Glossary...

Terms

Amortization Period. The time over which all regular payments would pay off the mortgage. This is usually 25 years for a new mortgage, however can be greater, up to a maximum of 40 years.

Appraisal. The process of determining the value of property, usually for lending purposes. This value may or may not be the same as the purchase price of the home.

Assumable Mortgage. A type of financing arrangement in which the outstanding mortgage and its terms can be transfered from the current owner to a buyer. By assuming the previous owner's remaining debt, the buyer can avoid having to obtain his or her own mortgage.

Blended Payments. Payments consisting of both a principal and an interest component, paid on a regular basis (e.g. weekly, biweekly, monthly) during the term of the mortgage. The principal portion of payment increases, while the interest portion decreases over the term of the mortgage, but the total regular payment usually does not change.

Bungalow. A one-story house, cottage, or cabin.

Canadian Mortgage and Housing Corporation - CMHC. A division of the Government of Canada that acts as Canada's national housing agency. The CMHC's mandate is to help Canadians access a variety of affordable housing options. It also researches housing and real estate trends in Canada and around the world, providing research to consumers, businesses and other government divisions. The major activity of the CMHC, and the one for which it is best known, is mortgage loan insurance, which insures approved lenders (such as Canada's chartered banks) against borrower default. Mortgage loan insurance provides approved borrowers access to low-cost mortgage rates. CMHC approved buyers may purchase property with as little as 0% down payment.

Certificate of Search or Abstract of Title. A document setting out instruments registered against the title to the property, e.g. deed, mortgages, etc.

Close. The final procedure in a home sale in which documents are signed and recorded. This is the time when the ownership of the property is transferred.

Closed Mortgage. A mortgage agreement that cannot be prepaid, renegotiated or refinanced before maturity, except according to its terms.

Closing Statement. A document commonly used in real estate transactions, detailing the fees, commissions, insurance, etc. that must be transacted for a successful transfer of ownership to take place. This document is prepared by a closing agent and is also known as a "settlement sheet".

Collateral. Properties or assets that are offered to secure a loan or other credit. Collateral becomes subject to seizure on default.

Commercial Real Estate. Property that is solely used for business purposes.

Condominium. A large property complex that is divided into individual units and sold. Ownership usually includes a non-exclusive interest in certain "common properties" controlled by the condominium management.

Conventional Mortgage. A mortgage that does not exceed 80% of the purchase price of the home. Mortgages that exceed this limit must be insured against default, and are referred to as high-ratio mortgages.

Debt-Service Ratio. The percentage of the borrower's gross income that will be used for monthly payments of principal, interest, taxes, heating costs and condominium fees.

Deed. A legal document that grants the bearer a right or privilege, provided that he or she meets a number of conditions. In order to receive the privilege - usually ownership, the bearer must be able to do so without causing others undue hardship. A person who poses a risk to society as a result of holding a deed may be restricted in his or her ability to use the property. Deeds are most known for being used to transfer the ownership of automobiles or land between two parties.

High Ratio Mortgage. If you don't have 20% of the lesser of the purchase price or appraised value of the property, your mortgage must be insured against payment default by a Mortgage Insurer, such as CMHC.

Interest Rate Ceiling. The absolute maximum rate of interest that a financial institution can charge for an adjustable rate mortgage or loan.

Investment Real Estate. Real estate that generates income or is otherwise intended for investment purposes rather than as a primary residence. It is common for investors to own multiple pieces of real estate, one of which serves as a primary residence, while the others are used to generate rental income and profits through price appreciation. The tax implications for investment real estate are often different than those for residential real estate.

Land Value. The total value of the land, including any upgrades or improvements to the land.

Land. Property or real estate, not including buildings or equipment, that does not occur naturally. Depending on the title, land ownership may also give the holder the rights to all natural resources on the land. These may include water, plants, human and animal life, fossils, soil, minerals, electromagnetic features, geographical location, and geophysical occurrences.

Mortgage Banker. A company, individual or institution that originates, sells and services mortgage loans.

Mortgage Broker. The matchmaker between a home buyer and a lender whose goal is to originate a mortgage loan. The broker draws from a pool of various lenders to find the right match.

Mortgage. A debt instrument, secured by the collateral of specified real estate property, that the borrower is obliged to pay back with a predetermined set of payments. Mortgages are used by individuals and businesses wishing to make large value purchases of real estate without paying the entire value of the purchase up front. Mortgages are also known as liens against property, or claims on property.

Mortgage. An entity that lends money to a borrower for the purpose of purchasing a piece of real property. By accepting a mortgage on the real property, the lender creates security in the full repayment of the loan in the future.

Mortgagor. An individual or company who borrows money to purchase a piece of real property. By granting the lender an interest in the property, which allows it to lend the funds with an accurate assessment of risk, the mortgagor provides the lender with a guarantee for the full repayment of the loan. Also known as a "chargor".

Real Estate Sales Representative. A person with a provincial license to represent a buyer or a seller in a real-estate transaction in exchange for commission. Most Sales Representatives work for a real estate brokerage or agent.

Total Debt Service (TDS) Ratio. The percentage of gross income needed to cover monthly payments for housing and all other debts and financing obligations. The total should generally not exceed 40% of gross monthly income.

Zoning. Government (usually municipal) laws that control the use of land within a jurisdiction.

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