Abstract (of Title)

A summary of the public records affecting the title to a particular piece of land, created by examining all recorded instruments (documents) relating to a specific piece of property, such as easements, liens, mortgages, etc.

Acceleration Clause

A provision in a loan agreement that allows the lender to require the balance of the loan to become due immediately if mortgage payments are not made or there is a breach in your obligation under your mortgage.

Addendum

Any addition to, or modification of, a contract. Also called an amendment or rider.

Administrator

One who has charge of the estate of a deceased person who died without a will, or one who did not appoint an executor. Appointed by court order.

Adverse Possession

When someone, other than the owner, takes physical possession of property, without the owner's consent.

Adjustable-Rate Mortgage (ARM)

A type of loan whose prevailing interest rate is tied to an economic index, which fluctuates with the market. There are three types of ARMs, including one-year ARMs, which adjust every year; three- year ARMs, which adjust every three years; and five-year ARMs, which adjust every five years. When the loan adjusts, the lender tacks a margin onto the economic index rate to come up with your loan's new rate. ARMs are considered far riskier than fixed-rate mortgages, but their starting interest rates are extremely low.

Agency

A term used to describe the relationship between a seller and a broker, or a buyer and a broker.

Agent

One who legally represents an individual or corporate body.

Agreement of Purchase and Sale

Written agreement whereby one agrees to buy, and another agrees to sell, according to the terms of the agreement. It contains all the provisions and conditions for the purchase, must be signed by both parties.

Amortization

A payment plan which enables the borrower to reduce his debt gradually through monthly payments of principal and interest. Amortization tables allow you to see exactly how much you would pay each month in interest and how much you repay in principal, depending on the amount of money borrowed at a specific interest rate.

Annual Percentage Rate (APR)

The total cost of your loan, expressed as a percentage rate of interest, which includes not only the loan's interest rate, but factors in all the costs associated with making that loan, including closing costs and fees. The costs are then amortized over the life of the loan.

Application

A series of documents you must fill out when you apply for a loan.

Application Fee

A one-time fee charged by the mortgage company for processing your application for a loan. Sometimes the application fee is applied toward certain costs, including the appraisal and credit report, sometimes is waved.

Appraisal

The opinion of an appraiser, who estimates the value of a home at a specific point in time.

Appreciation

Increased market value of real property.

Assessed Value

Value of real property set by a municipality for taxation purposes.

Assumption of Mortgage

If you assume a mortgage when you purchase a home, you undertake to fulfil the obligations of the existing loan agreement the seller made with the lender. The obligations are similar to those that you would incur if you took out a new mortgage. When assuming a mortgage, you become personally liable for the payment of principal and interest. The seller, or original mortgagor, is released from the liability, and should get that release in writing. Otherwise, he or she could be liable if you don't make the monthly payments.

Balloon Mortgage

A type of mortgage which is generally short in length, but is amortized over twenty-five or thirty years so that the borrower pays a combination of interest and principal each month. At the end of the loan term, the entire balance of the loan must be repaid at once.

Broker

An individual who legally trades in real estate for another, for compensation.

Building Line or Setback

The distances from the front, back, or side of a lot beyond which construction or improvements may not extend without permission by the proper governmental authority. The building line may be established by filed plat of subdivision, by restrictive covenants in deeds, by building codes, or by zoning ordinances.

Buy Down

An incentive offered by a developer or seller that allows the buyer to lower his or her initial interest rate by putting up a certain amount of money. A buy down also refers to the process of paying extra points upfront at the closing of your loan in order to have a lower interest rate over the life of the loan.

Buyer's Market

Market conditions that favor the buyer. A buyer's market is usually expressed when there are too many homes for sale, and a home can he bought for less money.

Chain of Title

The lineage of ownership of a particular property.

Chattels

Moveable possessions, such as furniture, personal possessions, etc. A furnace, before it is installed, is a chattel. Once installed, it is not.

Closing

The day when buyers and sellers actually swap money for title to the Real Estate. The closing finalizes the agreements reached in the sales agreement.

