Definitions

Amortization- The schedule of loan payments that establishes the amount of payment to be applied to the principal and the amount to be applied to interest, usually on a monthly basis, for the full term of the loan. The number of years it takes to repay the entire amount of mortgage.

Appraisal – An estimate of value of a Real Estate property by a professional third party. Virtually all non-owner financed mortgages will require an appraisal and is a generally paid for by the buyer. An independent estimate of a property’s market value, used by lenders in determining the amount of the mortgage.

Appreciation – The increase of a property’s value over time.

Assessment – The value of a property as determined by the local municipality which is used to determine the amount of your property taxes.

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.

Blended Mortgage – A combination of two 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.

Broker – A real estate professional licensed by Ontario to facilitate the sale, lease or exchange of a property.

Buyer Agency Agreement – Establish a formal and exclusive relationship between the potential buyer and the broker and its representatives.

Chattel – Personal property that is tangible and movable.

Closed Mortgage – A mortgage that cannot be prepaid, renegotiated or refinanced during its term.

Comparable Market Analysis (CMA) – A comparison of the prices of similar houses in the same general geographic area. A CMA is used to help determine the value of a property, either for a seller or a buyer.

Closing – The process that effects the final transfer of the deed from the seller to the buyer, as well as finalize all aspects of the mortgage of the property.

Closing Costs – Funds needed at the time of closing (separate from and in addition to the down payment). Loan origination fees, discount points, lawyers fees and prepaids are some items that maybe be included. The often will total from 3%-5% of the price of the home, payable in cash.

Closing Date – The date on which the title and keys to the property are transferred from the seller to buyer, and the money is paid.

Common Elements – The portion of a condominium development owned in common (shared) by the unit owners.

Condominium – Housing where the owner owns only the unit in which the live- from the interior walls inward, generally – as well as a portion of the common area.

Conventional Mortgage – A first mortgage issued for up to 75% of the property appraised value or purchase price, whichever is lower.

Counteroffer – One party’s written response to the other party’s offer during negotiation of a real estate purchase between buyer and seller.

Debt Service Ratio – The percentage of a borrower’s gross income that can be used for housing costs, including mortgage payment and taxes (and condominium fees, when applicable)

Deed – The document that, when recorded with your local government, determines ownership of a property. Transferred from seller to buyer at closing.

Deposit – Money that is submitted with an offer to purchase which indicates a buyer’s seriousness and good faith. In virtually all cases, deposit will need to be submitted at the time of the offer and remains in escrow until the time of closing, at which time it becomes part of the down payment.

Down Payment – The difference between a property’s purchase price and the amount financed.

Equity – The difference between the value of a property and the total of any outstanding mortgages or loans against it.

Easement – A legal right to use or cross (right of way) another person’s land for limited purposes. A common example is a utility company’s right to run wires or lay pipe across a property.

Encroachment – An intrusion onto an adjoining property. A neighbor’s fence, storage shed, or overhanging roof line that partially (or even fully) intrude onto your property are examples of encroachments.

Equity – The difference between the price for which a property can be sold and the mortgage(s) on the property. Equity is the owner’s “stake” in a property.

First Mortgage – The first security registered on a property. Additional mortgages secured against the property are “secondary” to the first mortgage.

Fixed Rate Mortgage – A mortgage load where the interest rate is established at its origination and continues unchanged through the life of the loan.

Fixed – Permanent improvements to property that may not be removed at the expiration of the term of lease or tenure.

Foreclosure – The process through which a lender takes back property from a defaulting owner and re-sells it.

Hazard Insurance -  An insurance policy required by lenders to protect a property against damage or loss caused by fire, weather, ect.

High-Ratio Mortgage – A mortgage for more than 75% of a property’s appraised value or purchase price.

Inspection – A whole house inspection of a home being considered for purchase which looks for defects in the property.

Interest – That portion of a mortgage payment that is the “charge” for using the lender’s funds.

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 Transfer Tax – Payment to the provincial government for transferring property from the seller to the buyer.

