Glossary of Terms
Definitions for frequently used real estate terms.
A measure of land; 160 square rods, 4.840 square yards or 43,560 square feet; 0.4047 hectares.
The date on the Contract of Purchase and Sale on which costs are adjusted to conform with the contract. Property taxes, for example, would be paid by the seller up to this date and by the buyer beyond this date.
One who acts for another, called a principal; one who represents another from whom he has derived authority.
The gradual reduction of a debt by means of a regular payment. Repayments of principal and interest in "blended" amounts. The normal amortization period for a mortgage in Canada is 25 years, but can be as short as 5 years or as long as 25 years.
Lenders require an independent assessment of the value of the home you are buying before agreeing to finance the purchase.
The value placed on land and buildings by a government agency for tax purposes.
A tax or charge levied on property by a taxing authority to pay for improvements such as sidewalks, streets, and sewers.
What the borrower owns. This could include real estate, savings, vehicles, RRSPs, GICs, stocks, bonds, household goods, etc.
Buyer assuming responsibility of seller's existing mortgage at the interest rate and terms as laid out in the original mortgage documents.
A Contract of Purchase and Sale made after another offer has been accepted. The seller may accept such an offer, but only as a back-up offer subject to the collapse of the previously accepted offer.
A wall which supports the weight of a part of a structure in addition to its own weight.
A mortgage that combines the amount owing on an existing mortgage with additional funds being advanced. The interest rate would be a combination of the rate on the old loan and the rate in effect at the time of the new financing.
In good faith.
Interim financing to bridge the time gap between the closing date on the purchase of a new home and the closing date on the sale of the current home.
Provincial or locally adopted regulations that control the design, construction, repair, quality of building materials, use, and occupancy of any structure under its jurisdiction.
The agent who represents the buyer and the buyer's best interests, acts solely for the buyer, and negotiates on the buyer's behalf.
A clause in a Contract of Purchase and Sale for the benefit of the buyer, such as financing or inspection.
Gains realized from the sale of capital assets. Generally, the difference between cost and selling price, less certain deductible expenses. Used mainly for income tax purposes.
A note placed on the register at the instigation of a person who claims a certain interest in the land to protect the status quo (In B.C., remains in force for two months).
Let the buyer beware.
Articles of personal property such as household goods, furnishings, and fixtures that are not permanently affixed to the house.
The restriction or denial of repayment rights until the end of the mortgage term.
The meeting (usually in a lawyer's office) to sign documents to transfer the property title from the seller to the buyer. Same as Completion.
All the charges that are attached to the closing ceremony. These one-time fees include charges for title search and insurance, attorney's fee, lender and/or broker fee(s).
Canada Mortgage and Housing Corporation, a Crown Corporation which administers the National Housing Act.
If your down payment is less than 20% , you must have mortgage insurance. It insures the lender against the possibility of you defaulting on your mortgage. Canada Mortgage and Housing Corporation is the principal source of mortgage insurance. G.E. Capital also provides mortgage insurance to many of Canada's financial institutions.
The payment given by a principal (seller or buyer) to a Real Estate agent for his/her services. The amount is usually a percentage of the sale price and is usually paid at closing.
A letter outlining the amount, terms and conditions under which a lender is willing to offer a mortgage.
Lands or improvements on land that are designated for common use and enjoyment by all occupants, tenants or owners. The lobby, a pool, tennis court or common hallways would all be Common Areas in a condominium or townhouse complex.
The ownership of property by two or more persons, where on the death of one, his share does not automatically go to the other(s) but is credited to his estate.
A term used to refer to area sales and/or properties that have sold, implying that "sales comps" are comparable in size, location, condition, amenities, etc., to the subject property.
The date on the Contract of Purchase and Sale on which the buyer pays for the property, title transfers from seller to buyer, and the sale is registered at Land Titles Office. Same as Closing Date.
Interest charged on both the principal amount of a loan as well as on the interest charged in a preceeding period.
A clause in a contract which must be satisfied before the contract becomes firm and binding. Same as Subject Clause.
A Contract of Purchase and Sale that has been agreed to by both buyer and seller, but has conditions to be removed before the contract becomes firm and binding. The buyer is in control of the sale at this point and has the option of not proceeding with the contract if the conditions are not met. The seller can not accept another offer except as a back-up offer.