Closing Costs

This phrase can refer to a lender's costs for closing on a. loan, or it can mean all the costs associated with closing on a piece of property. Considering all closing costs, it's easy to see that closing can be expensive for both buyers and sellers. A home buyer's closing costs might include: land transfer tax; legal fees and disbursements; house inspection fees; mortgage financing fees; survey; title insurance; fire insurance; all types of adjustments (e.g. municipal taxes, mortgage interest adjustments, etc.) A seller's closing costs might include: legal fees and disbursements; survey; mortgage discharge fee; broker's commission; credit to the buyer for unpaid property taxes and other bills.

Cloud on Title

An outstanding claim or encumbrance that adversely affects the marketability of a property.

CMHC

Canada Mortgage and Housing Corporation, a Crown agency administering Canada's National Housing Act.

Commission

The amount of money paid to the broker by the seller (or, in some cases, the buyer), as compensation for selling the home. Usually, the commission is a percentage of the sales price of the home, and generally hovers in the 5 to .6 percent range.

Conditional Offer

An offer to buy a property if certain conditions are met.

Condominium

A dwelling of two or more units in which you individually own the interior space of your unit and jointly own common areas such as the lobby, roof, parking, plumbing, and recreational areas.

Consideration

Something of value for compensation.

Contingency

A provision in a contract that sets forth one or more conditions that must be met prior to the closing. If the contingency is not met, usually the party who is benefiting from the contingency can terminate the contract. Some common contingencies include financing and inspection.

Contract

An agreement upon lawful consideration which binds the parties to a performance.

Contract to Purchase

Another name for Agreement of Purchase and Sale.

Contractor

In the building industry, the contractor is the individual who contracts to build the property. He or she erects the structure and manages the subcontracting (to the electrician, plumber, etc.) until the project is finished.

Conventional Mortgage

A first mortgage for up to 75% of the property's appraised value or purchase price, whichever is lower.

Co-op

Co-operative housing refers to a building, or a group of buildings, that is owned by a corporation. The shareholders of the corporation are the people who live in the building. They own shares- which gives them the right to lease a specific unit within the building-in the corporation that owns their building and pay "rent" or monthly maintenance assessments for the expenses associated with living in the building.

Counter-offer

When the seller or buyer responds to a bid. If you decide to offer $ 300,000 for a home listed at $350,000, the seller might counter your offer and propose that you purchase the home for $340,000. That new proposal, and any subsequent offer, is called a counter-offer.

Cul-de-Sac

A street that ends in a U-shape, leading the driver or pedestrian back to the beginning. The cul-de-sac has become exceptionally popular with modern subdivision developers, who use the design technique to create quiet streets and give the development a non-linear feel.

Custom Builder

A homebuilder who builds houses for individual owners to the owners' specification. The homebuilder may either own a piece of property or build a home on someone else's land.

Debt Service

The total amount of debt (credit cards, mortgage, car loan) that an individual is carrying at any one time.

Deed

The document used to transfer ownership in a property from seller to buyer.

Deposit

Money or other considerations of value given as pledge for fulfillment of a contract or agreement.

Depreciation

Reduction in market value of property.

Downpayment

The cash put into a purchase by the borrower. Lenders like to see the borrower put at least 25 percent down in cash, because lenders generally believe that if you have a higher cash down payment, it is less likely the home will go into foreclosure. In recent years, however, lenders have become more flexible about cash down payments; recently, lenders have begun accepting cash down payments of as little as 5 percent.

Dual Agency

It may be on a particular transaction involving real estate that both the seller and buyer are represented by the same firm or broker (sometimes even by the same sales representative). This is known as Dual Agency.

While legally possible, the Canadian Real Estate Association has traditionally discouraged this practice.

In Dual Agency, there is effectively only one agent, or firm, in a situation where there are two principals. In this case, duties to principals can become conflicting, given that one agent is acting for more then one principal.

Easement

A right given by a landowner to a third party to make use of the land in a specific way. There may he several easements on your property, including for passage of utility lines or poles, sewer or water mains, and even a driveway. Once the right is given, it runs with the property and continues indefinitely, or until released by the party who received it.

Encroachment

When your neighbour builds a garage or a fence, and it occupies your land, it is said to "encroach on" your property.

Encumbrance

A claim or lien or interest in a property by another party. An encumbrance hinders the seller's ability to pass good, marketable, and unencumbered title to you.

