Glossary
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balance sheet
A financial statement that shows assets, liabilities, and net worth as of
a specific date.
bankrupt
A person, firm, or corporation that, through a court proceeding, is relieved
from the payment of all debts after the surrender of all assets to a court-appointed
trustee.
bankruptcy
A proceeding in a federal court in which a debtor who owes more than his
or her assets can relieve the debts by transferring his or her assets to
a trustee.
before-tax income
Income before taxes are deducted.
beneficiary
The person designated to receive the income from a trust, estate, or a deed
of trust.
bequeath
To transfer personal property through a will.
betterment
An improvement that increases property value as distinguished from repairs
or replacements that simply maintain value.
biweekly payment mortgage
A mortgage that requires payments to reduce the debt every two weeks (instead
of the standard monthly payment schedule). The 26 (or possibly 27) biweekly
payments are each equal to one-half of the monthly payment that would be
required if the loan were a standard 30-year fixed-rate mortgage, and they
are usually drafted from the borrower’s bank account. The result
for the borrower is a substantial savings in interest.
blanket insurance policy
A single policy that covers more than one piece of property (or more than
one person).
blended mortgage
A combination of two mortgages, one with a higher interest rate than the
other, to create a new mortgage with an interest rate somewhere between
the two original rates.
bona fide
In good faith, without fraud.
bond
An interest-bearing certificate of debt with a maturity date. An obligation
of a government or business corporation. A real estate bond is a written
obligation usually secured by a mortgage or a deed of trust.
breach
A violation of any legal obligation.
bridge loan
A form of second trust that is collateralized by the borrower's present home
(which is usually for sale) in a manner that allows the proceeds to be
used for closing on a new house before the present home is sold.
broker
A person who, for a commission or a fee, brings parties together and assists
in negotiating contracts between them.
budget
A detailed plan of income and expenses expected over a certain period of
time. A budget can provide guidelines for managing future investments and
expenses.
budget category
A category of income or expense data that you can use in a budget. You can
also define your own budget categories and add them to some or all of the
budgets you create. "Rent" is an example of an expense category. "Salary" is
a typical income category.
building code
Local regulations that control design, construction, and materials used in
construction. Building codes are based on safety and health standards.
bundle of rights
The real property rights which arise by reason of the ownership of the physical
real estate. Some rights included are: the right to enter and use, to lease,
to sell, to give it away, and to refrain from doing any of these things.
buydown account
An account in which funds are held so that they can be applied as part of
the monthly mortgage payment as each payment comes due during the period
that an interest rate buydown plan is in effect.
buydown mortgage
A temporary buydown is a mortgage on which an initial lump sum payment is
made by any party to reduce a borrower’s monthly payments during
the first few years of a mortgage. A permanent buydown reduces the interest
rate over the entire life of a mortgage.
buyer agency agreement
Establishes a formal and exclusive relationship between the potential buyer
and the broker and its representatives.
call option
A provision in the mortgage that gives the mortgagee the right to call the
mortgage due and payable at the end of a specified period for whatever
reason.
cap
A provision of an adjustable-rate mortgage (ARM) that limits how much the
interest rate or mortgage payments may increase or decrease.
capital
(1) Money used to create income, either as an investment in a business or
an income property.
(2) The money or property comprising the wealth owned or used by a person
or business enterprise.
(3) The accumulated wealth of a person or business.
(4) The net worth of a business represented by the amount by which its assets
exceed liabilities.
capital expenditure
The cost of an improvement made to extend the useful life of a property or
to add to its value.
capital improvement
Any structure or component erected as a permanent improvement to real property
that adds to its value and useful life.
cash-out refinance
A refinance transaction in which the amount of money received from the new
loan exceeds the total of the money needed to repay the existing first
mortgage, closing costs, points, and the amount required to satisfy any
outstanding subordinate mortgage liens. In other words, a refinance transaction
in which the borrower receives additional cash that can be used for any
purpose.
caveat
A notice given to a legal authority not to do something until the person
giving notice can be heard.
certificate of acknowledgement
One of two documents that give the property owner the right to sell if dower
rights apply. This document is signed by the non-owner spouse and certifies
that the non-owner spouse consented to the sale of his/her own FREE will.
certificate of compliance
A stamp issued by the municipality which states that the building complies
with the building location requirements.
certificate of title
A statement provided by an abstract company, title company, or attorney stating
that the title to real estate is legally held by the current owner.
chain of title
The history of all of the documents that transfer title to a parcel of real
property, starting with the earliest existing document and ending with
the most recent.
change frequency
The frequency (in months) of payment and/or interest rate changes in an adjustable-rate
mortgage (ARM).
chattel
Another name for personal property.
clear title
A title that is FREE of liens or legal questions as to ownership of the property.
closing
A meeting at which a sale of a property is finalized by the buyer signing
the mortgage documents and paying closing costs. Also called "settlement."
closing costs
Expenses (over and above the price of the property) incurred by buyers and
sellers in transferring ownership of a property. Closing costs normally
include an origination fee, an attorney's fee, taxes, an amount placed
in escrow, and charges for obtaining title insurance and a survey. Closing
costs percentage will vary according to the area of the country; lenders
or Realtors often provide estimates of closing costs to prospective home
buyers.
closing date
The date on which the title and keys to the property are transferred from
the seller to the buyer, and the money is paid.
