Real Estate Glossary

AGREEMENT OF PURCHASE & SALE:  A legal contract that obligates a buyer to buy and a seller to sell a property. It is a way of finalizing the interests of both parties before closing.

AMORTIZATION:  Length of time it takes to repay the entire amount of a mortgage.

APPRAISAL:  An estimate of a property’s market value, used by lenders to determine the amount of a mortgage.

APPRAISER:  Certified professional who carries out an appraisal.

APPRECIATION:  The increase of a property’s value over time.

APPROVED LENDER:  A lending institution designated as an approved lender by CMHC under the National Housing Act. Only Approved Lenders may qualify for CMHC Loan Insurance.

ASSESSMENT:  The value of a property set by the local municipality, for the purposes of calculating property tax.

ASSUMPTION AGREEMENT:  A legal document signed by a homebuyer that requires them to assume responsibility for the obligations of a mortgage by the builder or the previous owner.

BLENDED PAYMENT:  A mortgage payment that includes principal and interest. It is paid regularly during the term of the mortgage. The payment total remains the same, although the principal portion increases over time and the interest portion decreases.

BUILDER:  A person or company that builds homes.

CLOSED MORTGAGE:  A closed mortgage cannot be paid off (in whole or in part) before the end of its term, except as permitted in the mortgage agreement. In some cases, the lender may allow for partial prepayment in the form of an increased mortgage payment or a lump sum prepayment. However, any prepayment made above stipulated allowances may incur penalty charges.

CLOSING:  The completion of a real estate transaction, 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, such as legal fees, transfer fees and disbursements, that are payable on closing day. They range from 1.5% to 4% of the sale price of a property.

CLOSING DAY (or COMPLETION DATE):  Date on which the sale of the property becomes final and the title of the property is transferred from the seller to the buyer.

CMHC (CANADA MORTGAGE AND HOUSING CORPORATION):  A Crown Corporation that administers the National Housing Act for the federal government and encourages the improvement of housing and living conditions for all Canadians. CMHC also develops and sells mortgage loan insurance products.

CMHC INSURANCE PREMIUMS:  When a home buyer takes out a mortgage loan with less than a 20% down payment, an insurance premium is paid to CMHC, and a mortgage loan insurance policy is issued to the lender. The CMHC Mortgage Loan Insurance premium is calculated as a percentage of the loan and is based on a number of factors such as the purpose of the property (owner occupied or rental), the type of loan (i.e. purchase, construction or refinance loan), the ability of a self-employed borrower to supply income verification, and the size of your down payment (i.e. the higher the percentage of the total house price/value that you borrow, the higher percentage you will pay insurance premiums).

COMMITMENT LETTER (or MORTGAGE APPROVAL):  Written notification from the mortgage lender to the borrower that approves the advancement of a specified amount of mortgage funds under specified conditions.

COMPLETION DATE:  See CLOSING DAY.

COMPOUND INTEREST:  Interest calculated on both the principal and the accrued interest.

CONDITIONAL OFFER:  An Offer to Purchase that is subject to specified conditions, such as home inspection or arrangement of a mortgage. There is usually a stipulated time limit within which the specified conditions must be met.

CONDOMINIUM:  You own the unit you live in (e.g. highrise or lowrise, or a townhouse) and share ownership rights for the common areas of the building along with the development’s other owners.

CONTRACTOR:  A person responsible for overall construction of a home, including buying, scheduling, workmanship, and management of subcontractors and suppliers.

CONVENTIONAL MORTGAGE:  A mortgage loan up to a maximum of 80% of the lending value of the property. Typically, the lending value is the lesser of the purchase price and market value of the property. Mortgage insurance is usually not required for this type of mortgage.

COUNTEROFFER:  One party’s written response to the other party’s offer during negotiation of a real estate purchase between buyer and seller. If a counteroffer is presented, the individual has a specified amount of time to accept or reject.

CREDIT BUREAU:  A company that collects information from various sources and provides credit information on a person’s borrowing and bill paying habits to help lenders assess whether or not to lend money to the person.

