The
one thing about participating in the real estate market that confounds
most consumers is the terminology and jargon that must be learned. But,
as with any business, in order to be successful as a buyer or seller,
it
is necessary to become familiar with certain concepts and words.
The real estate
business is somewhat unique in that it is not confined to one
particular
set of dealings. Instead, it encompasses a number of professions:
financial,
legal, governmental, building trades, and of course, real estate
itself.
So, from A
for amortization to Z for zoning regulations, here is a quick
run-through
of some the important real estate terminology you'll encounter:
Amortization:
The number of years it will take to pay off the entire amount of a
mortgage.
In Ontario, most mortgages are amortized over 25 years.
Appraisal:
An estimate of a property's market value. This is used by lenders to
determine
the amount of your mortgage.
Assessment:
The value of a property set by the local municipality. The assessment
is
used to calculate your property tax.
Assumable
Mortgage: A mortgage held on a property by a seller that can be
taken
over by the buyer. The buyer then assumes responsibility for making
payments.
An assumable mortgage can make a property more attractive to potential
buyers.
Blended
Mortgage Payments: Equal or regular mortgage payments consisting of
both a principal and an interest component.
Broker:
A real estate professional licensed in Ontario to facilitate the sale,
lease or exchange of a property.
Bridge Financing:
Money borrowed against a homeowner's equity in a property (usually for
a short term) to help finance the purchase of another property or to
make
improvements to a property being sold.
Buy-down:
A situation where the seller reduces the interest rate on a mortgage by
paying the difference between the reduced rate and market rate directly
to the lender. Or, the difference can be paid to the purchaser in one
lump
sum or monthly installments. A buy-down can make a property more
attractive
to potential buyers.
Closed Mortgage:
A mortgage that cannot be prepaid, renegotiated or refinanced during
its
term without significant penalties.
Conventional
Mortgage: A first mortgage issued for up to 75 per cent of the
property's
appraised value or purchase price, whichever is lower.
Debt Service
Ratio: The percentage of a borrower's gross income that can be used
for housing costs (including mortgage payments and taxes). This is used
to determine the amount of monthly mortgage payment the borrower can
afford.
Easement:
A legal right to use or cross (right of way) another person's land for
limited purpose. A utility's right to run wires or lay pipe across a
property
is a common example.
Encroachment:
An intrusion onto an adjoining property. A neighbour's fence, shed or
overhanging
roof line that partially or fully intrudes onto your property are
examples.
First Mortgage:
The first security registered on a property. Additional mortgages
secured
against the property are termed 'secondary'.
High-Ratio
Mortgage: A mortgage for more than 75 per cent of a property's
appraised
value or purchase price.
Listing
Agreement: The contract between the listing broker and an owner,
authorizing
the Realtor to facilitate the sale or lease of a property.
Mortgage:
A contract between a borrower and a lender where the borrower pledges a
property as security to guarantee repayment of the mortgage debt.
Mortgage
Term: The length of time a lender will loan mortgage funds to a
borrower.
Most terms run from six months to five years, after which the borrower
will either pay off the balance or renegotiate the mortgage for another
term. Payments are calculated using the interest rate offered for the
term,
the amount of the mortgage, and the amortization period.
Multiple
Listing Service (MLS): A comprehensive system for relaying
information
to Realtors about properties for sale.
Open Mortgage:
A mortgage that can be prepaid or renegotiated at any time and in any
amount
without penalty.
Partially
Open Mortgage: A mortgage that allows the borrower to pre-pay a
specific
portion of the mortgage principal at certain times with or without
penalty.
Realtor:
A trademarked name describing real estate professionals who are members
of a local real estate board and the Canadian Real Estate Association.
Transfer
Taxes: Payment to the provincial government for transferring
property
from the seller to the buyer.
Vendor Take-Back
Mortgage: A situation where sellers use their equity in a property
to provide some or all of the mortgage financing in order to sell the
property.
Zoning Regulations:
Strict guidelines set and enforced by municipal governments regulating
how a property may or may not be used.
Ontario
Real Estate Association
MLS
Listings
