A
Adjustments:
Property
taxes and/or utility bills (electricity, gas, fuel), condominium common
expenses, if any, that have been prepaid by the vendor are pro-rated
and
paid by the purchaser to the vendor on closing. This can involve an
expenditure
of several hundred dollars payable when the sale is completed. |
Amortization:
The
number of years it takes to repay the entire amount of a mortgage. The
conventional amortization period for a mortgage is anywhere between 15
and 25 years. The shorter the amortization period, the less interest
you
have to pay. |
Appraisal:
An
estimate of a property's market value used by lenders in determining
the
amount of the mortgage. This value may or may not match the purchase
price
of the home. |
Appreciation:
The
increase of a property's value over time. |
Asking
(list) price:
The
price placed on the property for sale by the seller. |
Assessment:
The
value of a property, set by the local municipality, for the purposes of
calculating property tax. |
Assumable
Mortgage:
A
mortgage held on a property by the seller that can be taken over by the
buyer, who then accepts responsibility, for making the mortgage
payments. |
Assumption
Agreement:
A
legal document signed by a home buyer which requires the buyer to
assume
responsibility for the obligations of a mortgage made by a former owner.
|
B
Blended
Mortgage:
A
combination of two mortgages, one with a higher interest rate than the
other, to create a new mortgage with an interest rate somewhere between
the two original rates. |
Blended
Mortgage Payments:
Equal
or regular mortgage payments consisting of both a principal and an
interest
component. With each successive payment, the amount applied to interest
decreases and the amount applied to the principal increases, although
the
total payment doesn't change during the term. |
Breakage
Costs:
A
sum of money paid to the lender for the prepayment of a closed mortgage
in part or in full prior to maturity of the term. |
Broker:
A
person licensed by the provincial or territorial government to trade in
real estate. |
Building
Permit:
A
certificate that must be obtained from the municipality by the property
owner or contractor before a building can be erected or renovated. |
Buyer's
Agent (also known as "Purchaser's Agent"):
A
person or firm representing the buyer. |
Buy-down:
When
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 to
the purchaser, in one lump sum or monthly installments. |
Buyer
Agency Agreement:
A
written contractual agreement in which an agent commits to provide
services
necessary to secure a transaction and the purchaser commits to working
exclusively with that agent for a specified time period.
|
C
Cash
to Mortgage:
When buyer assumes
the outstanding principal amount of the existing mortgage on a property
and pays the balance of the purchase price in cash. |
Certificate
Of Location:
A
document specifying the exact location of the property and describing
the
type and size of the house including additions. |
Certificate
Of Search:
A
document verifying the transactions registered against the property
e.g. mortgages, sales, etc. |
Client:
The
person being represented by an agent. |
Closed
Mortgage:
A
mortgage that cannot be prepaid, renegotiated or refinanced during its
term, except with compensation or breakage costs. |
Closing:
The
real estate transaction's completion, when the parties involved agree
that
all legal and financial obligations have been met, and the deed to the
property is transferred from the seller to the buyer. |
Closing
Costs:
Expenses
in addition to the purchase price for buying and selling a property.
Standard
closing costs include adjustments for prepayment of taxes, utilities
and
condominium common expenses, if any, made by the vendor; property land
transfer taxes; property insurance; and legal/notary fees. |
Closing
Date:
The
date on which the title and keys to the property are transferred from
the
seller to the buyer and the money is paid. |
CMHC
(Canada Mortgage and Housing Corporation):
A
Crown corporation providing information services and mortgage loan
insurance. |
Commission:
An
amount agreed to by the seller and the real estate broker/agent and
stated
in the listing agreement. It is payable to the broker/agent on closing
and shared, if applicable, among those salespeople involved in the
sale. |
Common
Elements:
The
portions of a condominium development owned in common (shared) by the
unit
owners. |
Conditional
Offer:
An
offer to purchase subject to specified conditions. These conditions
could
be the arranging of a mortgage, a satisfactory inspection, or the
selling
of a present home. A time limit in which the specified conditions must
be met should be stipulated in the offer to purchase. |
Condominium:
Shared
ownership in property. Owners have title (owner-ship) to individual
units
and a proportionate share in the common elements. |
Conventional
Mortgage:
A
first mortgage issued for up to 75% of the property's appraised value
or
purchase price, whichever is lower. |
Convertible
Mortgage:
A
fixed rate mortgage which offers the same security as a closed
mortgage,
but which can be converted to a longer, closed mortgage at any time
without
penalty. |
Counteroffer:
One
party's written response to the other party's offer during negotiation
of a real estate purchase between buyer and seller. |
CREA
(Canadian Real Estate Association):
A
national association representing the real estate industry on federal
public
policy matters, providing member services and education.
