissions.
Net Cash Flow
The amount property generates minus taxes, insurance, fees, salaries. It is a commercial term used by owners of for-profit properties, such as shopping centers, rentals, etc.
Net Effective Income
Income minus federal taxes.
Net Income
Total income minus all the costs: taxes, mortgage, credit cads, insurance, phone bills, etc.
Net Operating Income / NOI
Company income, minus operating expenses, but including taxes, insurance and interest rates. For example, YYY Company makes $1.000.000 per year. It spends $400.000 on salaries, rent and equipment, which are operating expenses.
$1.000.000 – $400.000 = $600.000 is Net Operating Income.
Net operating income does not include taxes and insurance.
Net Interest Margin
Profits/losses from an investment. Most corporations borrow money and pay interest rates. Corporations also invest in different projects. Once corporation invests in a project, makes money from it and pays interest rates to the bank, money is calculated and net interest margin shows the success of the investment.
It is calculated with formula:
Net Monthly Repayment
Monthly mortgage payment that goes towards reducing principal (total amount borrowed) plus interest.
Net-net Lease / NN Lease / Net Net Lease
Lease payments, plus insurance and taxes.
Net Operating Loss / NOL
Net Operating Loss happens when company’s operating costs exceed revenues. Since businesses do not pay taxes on business related expenses, Net Operating Loss puts a company in a position where tax deductions are greater than the tax that can be collected from its income.
Net Worth
Total value of assets minus all liabilities. Assets are: equipment, savings, automobiles, investments, property. Liabilities are: credit cards, mortgages, car loans.
Value of Assets – Liabilities = Net Worth
NHA / National Housing Act
National Housing Act was passed by Canadian Parliament in 1944 in order to ease and promote construction and development of new houses in Canada. Canada Mortgage and Housing Corporation (CMHC) administers National Housing Act. The act helped to develop affordable homes, for all income brackets.
Find out more about National Housing Act. http://lois.justice.gc.ca/en/N-11/index.html
Find out more about Canada Mortgage and Housing Corporation http://www.cmhc-schl.gc.ca/
Niche Banks
Banks that target specific groups of people. For example: people with bad credit, self-employed, low income etc. Niche banks deal mostly exclusively with their target and usually offer options which are not available with regular banks.
NIMBY / Not In My Backyard
Refers to people who object to developments near their properties. It is abbreviation from “Not In My Backyard”. Nimbies(as developers call them) will protest and rally against developments they don’t like, such as an airports, highways, prisons, etc..
No Cash-out Refinance / No Cash out Refinance
Refers to regular refinance, where you refinance for the same amount you had before. It is done to reduce the interest rate. For example, Ron had a $100.000 mortgage at 5% interest rates. He paid out $20.000 and owed $80.000. He wanted to lower interest rates and refinanced with another lender, for $80.000 at 4% interest rate. Ron had done a no cash-out refinance, since he only got the amount that he owed.
No-doc Loan No-documentation Loan / No Documentation loan / No-doc Mortgage / No Documentation Mortgage
Mortgage that does not require extensive background and income verification. It is provided to people who cannot disclose their income, are self-employed or are recent immigrants. No documentation loans require good credit history, substantial down payment and have higher interest rates than conventional mortgages.
No Asset Loan
Mortgage where the borrower can choose to keep his assets undisclosed (not share).
Interested in No Asset mortgages?
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No Income Loan / No Ratio Loan / No Income Verification / Non-Status Loan
Mortgage that does not require income verification.
Interested in No Income Verification mortgages?
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No Money Down Mortgage / Zero Down Mortgage / Zero Down Payment Loan
Mortgage that does not require down payment. Also referred to as zero down mortgage, zero down payment loan. Interest rates are usually higher on no money down mortgages. Zero Down Mortgages require private mortgage insurance(PMI).
Non-assumption Clause / Non Assumption Clause
Agreement that does not allow the borrower transfer mortgage to another person.
Non-Conforming Loan / Non-conforming mortgage / Non Conforming Mortgage
Mortgage loans that do not fit into major bank’s guidelines of lending. This may be due to financial condition of the borrower, type of property, amount requested. Non-Conforming mortgages are usually issued by private lenders. Interest rates are slightly higher.
No Cost Refinance
Refinance fees that are added on top of the mortgage as opposed to being paid upfront. Fees are paid over time, together with principal.
No-Cost Loan / No Cost Mortgage
Mortgage, where lender waives the fees associated with a new mortgage at the cost of higher interest rates. The fees include: appraisal fees, document fees, legal fees.
No-competition Lots / No Competition Lots
Land lots (pieces of land) where buyer has no choice of selecting his house builder and is tied to one construction company.