Estate

One's interest in lands and any other subject of property.

Equity

The financial interest of a property owner in excess of any encumbrances, limited by it market value.

Exclusive Listing

An agreement granting sole and exclusive rights to an agent to sell the property.

Fee Simple

The most basic type of ownership, under which the owner has the right to use and dispose of the property at will.

Fee Tail

Property ownership limited to some particular heirs

Fiduciary Duty

A relationship of trust between an agent and a seller or an agent and a buyer, or a lawyer and a client. An agent owes his/her principal various fiduciary duties such as competence, obedience, good faith and full disclosure, and full accounting.

First Mortgage

A mortgage that takes priority over all others. Mortgage seniority established by date and time of registration.

Fixed Rate Mortgage

A mortgage for which the rate of interest is fixed for a specific period of time.

Fixture

Personal property, such as a built-in bookcase, furnace, hot water heater, and recessed lights, that becomes "affixed" because it has been permanently attached to the home.

Freehold

Property held in fee simple or fee tail (for the terms of owner's life).

Frontage

Property line facing street

Foreclosure

The legal action taken to extinguish a home owner's right and interest in a property, so that the property can be sold in a foreclosure sale to satisfy a debt. The most common is a foreclosure by a mortgagee.

Grace Period

The period of time after a loan payment due date in which a mortgage payment may be made and not be considered delinquent.

Gross Debt Service Ratio

Annual mortgage and other housing-related costs expressed as a percentage of the borrower's gross annual income.

Hazard Insurance

Insurance that covers the property from damages that might materially affect its value. Also known as homeowner's insurance.

High-Ratio Mortgage

A mortgage for more than 75% of a property's appraised value or purchase price, whichever is lower.

Holdback

An amount of money held back at closing by the lender until a particular condition has been met. If the problem is a repair, the money is kept until the repair is made. If the repair is not made the lender uses the money to make the repair. Buyers and sellers may also have holdbacks between them, to ensure that specific conditions of the sale are met.

Homeowner's Insurance

Coverage that includes hazard insurance, as well as personal liability and theft.

Inspection

The service an inspector performs when he or she is hired to scrutinize the home for any possible structural defects. May also he done in order to check for the presence of toxic substances, such as leaded paint or water, asbestos, radon, or pests, including termites.

Interest

Money charged for the use of borrowed funds. Usually expressed as an interest rate, it is the percentage of the total loan charged annually for the use of the funds.

Interest-Only Mortgage

A loan in which only the interest is paid on a regular basis (usually monthly), and the principal is owed in full at the end of the loan term.

Interest Rate Cap

The total number of percentage points that an adjustable-rate mortgage (ARM) might rise over the life of the loan.

Joint Tenancy

An equal, undivided ownership in a property taken by two or more owners. Under joint tenancy there are rights of survivorship, which means that if one of the owners dies, the surviving owner rather than the heirs of the estate inherits the other's total interest in the property.

Landlord

A lessor. One who allows another to occupy his land or building for a consideration.

Landscape

The trees, flowers, plantings, lawn, and shrubbery that surround the exterior of a dwelling.

Late Charge

A penalty applied to a mortgage payment that arrives after the grace period.

Lease

Binding contract between a landlord (lessor) and tenant (lessee) for the occupation of premises or land for a specific period of time and a financial or other consideration.

Lease with an Option to Buy

When the renter or lessee of a piece of property has the right to purchase the property for a specific period of time at a specific price. Usually, a lease with an option to buy allows a first-time buyer to accumulate a down payment by applying a portion of the monthly rent toward the down payment.

Leasehold

Property held by lease

Leaseholder

Tenant under a lease

Lender

A person, company, corporation, or entity that lends money for the purchase of real estate.

Lessee

The tenant. One who pays rent.

Lessor

The person granting use of property to another.

Leverage

Using a small amount of cash, say a 10 or 20 percent down payment, to purchase a piece of property.

Lien

An encumbrance against property, which may he voluntary or involuntary. There are many different kinds of liens, including a tax lien (for unpaid federal, provincial, or real estate taxes), a judgment lien (for monetary judgments by a court of law), a mortgage lien (when you take out a mortgage), and a mechanic's lien (for work done by a con- tractor on the property that has not been paid for). For a lien to be attached to the property's title, it must be filed or recorded with local government.