|
D
Debt
Service Ratio:
The
percentage of a borrower's gross household income which may include, in
addition to the main wage earner's salary, salaries of other wage
earners,
commissions, bonuses, overtime, etc. and can be used for housing costs,
including mortgage payment and taxes (and condominium fees, when
applicable). |
Deed:
A
legal document that conveys (transfers) ownership of a property from
the
vendor to the buyer. This document is then registered against the title
to the property as evidence of the ownership. |
Default:
Non-payment
of the installments due under the terms of the mortgage(s), or failure
to fulfill any other term or condition of the mortgage. |
Deposit:
A
sum of money deposited in trust by the purchaser on making an offer to
be held by the broker, lawyer or notary until the closing of the sale. |
Discharge:
The
removal of all mortgages and other financial encumbrances on a property. |
Down
Payment:
The
difference between a property's purchase price and the amount
financed. |
Dual
Agent:
A
real estate broker or salesperson who acts as agent for both the seller
and the buyer in the same transaction.
|
|
E
Easement:
The
right acquired for access to or over another person's property for a
specific
purpose such as driveway or public utilities.
|
Encumbrance:
A
registered claim for debt against a property, such as a mortgage. |
Equitable
Mortgage:
A mortgage of
the equity of redemption that can again be mortgaged. |
Equity:
The
difference between the value of the property and the amount owing on
the
mortgage.
|
F
Foreclosure:
A
legal procedure whereby the lender obtains ownership of the property
following
default by the borrower.
|
G
GE
Capital Mortgage Insurance Company:
The
only private sector source of mortgage insurance to lenders in Canada. |
Gross
Debt Service:
The
amount of money needed to pay principal, interest, taxes and sometimes,
energy costs. If the dwelling unit is a condominium, all or a portion
of
common fees are included, depending on what expenses are covered. |
Gross
Debt Service Ratio (GDS):
The
percentage of gross household income which you will be using to pay for
the mortgage payment including property taxes. A rule of thumb is that
GDS should not exceed 30%.
|
H
High
Ratio Mortgage
A
mortgage where you have a down payment of less than 25% of the purchase
price. This type of mortgage must be insured against default. |
Holdback
An
amount of money withheld by the lender during the progress of
construction
of a house to ensure that construction is satisfactory at every stage.
The amount of holdback is generally equivalent to the estimated cost to
complete construction.
|
I
Inspection
The
examination of the house by an expert selected by the buyer. |
Insurance
The
purchaser must have fire insurance arranged and in effect before the
transaction
can be closed. A certificate from the insurance company may be required
at the closing. |
Interest
Rate:
The
return the lender receives for putting up the money for the mortgage.
|
L
Lender:
A
person or organization providing temporary use of money through loans
and/or
mortgages for the acquisition of real property, usually grouped under
three
categories: major direct lenders (banks, trust companies, loan
companies,
credit unions, life insurance companies, finance companies or
provincial
credit corporations), agent sources (mortgage brokers), and private
investors. |
Lender
Holdback:
Funds
not advanced by a lender until specific conditions or requirements are
met by the borrower (e.g., re-inspection of the property, electrical
service
brought up to standard, certain work completed etc.). |
Life Insurance
on a Mortgage Loan:
Insurance that
insures the life of the borrower (mortgagor) for the outstanding
balance
of the loan. |
Listing
Agreement:
The
legal agreement between the listing broker and the seller, setting out
the services to be rendered, describing the property for sale and
stating
the terms of payment. A commission is generally payable to the broker
upon
closing.
|
M
Mechanic's
Lien:
A
claim against a property for money owing to a supplier, sub-contractor
or other person or company who has provided labour or materials. |
Multiple
Listing Service (MLS):
Trademarks
owned by The Canadian Real Estate Association. They are used in
conjunction
with a real estate database service, operated by local real estate
boards,
under which properties may be listed, purchased or sold. |
Mortgage:
A
document which is registered in Land Titles Office and provides
evidence
that you have given your home as collateral to a lender to secure a
loan.
Lenders consider both the property (security) and the financial worth
of
the borrower (covenant) in deciding on a mortgage loan. |
Mortgage
Broker:
A
person or company having contacts with financial institutions or
individuals
wishing to invest in mortgages. The mortgagor pays the broker a fee for
arranging the mortgage. Appraisal and legal services may or may not be
included in the fee. |
Mortgagee:
The
lender who provides a loan secured by a mortgage. |
Mortgage
Insurer:
In
Canada, high-ratio mortgages (those representing greater than 75% of
the
property value) must be insured against default by either CMHC or
private
insurers. The borrower must arrange and pay for the insurance, which
protects
the lender against default. |
Mortgage
Insurance Premium:
A
premium which is added to the mortgage and paid by the borrower over
the
life of the mortgage. The mortgage insurance insures the lender against
loss in case of default on the part of the borrower. |
Mortgage
Life Insurance:
A
form of reducing term insurance recommended for all mortgagors. In the
event of the death of the owner or one of the owners, the insurance
pays
the balance owing on the mortgage. The intent is to protect survivors
from
losing their home. |
Mortgagor:
The
property owner borrowing the money, secured by a mortgage.