Non-Assumption Clause / Non Assumption Clause / Non Assumption Clause Mortgage Loan
Mortgage agreement that allows one borrower to transfer mortgage to another borrower. For example, Ron sold his house to Marry. Marry wants Ron’s mortgage due to its low interest rates. Since it is a Non-Assumption clause loan, she can get it.
Assumption clause would be the opposite. She would not be allowed to get his loan.
Non-dischargeable Debt / Non Dischargeable Debt
Debt that cannot be eliminated even by filing bankruptcy. When someone files for bankruptcy, they are cleared from all debt, such as credit cards, mortgages, car loans etc., but it is not the case with non-dischargeable debt.
Nonresident Alien / Non-Resident Alien
Person from another country, who lives in Canada, but is not a Canadian citizen. Can be referred to: Landed immigrant status and Refugee status.
Non-liquid Asset / Non Liquid Asset
Asset that cannot be sold easily, such as real estate, car, boat, etc. It takes some time for someone to buy it, whereby assets such a stocks and bonds can be sold in a matter of days.
Non-owner Occupant / Non Owner Occupant / Non-occupant Borrower / Non Occupant Borrower
Person who borrows a mortgage, but does not live on the property bought with that mortgage. For example, Ron borrowed a mortgage, bought a condominium and rented it to Jessy. Ron is not living in that condo, while Jessy does.
To be a non owner occupant it is not necessary to rent property, a fact that owner doesn’t live there is enough.
Non Performing Asset / NPA / Non Performing Asset
An asset that does not produce income, or does not produce enough income. For example YYY bank gave a mortgage to George. George is late on his payments and may face foreclosure (loss of property due to non-payment). Bank can classify that mortgage as a non performing asset (NPA).
Non-recurring Closing Costs / Non Recurring Closing Costs
Costs associated with a new mortgage, which are only paid once. Those fees include: appraisal fee, land transfer taxes, points, legal fees.
No Redemption Penalty / No-Redemption Penalty
Mortgage that can be paid earlier. For example, Ron got a 25 year mortgage loan. He paid it 5 years earlier. He will not pay extra money to his lender because he had No Redemption Penalty. If he did, he would face fees associated with early repayment.
Non-refundable Credit / Non-refundable Tax Credit / Non Refundable Credit
To understand Non-refundable Tax Credit you need to understand tax credit.
Tax Credits: Tax credits reduce amount of taxes owned. As opposed to tax deductions, which deduct a percentage from overall taxes, tax credits reduce tax amount by applying a given credit. For example Ron owes $400 in taxes. He has tax credits for $300, meaning that he will only pay $100 in taxes.
($400-$300=$100).
Non-refundable Tax Credit: is when you have a tax credit which is bigger than the amount of taxes owed. For example, Ron has $600 worth of tax credits, but only owes $400 in actual taxes. If he applies his existing tax credit ($600) to the $400 that he owes, he will reduce it to $0, but will not get anything in return, from the government. This is why it is called Non-refundable Tax Credit.
Non-warrantable Property / Non Warrantable Property
Property that does not meet lender’s requirements for giving a mortgage. This may be due the age of the property, it’s conditions or costs.
Non-warrantable Condo / Non Warrantable Condo
Condominium that does not meet lender’s requirements for giving a mortgage. This may be due the age of the condominium, it’s conditions or costs.
Nominal Interest Rate
Stated interest rate, without including inflation. This is the rate given by banks and mortgage lenders.
Inflation: Inflation happens when money supply surpasses the value of goods and services in an economy. As the result you can purchase less with the same amount of money you could before.
Notary
Person who is legally bound to witnessing document signatures, document verification and other legal procedures.
Note
Document that guarantees repayment of the borrowed debt + interest. Note needs to be signed by the borrower.
Note Rate
Interest rate specified on the note.
Note: Document that guarantees repayment of the borrowed debt + interest. Note needs to be signed by the borrower.
Notice of Assessment
Document sent out by Canada Revenue Agency (government institution charged with collecting taxes) that details the amount of taxes owed, tax return, tax credits and taxes already paid.
Notice of Default
Letter sent to the borrower, when he/she fails to pay for the mortgage or follow loan agreement. For example, Ron hasn’t paid for his mortgage for 3 months, meaning that he defaulted. Lender can start a process of foreclosure (taking Ron’s property as per contract).
NSF / Non Sufficient Funds
Indication that there is not enough money on the bank account to complete the transaction. NSF error is usually given in ATMs(bank machines) and when using debit cards in retails stores.
Number of Free Transactions per Month
Number of free transactions allowed in a bank account per month. Transaction happens whenever you withdraw money, use the card to purchase goods, or make transfers. Once the transaction limit is exceeded, bank charges you a fee. Fee differs from bank to bank and also depends on the type of transaction.