CMHC - Canada Mortgage and Housing Corporation
Provides mortgage loan insurance to various mortgage lenders.
coinsurance
A sharing of insurance risk between the insurer and the insured. Coinsurance
depends on the relationship between the amount of the policy and a specified
percentage of the actual value of the property insured at the time of the
loss.
collateral
An asset (such as a car or a home) that guarantees the repayment of a loan.
The borrower risks losing the asset if the loan is not repaid according
to the terms of the loan contract.
collection
The efforts used to bring a delinquent mortgage current and to file the necessary
notices to proceed with foreclosure when necessary.
co-maker
A person who signs a promissory note along with the borrower. A co-maker's
signature guarantees that the loan will be repaid, because the borrower
and the co-maker are equally responsible for the repayment.
commission
The fee charged by a broker or agent for negotiating a real estate or loan
transaction. A commission is generally a percentage of the price of the
property or loan.
commitment letter
A formal offer by a lender stating the terms under which it agrees to lend
money to a home buyer. Also known as a "loan commitment."
common area assessments
Levies against individual unit owners in a condominium or planned unit development
(PUD) project for additional capital to defray homeowners' association
costs and expenses and to repair, replace, maintain, improve, or operate
the common areas of the project.
common areas
Those portions of a building, land, and amenities owned (or managed) by a
planned unit development (PUD) or condominium project's homeowners' association
(or a co-operative project's co-operative corporation) that are used by
all of the unit owners, who share in the common expenses of their operation
and maintenance. Common areas include swimming pools, tennis courts, and
other recreational facilities, as well as common corridors of buildings,
parking areas, means of ingress and egress, etc.
common law
An unwritten body of law based on general custom in England and used to an
extent in the United States.
comparables
An abbreviation for "comparable properties"; used for comparative
purposes in the appraisal process. Comparables are properties like the property
under consideration; they have reasonably the same size, location , and amenities
and have recently been sold. Comparables help the appraiser determine the
approximate fair market value of the subject property.
compound interest
Interest paid on the original principal balance and on the accrued and unpaid
interest.
condemnation
The determination that a building is not fit for use or is dangerous and
must be destroyed; the taking of private property for a public purpose
through an exercise of the right of eminent domain.
condominium
A real estate project in which each unit owner has title to a unit in a building,
an undivided interest in the common areas of the project, and sometimes
the exclusive use of certain limited common areas.
condominium conversion
Changing the ownership of an existing building (usually a rental project)
to the condominium form of ownership.
condominium hotel
A condominium project that has rental or registration desks, short-term occupancy,
food and telephone services, and daily cleaning services and that is operated
as a commercial hotel even though the units are individually owned.
construction loan
A short-term, interim loan for financing the cost of construction. The lender
makes payments to the builder at periodic intervals as the work progresses.
contingency
A condition that must be met before a contract is legally binding. For example,
home purchasers often include a contingency that specifies that the contract
is not binding until the purchaser obtains a satisfactory home inspection
report from a qualified home inspector.
contract
An oral or written agreement to do or not to do a certain thing.
conventional mortgage
A mortgage that is not insured or guaranteed by the federal government.
convertibility clause
A provision in some adjustable-rate mortgages (ARMs) that allows the borrower
to change the ARM to a fixed-rate mortgage at specified time frames after
loan origination.
convertible ARM
An adjustable-rate mortgage (ARM) that can be converted to a fixed-rate mortgage
under specified conditions.
co-operative (co-op)
A type of multiple ownership in which the residents of a multiunit housing
complex own shares in the co-operative corporation that owns the property,
giving each resident the right to occupy a specific apartment or unit.
co-operative corporation
A business trust entity that holds title to a co-operative project and grants
occupancy rights to particular apartments or units to shareholders through
proprietary leases or similar arrangements.
co-operative mortgages
Mortgages related to a co-operative project. This usually refers to the multifamily
mortgage covering the entire project but occasionally describes the share
loans on the individual units.
co-operative project
A residential or mixed-use building wherein a corporation or trust holds
title to the property and sells shares of stock representing the value
of a single apartment unit to individuals who, in turn, receive a proprietary
lease as evidence of title.
corporate relocation
Arrangements under which an employer moves an employee to another area as
part of the employer's normal course of business or under which it transfers
a substantial part or all of its operations and employees to another area
because it is relocating its headquarters or expanding its office capacity.