|
N
Negative
Cash Flow:
An
income property with operating expenses and debt service exceeding
gross
operating income. |
Net
Income:
Income
remaining following the deduction of expenses from revenue. |
Net
Worth:
The
difference between what you own (assets) and what you owe (liabilities).
|
O
Offer
of Purchase and Sale:
A
written contract through which the prospective buyer sets out the price
and conditions under which he or she will buy the property. Upon
acceptance
by the seller, it forms a contract, which will form the basis for the
final
document to be prepared by a lawyer or notary. |
Open
Mortgage:
A
mortgage which can be prepaid at any time, without penalty. |
Option
Agreement:
A
document stipulating that, in exchange for a deposit, a specified
individual
is to be given first chance of buying a property within a specified
period
of time. If the option-holder does not buy within a specified period of
time, he loses his deposit.
|
P
Penalty:
A
sum of money paid to a lender for the privilege of prepaying a mortgage
in part or in full. |
P.I.
Principal
and interest due on a mortgage. |
P.I.T.
Principal,
interest and taxes due on a mortgage. |
Portable:
A
mortgage that can be transferred from one property to another. This is
particularly useful if you sell one home and buy another. |
Power of
Sale:
The right of
a mortgage to force the sale of a property, without judicial
proceedings,
should default occur. |
Prepayment
Option:
The
right to prepay specified amounts of the principal balance. Penalty
interest
may be incurred on prepayment options. |
Prepayment
Penalty:
Unless
it is open, the mortgage may not be paid off before the Maturity Date
without
paying a Prepayment Penalty. The calculation of the penalty can be
complex
and it would be good idea to talk to your Mortgage Specialist. |
Principal:
The
amount of money actually borrowed (money owing to the lender at any
time).
|
R
Real
Estate Board:
A
non-profit organization representing local real estate brokers/agents,
salespeople, which provides services to its members and maintains and
operates
a MLS® system in the community. |
Realtor:
Trademark
identifying real estate professionals in Canada who are members of The
Canadian Real Estate Association, and as such, subscribe to a high
standard
of professional service and to a strict Code of Ethics. |
Roll-Over-Mortgage:
A
mortgage loan where the interest rate is established for a specific
term.
At the end of this term, the mortgage is said to "roll over" and the
borrower
and lender may agree to extend the loan. If satisfactory terms cannot
be
agreed upon, the lender is entitled to be repaid in full. In this case,
the borrower may seek alternative financing.
|
S
Second
Mortgage:
This
is usually at a higher interest rate and represents the difference
between
the price of the house and first mortgage plus the down-payment. May be
obtained from banks and finance companies or through lawyers or
notaries. |
Seller's
Agent:
The
Seller's Agent represents the seller -- either as a Listing Agent under
the listing agreement with the seller or by cooperating as a Sub-Agent,
typically through the MLS® system. In dealing with prospective
buyers
-- customers-- the Seller's Agent can provide a variety of information
and services to assist the buyer in his/her decision-making. The
Seller's
Agent does not represent the buyer. |
Specification
Form:
A
document stipulating the kind, quality and sometimes the quantity of
materials
and workmanship required in the construction of a particular house. |
Survey:
A
certificate prepared by a qualified surveyor showing the home and other
buildings relative to the property boundary.
|
T
Term:
The
length of time during which the actual life of a mortgage contract
exists
(usually from six months to ten years) at the end of which the mortgage
becomes due and payable unless the lender renews the mortgage for
another
term (see also Amortization). A mortgage may also be amortized over a
long
period (such as 25 years). |
Title:
A
lawful evidence of ownership. |
Title
Search:
An
inspection of records contained within the public land registration
office
to determine the current state of title to a property including a
review
of all interests such as liens, encumbrances, mortgages or any other
interests
that affect that title.
|
U
Underwriting
Fee:
A
sum of money collected by some lenders to offset expenses incurred in
the
lending transaction. |
Undivided
Interest:
A
right to possess and use real property in conjunction with other
co-owner(s),
in which each owner is entitled to undivided possession and use of the
whole property (e.g., joint tenancy).
|
V
Variable-Rate
Mortgage:
A
mortgage where payments are fixed, but the interest rate moves in
response
to trends (it could change from month to month depending on market
conditions.
If interest rates go up, a larger portion of your payment goes to the
interest;
if rates go down, more goes to cover the principal. |
Vendor
Financing (Balance of Sale):
The
seller sometimes takes the mortgage at a rate lower than market rates.
Most of these arrangements are not renewable or transferable to the
next
owner.
|
Z
Zoning
Laws:
Municipal
laws restricting the use of land for specific purposes. The zoning
bylaw
is the dominant legal document that sets out the minimum physical
requirements
of a site and specifies the various uses allowed.
|
Commercial
Listings