A structure of two or more units, the interior spaces of which are individually owned; the balance of the property (both land and building) is owned in common by the owners of the individual units. The balance of the property is called the common area. Applies to both apartments and townhouses. Same as Strata.
A written statement by which a buyer agrees to purchase, and a seller agrees to sell a particular piece of property according to the terms set forth in that agreement.
A first mortgage granted by an institutional lender such as a bank or trust company, where the amount of the loan does not exceed 80% of the lending value of the property.
A short term mortgage, usually 6 months or 1 year, that allows a borrower to lock in to a longer term at any time without penalty.
Transfer of ownership of real estate property from one individual to another.
A response from a seller to a buyer's offer to purchase property, where any part of the original offer may be changed, such as price or dates. Can also refer to any subsequent changes in the offer by buyer or seller.
A report by a credit reporting agency that maintains a history of timely, or untimely, repayment of debt. The lender's primary source of information regarding the credit history of a borrower
May be either Deferred Maintenance or Functional Obsolescence or both, which can be cured through performing the necessary maintenance and/or remodeling or updating to recapture the depreciation (Capital Value).
Failure to meet certain contractual obligations, such as mortgage payments. Default can lead to foreclosure.
A sum of money that is required to be paid with an offer to purchase as a symbol of the purchaser's commitment.
The option to make twice the normal regular payment at a regular payment due date.
The amount of cash put forward by the buyer toward the purchase price of real estate.
The difference between the value of a property and the amount of financing on that property.
Items which are specifically excluded from a property sale, such as a light fixture or kitchen appliance.
A contract whereby the Agent is given the exclusive right to sell the property or is made exclusive agent for its sale, for a designated period of time. Information on the property is not submitted to the Real Estate Board, and therefore other agents may not be aware of the property.
FAIR MARKET VALUE
The price which a property might reasonably be expected to realize when sold by a willing seller to a willing buyer in an arm's length transaction, after adequate exposure to the market. Determined by a comparison of the subject property to other similar properties in a similar area that have sold recently.
The interest rate remains the same for the term of the mortgage.
Items which are fixed in place and typically included in a property sale, such as wall to wall carpeting, plumbing fixtures, and light fixtures. Items that are questionable or that can easily be removed, such as kitchen appliances, should be stipulated in the contract as inclusions. Most sales include all appliances and window coverings.
Court action taken by a mortgagee when a borrower has defaulted.
The percentage of annual gross income of the mortgagor that is required to maintain annual mortgage payments, property taxes and hydro.
A mortgage loan that exceeds the normal limit of 80% LTV (loan to value) of a conventional mortgage. Typically made possible by a mortgage insurance plan, e.g. CMHC or GE Capital.
The use of land which will bring the greatest economic return over a given time.
Items to be included as part of a property sale, typically all fixtures as well as appliances and window coverings.
"Inter Alia" is Latin for "Amongst other things". An Inter Alia Mortgage is a mortgage that is secured by more than one property. A single mortgage document is executed and registered against each property that is used as security.
The price paid to rent money. The rate of interest over a period of time for a specific amount of money, usually expressed as a percentage.
The date on which the mortgage really begins, usually the first of the month. The interest owed for the number of days between the closing date and the last day of the month is paid on the closing date by cheque or by deduction from the mortgage advance.
Property held by two or more persons with an undivided interest. If one owner dies, the property passes automatically to the other(s).
Buying a piece of property by renting for a specified period, usually one year, with the provision that you will purchase the property at the end of that period for a predetermined sale price.
Outstanding debts of an individual. Mortgages, loans, credit card balances.
A charge registered against a property.
A written agreement signed by the seller authorizing a Realtor to act as the seller's agent in the sale of the seller's home.
The ratio between the mortgage loan amount and the value of the property usually expressed as a percentage, i.e. 75% LTV. The value of the property for lending purposes is the purchase price or appraised value, whichever is lower.
A conveyance of property to a creditor, as security for payment of a debt, redeemable on the payment or discharge of the debt at a specified date.