CREDIT HISTORY (or CREDIT REPORT):  A report used by the lender to determine your credit worthiness. It includes information about your ability to handle your debt obligations and your current outstanding obligations.

CURB APPEAL:  How attractive the home looks from the street. A home with good curb appeal will have attractive landscaping and a well-maintained exterior.

DEED (or TRANSFER):  A legal document that transfers ownership in the real property to the buyer, and it is registered as evidence of ownership.

DEFAULT ON PAYMENT:  Failure to make a mortgage payment in accordance with the mortgage document.

DELINQUENCY:  Failing to make a mortgage payment on time.

DEPOSIT:  Money placed in trust by the purchaser when an Offer to Purchase is made. The sum is held by the real estate brokerage or lawyer until the sale is closed and is then paid to the vendor as part of the home price.

DEPRECIATION:  The decrease in value of something over time.

DOWN PAYMENT:  The portion of the home price that is not financed by the mortgage loan. The buyer must pay the down payment from his/her own funds or other eligible sources before securing a mortgage.

DUPLEX:  A building containing two single-family homes, located one above the other.

EASEMENT:  A legal right to cross or use another person’s land for a specific limited purpose (i.e. right of way permitting passage over a particular strip of land). A common example is the utility company’s right to run wire or lay pipe across a property.

ENCROACHMENT:  An intrusion onto an adjoining property. A neighbour’s fence, storage shed, or overhanging roof line that partially (or even fully) intrudes onto your property is examples of encroachments.

EQUITY:  A homeowner’s financial interest in a property. It is the difference between the value of the property and the amount owing (if any) on a mortgage. Equity usually increases as the mortgage is reduced through regular payments. Market values and improvements to the property may also affect equity.

ESTOPPEL CERTIFICATE:  See STATUS CERTIFICATE.

FIXED MORTGAGE INTEREST RATE:  A locked-in rate that will not increase for the term of the mortgage.

FORECLOSURE:  A legal process where the lender takes possession of your property and sells it to cover the unpaid debt.

FREEHOLD :  A freehold title is an interest in land that gives the holder full and exclusive ownership of the land and building for an indefinite period. A leasehold title is an interest in land that gives the holder the right to use and occupy the land and building for a defined period.

GROSS DEBT SERVICE RATIO (GDS):  The percentage of the gross income that will be used for payments of principal, interest, taxes and heating costs (P.I.T.H.) and 50% of any condominium maintenance fees or 100% of the annual site lease for leasehold tenure.

GROSS MONTHLY INCOME:  Monthly income before taxes and deductions.

HIGH-RATIO MORTGAGE:  A mortgage loan higher than 80% of the lending value of the property. This type of mortgage must be insured by CMHC or a private company, for the benefit of the approved lender, against payment default.

HOME INSPECTOR:  A person who visually inspects a home to tell you if something is not working properly, or is unsafe. He or she will also tell you if repairs are needed, and maybe even where there were problems in the past.

HOUSEHOLD BUDGET:  A plan that allocates income for household expenses.

INSURANCE:  Insurance provides coverage to ensure a loan is paid.

INSURANCE PREMIUM:  Payment for insurance.

INTEREST:  The cost of borrowing money. Interest is usually paid to the lender in regular payments along with repayment of the principal (loan amount).

INTEREST RATE:  The price paid for the use of money borrowed from a lender.

JOINT TENANCY:  A form of ownership in which two or more individuals (often spouses) have an equal share in the ownership of a property. In the event of one owner’s death, his or her share is automatically transferred to the surviving owner(s), apart from the deceased’s will.

LAND REGISTRATION:  A system to record interests in land, including the ownership and disposition of land.

LAND SURVEYOR:  A professional who can survey a property in order to provide a land survey or  certificate of location.

LAWYER:  A legal advisor who is licensed to practice law and who assists people by representing them on legal matters.

LEVERAGE:  Controlling a large asset with a relatively small amount of cash. For example, $25,000 down payment (or less) can be used to purchase (control) a $100,000 home.