Listing

A property that a broker agrees to list for sale in return for a commission.

Loan

An amount of money that is lent to a borrower, who agrees to repay it plus interest.

Loan Commitment

A written document that states that a mortgage company has agreed to lend a buyer a certain amount of money at a certain rate of interest for a specific period of time, which may contain sets of conditions and a date by which the loan must close.

Loan Origination Fee

A one-time fee charged by the mortgage company to arrange the financing for the loan.

Loan-to-Value Ratio

The ratio of the amount of money you wish to borrow compared to the value of the property you wish to purchase. Institutional investors (who buy loans on the secondary market from your mortgage company) set up certain ratios that guide lending practices. For example, the mortgage company might only lend you 75 percent of a property's value.

Location

Where property is geographically situated. "Location, location, location" is a broker's maxim that states that where the property is located is its most important feature, because you can change everything about a house, except its location.

Lock-In

When a borrower signals to a mortgage company that he or she has decided to lock in, or take, a particular interest rate for a specific amount of time. The mechanism by which a borrower locks in the interest rate that will be charged on a particular loan. Usually, the lock lasts for a certain time period, such as thirty, forty-five, or sixty days. On a new construction, the lock may be much longer.

Maintenance Fee

The monthly fee charged to condo, co- op, or town house owners, and paid to the homeowners' association, for the maintenance of common property. Maintenance fee can include heat, hydro, water, central air conditioning, parking, building insurance, TV cable, common elements.

Market Value

The courts have defined this as being the highest price estimated in terms of money which a property will bring, if exposed for sale in the open market, allowing a reasonable time to find a purchaser who buys with knowledge of all the uses to which it may be put, and for which it is capable of being used.

Mortgage

A loan used to purchase a home. The borrower pledges the property as security for the loan.

Mortgage Broker

A company or individual that brings together lenders and borrowers and processes mortgage applications.

Mortgage Payment

The amount of money that the purchaser pays to the lender on an established, regular basis to repay the principal and pay interest on the mortgage loan.

Mortgagee

A legal term for the lender.

Mortgagor

A legal term for the borrower.

Multiple Listing Service (MLS)

A computerized listing of all properties offered for sale by member brokers.

Negative Amortization

A condition created when the monthly mortgage payment is less than the amount necessary to pay off the loan over the period of time set forth in the note. Because you're paying less than the amount necessary, the actual loan amount increases over time. That's how you end up with negative equity. To pay off the loan, a lump-sum payment must be made.

Net Worth

The difference between total assets and total liabilities.

Open Mortgage

A mortgage that can be prepaid of renegotiated at any time and in any amount without interest penalty.

Option

An agreement whereby one has the exclusive right to buy another's property at a specific price, with a time limit.

Origination Fee

A fee charged by the lender for allowing you to borrow money to purchase property. The fee, which is also referred to as points, is usually expressed as a percentage of the total loan amount.

Ownership

The absolute rights to use, enjoy, and dispose of property. You own it!

Package Mortgage

A mortgage that uses both real and personal property to secure a loan.

Personal Property

Moveable property, such as appliances, furniture, clothing, artwork etc.

Point

A point is one percent of the loan amount.

Possession

Being in control of a piece of property, and having the right to use it to the exclusion of all others.

Power of Attorney

The legal authorization given to an individual to act on behalf of another individual.

Prearranged Mortgage

Preliminary approval by the lender of the borrower's application for a mortgage to a certain maximum amount and rate.

Prepayment Clause

In a mortgage, an agreement giving the mortgagor the privilege of paying additional sums off the principal balance over and above the agreed payments.

Prepayment Penalty

A fine imposed when a loan is paid off before it comes due. If possible, do not use a mortgage that has a prepayment penalty, or you will be charged a fine if you sell your property before your mortgage has been paid off.

Prequalifying for a loan

When a mortgage company tells a buyer in advance of the formal application approximately how much money the buyer can afford to borrow.

Principal (1)

The amount of money you borrow.