Trained professionals with a wealth of knowledge and experience to find the mortgage that best suits your needs, at the best rate available, from a large selection of lenders that include most major banks, trust companies, credit unions. A mortgage broker works for you, not for the lender. Many financial institutions pay finders fees to mortgage brokers who refer business to them making it possible for you to get the best mortgage product at no cost to you.
The lender of mortgage funds.
The borrower of mortgage funds.
A service providing detailed information to member Realtors on properties listed for sale and properties which have sold.
A situation where two or more offers to purchase are made at the same time. Offers are usually presented to the seller in the order they were received. One may be accepted or none may be accepted.
The value of ones assets minus their liabilities.
A Contract of Purchase and Sale where a buyer makes an offer to purchase property.
A mortgage which allows for extra payments, principal reductions or full payment at anytime without penalty.
The ability to transfer your mortgage including rate and terms, from your existing property to a new property.
The date on the Contract of Purchase and Sale on which the buyer gets physical possession of the property.
A clause in a mortgage agreement that allows you to pay off all or a percentage of the mortgage before the maturity date.
A fee charged by a lender when the borrower prepays all or a part of a mortgage in excess of the regular payments allowed by the mortgage terms.
The money borrowed, not including any accrued interest.
A form the seller is asked to fill out when signing a Multiple Listing Service agreement, which indicates, to the best of the seller's knowledge, the condition or state of repair of the home.
A tax on the purchase of property, based on 1% of the first $200,000 and 2% of the balance of purchase price.
A lenders commitment to offer to hold a specific rate for a certain length of time. Rate commitments can vary from 30 to 180 days.
To pay in full and discharge a mortgage with the proceeds of a new mortgage.
An agreement registered on title restricting the use of a property.
A right registered on title providing access or use of a portion of a property, such as allowing a sewer or hydro line to be installed and maintained.
A mortgage registered against real property which is already encumbered with one mortgage. Date and time of registration determines which is first and which is second.
A clause in a Contract of Purchase and Sale for the benefit of the seller, such as purchasing a home.
A property is said to be "sold solid" when a Contract of Purchase and Sale has been agreed to by both buyer and seller and all conditions have been removed from the Contract.
A property is said to be "sold subject" when a Contract of Purchase and Sale has been agreed to by both buyer and seller but there are conditions yet to be removed on the Contract.
The document prepared by the buyer's lawyer or notary showing a breakdown of all costs to a real estate sale and detailing the amount owed by buyer and the amount to be received by the seller upon completion of sale.
A charge (usually monthly) by a Strata Corporation to cover the costs of maintenance, repair, cleaning etc. of common areas. This fee will usually include a reserve to cover major repairs such as reroofing and heating system replacement.
A clause in a contract which must be satisfied before the contract becomes firm and binding. Same as Condition.
TAX HOLD BACK
When your property taxes are included with your mortgage payments, your lender will withhold funds from your disbursement to cover interim or final taxes payable to the municipality. The amount depends on the month that the mortgage was funded and the dates when interim and final taxes are due. Tax hold backs are used to pay for the current year's taxes while your monthly tax installments are accumulated in an account to pay the tax bills for the following year.
The length of time a mortgage has been committed for. The interest rate usually remains constant during this term unless the commitment states otherwise.
Percentage of gross annual income of a borrower required to maintain annual payments of mortgage, property taxes, hydro and other debts such as loans, credit card payments, child support and leases.
Deposits are usually held in trust by the buyer's or seller's real estate agent or lawyer, and are released to form part of the purchase price on completion date.
A Contract of Purchase and Sale with no conditions. If such an offer is accepted by the seller, the property is sold immediately, with none of the delay or uncertainty that occurs with a conditional offer.
The assessment of loan applications based on: the value of real property, a borrowers credit worthiness and ability to pay and the lending guidelines of the lender.
The proportion of the total complex which is represented (in terms of square footage) by one owners strata lot. Must be noted on the plan before filing. It determines a) the undivided share of each owner in the common property, and b) the proportion payable by contributions determined and levied by corporation to meet administrative and maintenance expenses.
A mortgage where the interest rate varies during the term of the mortgage, usually based on the prime bank rate or the GIC rate of the lender.
You can usually choose to make your mortgage payments once a week or once every two weeks. This accelerates the reduction of your mortgage because you are making the equivalent of one extra monthly payment per year.