LIEN:  A legal claim against a property for money owing. It can be filed by a supplier or a subcontractor who has provided labour or materials but has not been paid.

LINK HOME:  A home that is joined by a garage, carport or underground.

LISTING AGREEMENT:  The contract between the listing broker and an owner, authorizing the real estate professional to facilitate the sale or lease of a property.

LISTING BROKER:  The real estate professional who signs a contract with an owner to sell or lease the property.

LUMP SUM PREPAYMENT:  An extra payment, made in lump sum, to reduce the principal balance of your mortgage, with or without penalty.

MAINTENANCE FEE:  A monthly fee paid by condominium owners for maintaining the development’s common areas.

MANUFACTURED HOME:  A factory-built, single-family home that is transported to a chosen location, and placed onto a foundation.

MATURITY DATE:  The last day of the term of the mortgage, at which the mortgage loan must either be paid in full or the agreement renewed.

MOBILE HOME:  A factory-built home that is transported to the place where it will be occupied permanently, but it also retains the ability to be moved to another location.

MODULAR HOME:  A factory-built, single-family home that is shipped to a location in two or more sections (or modules) and then assembled on site.

MORTGAGE:  A security interest given in the property you are purchasing which secures repayment of the loan related to the property. It is discharged on payment of the principal and interest owing on the loan in accordance with mortgage document.

MORTGAGE APPROVAL:  Written notification from the mortgage lender to the borrower that approves the advancement of a specified amount of mortgage funds under specified conditions.

MORTGAGE BROKER/AGENT:  A licensed individual who brings together a borrower in search of a mortgage and a lender who is willing to issue that mortgage.

MORTGAGE LENDER:  An institution (bank, trust company, credit union, etc.) that lends money for a mortgage.

MORTGAGE LIFE INSURANCE:  Mortgage life insurance gives coverage for your family if you die before your mortgage is paid off.

MORTGAGE LOAN INSURANCE:  It protects the lender against losses in the event that a borrower fails to pay his or her mortgage, while enabling more Canadians to purchase their home earlier, at competitive interest rates and benefit from the growth in home equity sooner. It is required for residential mortgage loans with a loan-to-value ratio of more than 80%, and is available from CMHC or a private company (Genworth Financial or Canada Guaranty).

MORTGAGE PAYMENT:  A regular payment to the lender that includes both the interest and the principal.

MORTGAGE TERM:  Length of time that the mortgage contract conditions, including interest rate, is fixed.

MORTGAGEE:  The lender.

MORTGAGOR:  The borrower.

MLS (MULTIPLE LISTING SERVICE):  A cooperative computer-based system for relaying information to real estate professionals about properties for sale or lease.

NET WORTH:  Your financial worth, calculated by subtracting your total liabilities from your total assets.

NEW HOME WARRANTY PROGRAM:  Coverage in the event that an item under the warranty needs to be repaired within the specific warranty period. The repair will be made by the organization that provided the warranty.

OFFER TO PURCHASE:  A written contract setting out the terms under which the buyer agrees to buy the home. If the Offer to Purchase is accepted by the seller, it forms a legally binding contract that binds the people who signed to certain terms and conditions.

OPEN MORTGAGE:  A flexible mortgage that allows you to prepay any amount of your mortgage at any time without a compensation charge.

OPEN HOUSE:  A period of time during which a house or apartment for sale or rent is held open for public viewing.

OPERATING COSTS:  The expenses that a homeowner needs to operate a home. These include property taxes, property insurance, utilities, telephone and communications charges, maintenance and repairs.

PAYMENT SCHEDULE:  The monthly, biweekly, or weekly mortgage payments.

PREMIUM:  See CMHC NSURANCE PREMIUM.

PORTABILITY:  A mortgage feature that allows borrowers to take their mortgage with them without penalty, when they sell their present home and buy another one.

PREPAYMENT PRIVILEGE:  A mortgage feature that allows the borrower to prepay a portion or all of the principal balance with or without penalty. This privilege is frequently restricted to specific amounts and times.