Principal (2)

A person or corporate body employing an agent.

Property Tax

A tax levied by a local authority on the value of real estate.

Proration

The proportional division of certain costs of home ownership. Usually used at closing to figure out how much the buyer and seller each owe for certain expenditures, including real estate taxes, assessments, and water bills.

Purchase Agreement

An agreement between the buyer and seller for the purchase of property.

Real Estate

Landed property (land)

Real Estate Agent

One who is authorized by a principal to represent that principal in real estate transactions with another party.

Real Estate Broker

A broker is a special class of agent who may negotiate contracts for the principal, although not entrusted with the possession of the title documents or the property. The broker is the agent in real estate transactions.

Real Property

Land and anything permanently attached to it, such as buildings and improvements.

Realtor

A designation given to a real estate agent or broker who is a member of the Canadian Real Estate Association (CREA).

Recording

The process of filing documents at a specific government office. Upon such recording, the document becomes part of the public record.

Reserve

The amount of money set aside by a condo, co-op, or homeowners' association for future capital improvements.

Sale-Leaseback

A transaction in which the seller sells property to a buyer, who then leases the property back to the seller. This is accomplished within the same transaction.

Second Mortgage

A mortgage that is obtained after the primary mortgage, and whose rights for repayment are secondary to the first mortgage.

Settlement Statement

A statement that details the monies paid out and received by the buyer and seller at closing.

Shared Appreciation Mortgage

A relatively new mortgage used to help first-time buyers who might not qualify for conventional financing. In a shared appreciation mortgage, the lender offers a below-market interest rate in return for a portion of the profits made by the home owner when the property is sold. Before entering into a shared appreciation mortgage, be sure to have your lawyer the documentation.

Special Assessment

An additional charge levied by a condo or co-op board in order to pay for capital improvements, or other unforeseen expenses.

Statement of Adjustments

A document detailing the exact amount owed by the purchaser to the vendor upon closing. It includes the balance of the purchase price, reimbursement for any prepaid utilities or services and lawyer/notary fees and costs.

Straight Loan

In mortgaging, a mortgage with no principal payments, interest only.

Survey

A document providing details of a property's boundaries, measurements and structures. It also describes any easements, rights-of-way, or encroachments made by either your property or adjoining properties.

Subdivision

The division of a large piece of property into several smaller pieces. Usually a developer or a group of developers will build single family or duplex homes of a similar design and cost within one subdivision.

Tenant

The one who pays the rent for the right to occupy land or buildings.

Tenants in Common

A type of ownership in which two or more parties have an undivided interest in the property. The owners may or may not have equal shares of ownership, and there are no rights of survivorship. However, each owner retains the right to sell his or her share in the property as he or she sees fit.

Tenants in Tail

Holder of an estate limited to the heirs of his body. The line of heirs is called entail.

Tenement

Property held by tenant.

Term

The length of time that a mortgage agreement covers. When the term expires, the mortgage is usually repaid in full or renegotiated for another term.

Title

Refers to the ownership of a particular piece of property.

Title Company

The corporation or company that insures the status of title (title insurance) through the closing, and may handle other aspects of the closing.

Title Deed

Proof of legal ownership of property.

Title Insurance

Insurance that protects the lender and the property owner against losses arising from defects or problems with the title to property.

Title Search

Research of records in registry of land titles office to determine history and chain or ownership of property.

Total Debt Service Ratio

The total of annual mortgage payments and all other debts expressed as a percentage of gross annual income.

Trust Account

An account used by brokers, in which funds for another individual are held separately, and not commingled with other funds.

Underwriter

One who underwrites a loan for another. Your lender will have an investor underwrite your loan.

Variable Interest Rate

An interest rate that rises and falls according to a particular economic indicator.

Void

A contract or document that is not enforceable.

Voluntary Lien

A lien, such as a mortgage, that a homeowner elects to grant to a lender.

Waiver

The surrender or relinquishment of a particular right, claim, or privilege.

Warranty

A legally binding promise given to the buyer at closing by the seller, generally regarding the condition of the home, property, or other matter.

Zoning

The right of the local municipal government to decide how different areas of the municipality will be used. Zoning ordinances are the laws that govern the use of the land.