Leverage – Controlling a large asset with a relatively small amount of cash. In real estate, a $25,000 down payment (or less) can be used to purchases (control) a $100,000 home, for example.

Lien – A legal claim against a piece of property that can prevent it from being sold unless the lien is satisfied (paid off). Liens can be filed by unpaid contractors or other debtors in a legal process so that they will be paid when a property is sold.

Listing Agreement – The contract between the listing broker and an owner, authorizing the REALTOR to facilitate the sale or lease of a property.

Listing Broker – The REALTOR who signs a contract with an owner to sell the property.

Maintenance Fee – A monthly fee paid by condominium owners for maintaining the development’s common areas.

Mortgage – A contract between a borrower and a lender. The borrower pledges a property as security to guarantee repayment of the mortgage debt.

Mortgage Broker – A licensed individual who, for a fee, brings together a borrower in search of a mortgage and a lender willing to issue that mortgage.

Mortgage – The lender.

Mortgage Insurance – Government-backed or private-backed insurance protecting the lender against the borrower’s default on high-ratio (and other types of) mortgages. A whole house inspection of a home being considered for purchase which looks for defects in the property.

Mortgage Life Insurance – Insurance that pays off the mortgage debt, should the insured borrower die.

Mortgage Payment – The regular instalments made towards paying back the principal and interest on a mortgage.

Mortgage Term – The length of time a lender will loan mortgage funds to a borrower. Most mortgage terms run from six months to five years, after which the borrower can either repay the balance (remaining principal) of the mortgage, or renegotiate the mortgage for another term.

Mortgagor – The borrower.

Multiple Listing Service (MLS) – A 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 (Also called a “partially closed” mortgage). Allows the borrower to prepay a specific portion of the mortgage principal at certain times with or without penalty.

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 amount borrowed for a mortgage loan. Your monthly mortgage payment will be applied to both the interest and the principal (be assured, though, that the lions share will go to the interest portion in the first years of the loan.

Property Tax – An annual or semi-annual tax paid to one or more government jurisdictions based on the amount of the property assessment.

Rate (Interest) – The return the lender receives for advancing the mortgage funds required by the borrower to purchase a properly.

REALTORS – Real Estate Professionals who are members of a local real estate board and the Canadian Real Estate Association. Only these professionals can call themselves REALTORS.

Refinancing – The process of obtaining a new mortgage, usually at a lower interest rate, or replace the existing mortgage.

Reserve fund – The portion of a condominium maintenance fee that is set aside to cover major repair and replacement costs.

Second Mortgage – A second financial arrangement, in addition to the first mortgage, also secured by the property. Second mortgages are usually issued at a higher interest rate and for a shorter term than the first mortgage.

Second Financing – Second, third, fourth, etc mortgages, secured by a property “behind” the first mortgage.

Seller – The seller is a real estate transaction.

Seller-Take-Back Mortgage – When sellers use their equity in a property to provide some or all of the mortgage financing in order to sell the property.

Seller Broker – The REALTOR who actually finds the buyer.

Status Certificate – A written statement of a condominium unit’s current financial and legal status.

Take-Back Mortgage – See Seller-Take-Back Mortgage

Term – See Mortgage Term

Title – The legal evidence of ownership in a property.

Title Insurance – Protects your title – your ownership rights – from claims against it. Paid at closing, title insurance may be the responsibility of the buyer, the seller, or both, depending on what is traditional in your locality.

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.

Unit – Term used to describe the individual home or apartment held by the owner within a condominium development.

Variable-Rate Mortgage – A mortgage for which payments are fixed, but whose interest rate changes in relationship to fluctuating marker interest rate. If market rates go up, a larger portion of the payment goes to interest. If rates go down, a larger portion of the payment is applied to the principal.

Weekly payments – Mortgage payments made weekly or 52 times per year.

Zoning – Laws that govern specifically how a zoned area can be used. For example, an area may be zoned for single family residential, condominium, commercial or retail, or a mix of two or more uses.