PRINCIPAL:  The mortgage amount initially borrowed, or the portion still owing on the mortgage. Interest is calculated on the principal amount.

P.I.T.H. (PRINCIPAL, INTEREST, TAXES AND HEATING):  Costs used in both the Gross Debt Service ratio (GDS) and Total Debt Service ratio (TDS) calculations to determine mortgage affordability.

PROPERTY INSURANCE:  Insurance that you buy for the building(s) on the land you own. This insurance should be high enough to pay for the building to be re-built if it is destroyed by fire or other hazards listed in the policy.

PROPERTY TAXES:  Taxes charged by the municipality where the home is located, usually based on the value of the home.

REAL ESTATE:  Property consisting of buildings and land.

REALTOR (or REAL ESTATE AGENT):  A licensed individual who acts as an intermediary between the seller and the buyer of a property.

RESERVE FUND:  A fund required to be set up by the condominium corporation for major repair and replacement of common elements and assets of a corporation. It is the portion of a condominium maintenance fee that is set aside by the homeowner on a regular basis so that funds are available for emergency or major repairs.

SECURITY:  Property that is pledged to guarantee the fulfillment of an obligation and that can be claimed by a creditor if a loan is not repaid.

SINGLE-FAMILY DETACHED HOME:  Free-standing home for one family, not attached to a house on either side.

SINGLE-FAMILY SEMI-DETACHED HOME:  Home for one family, attached to another building on one side.

STACKED TOWNHOUSE:  Two two-story homes are stacked one on top of the other. The buildings are usually attached in groups of four or more. Each unit has direct access from the outside.

STATUS CERTIFICATE (or ESTOPPEL CERTIFICATE):   A document that provides basic and essential information concerning a condominium corporation's financial and legal state. Its main focus is to inform a prospective owner of the fees, of any large increase that is going to come into effect, of any special assessment that is being contemplated by the board, and any arrears or lien that s particular suite might have. It also includes the condo declaration, by-laws, budget, reserve fund, insurance, management contract, rules, regulations, minutes of the last annual general meeting, and mention of any lawsuit involving the corporation.

SURVEY (or CERTIFICATE OF LOCATION):  A document that shows property boundaries and measurements specifies the location of buildings, fences, and other improvements on the property and states easements or encroachments, at a specific point in time.

SUSTAINABLE NEIGHBOURHOOD:  Neighbourhood that meets residents needs while protecting the environment.

TERM:  Mortgage term is the length of time that the mortgage contract conditions, including interest rate, are fixed.

TITLE:  The legal evidence of ownership of a property. (A FREEHOLD TITLE is an interest in land that gives the holder full and exclusive ownership of the land and building for an indefinite period. A LEASEHOLD TITLE is an interest in land that gives the holder the right to use and occupy the land and building for a defined period.)

TITLE INSURANCE:  Insurance against loss or damage arising from a matter affecting the title to real property (e.g. by a defect in the title or by the existence of a lien, encumbrance or servitude).

TITLE SEARCH:  A detailed examination of the ownership documents to ensure there are no liens or other encumbrances on the property, and no questions regarding the seller’s ownership claim.

TOTAL DEBT SERVICE RATIO (TDS):  The percentage of gross income that will be used for payments of principal, interest, taxes and heat (P.I.T.H.) and other debt obligations, such as car payments or payments of other loans.

TOWNHOUSE (or ROW HOUSE):  A townhouse is one unit of several similar single-family homes, side-by-side, joined by common walls.

VARIABLE MORTGAGE INTEREST RATE:  It fluctuates based on market conditions but the mortgage payment remains unchanged.

VENDOR  The seller of a property.

VENDOR TAKE-BACK MORTGAGE (or TAKE-BACK MORTGAGE):  The mortgage that is financed by the vendor, not a financial institution. The title of the property is transferred to the buyer who makes mortgage payments directly to the seller.

ZONING REGULATIONS:  Strict guidelines set and enforced by municipal governments regulating how a property may or may not be used.