counteroffer
One party’s written response to the other party’s offer during
negotiation of a real estate purchase between buyer and seller.
covenant
A clause in a mortgage that obligates or restricts the borrower and that,
if violated, can result in foreclosure.
credit
An agreement in which a borrower receives something of value in exchange
for a promise to repay the lender at a later date.
credit history
A record of an individual's open and fully repaid debts. A credit history
helps a lender to determine whether a potential borrower has a history
of repaying debts in a timely manner.
credit life insurance
A type of insurance often bought by mortgagors because it will pay off the
mortgage debt if the mortgagor dies while the policy is in force.
creditor
A person to whom money is owed.
credit report
A report of an individual's credit history prepared by a credit bureau and
used by a lender in determining a loan applicant's creditworthiness. See
merged credit report.
debt
An amount owed to another.
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 legal document conveying title to a property.
default
Failure to make mortgage payments on a timely basis or to comply with other
requirements of a mortgage.
delinquency
Failure to make mortgage payments when mortgage payments are due.
deposit
A sum of money given to bind the sale of real estate, or a sum of money given
to ensure payment or an advance of funds in the processing of a loan.
depreciation
A decline in the value of property; the opposite of appreciation.
disclosed dual agency
Dual agency relationships require that both parties, the buyer and the seller,
give their informed consent concerning this relationship.
dower act
Provincial legislation created to provide protection to one spouse from disposition
of property by the other spouse.
dower affidavit
A document signed by the owner of a property when there is only one name
on title to show that there is no need for consent. Either the owner is
not marred or the owner and/or spouse have never lived on the property.
dower rights
All rights given by the Dower Act to the spouse of a married person in respect
to the homestead and property of the marred person.
down payment
The part of the purchase price of a property that the buyer pays in cash
and does not finance with a mortgage.
dual agency
A situation in which an agent represents both the seller and the buyer in
the same transaction or when the seller’s and co-operating agents
both work for the same real estate company, one representing the buyer
and one representing the seller, even if they are in different offices
or different cities.
due-on-sale provision
A provision in a mortgage that allows the lender to demand repayment in full
if the borrower sells the property that serves as security for the mortgage.
earnest money deposit
A deposit made by the potential home buyer to show that he or she is serious
about buying the house.
easement
A right of way giving persons other than the owner access to or over a property.
effective age
An appraiser’s estimate of the physical condition of a building. The
actual age of a building may be shorter or longer than its effective age.
effective gross income
Normal annual income including overtime that is regular or guaranteed. The
income may be from more than one source. Salary is generally the principal
source, but other income may qualify if it is significant and stable.
eminent domain
The right of a government to take private property for public use upon payment
of its fair market value. Eminent domain is the basis for condemnation
proceedings.
Employer-assisted housing
A special Fannie Mae housing initiative that offers several different ways
for employers to work with local lenders to develop plans to assist their
employees in purchasing homes.
encroachment
An improvement that intrudes illegally on another’s property.
encumbrance
Anything that affects or limits the fee simple title to a property, such
as mortgages, leases, easements, or restrictions.
endorser
A person who signs ownership interest over to another party. Contrast with
co-maker.
Equal Credit Opportunity Act (ECOA)
A federal law that requires lenders and other creditors to make credit equally
available without discrimination based on race, colour, religion, national
origin, age, sex, marital status, or receipt of income from public assistance
programs.
equity
A homeowner's financial interest in a property. Equity is the difference
between the fair market value of the property and the amount still owed
on its mortgage.
estate
The ownership interest of an individual in real property. The sum total of
all the real property and personal property owned by an individual at time
of death.
escheat (power of)
The right of the Crown to have ownership of property returned to it if the
taxes are no paid, or if the owner dies intestate (without a will or heirs).
eviction
The lawful expulsion of an occupant from real property.
examination of title
The report on the title of a property from the public records or an abstract
of the title.
exclusive listing
A written contract that gives a licensed real estate agent the exclusive
right to sell a property for a specified time, but reserving the owner’s
right to sell the property alone without the payment of a commission.
executor
A person named in a will to administer an estate. The court will appoint
an administrator if no executor is named. "Executrix" is the
feminine form.
fair market value
The highest price that a buyer, willing but not compelled to buy, would pay,
and the lowest a seller, willing but not compelled to sell, would accept.
fee simple
The greatest possible interest a person can have in real estate.
fee simple estate
An unconditional, unlimited estate of inheritance that represents the greatest
estate and most extensive interest in land that can be enjoyed. It is of
perpetual duration. When the real estate is in a condominium project, the
unit owner is the exclusive owner only of the air space within his or her
portion of the building (the unit) and is an owner in common with respect
to the land and other common portions of the property.
fiduciary duty(ies)
The duties of loyalty, disclosure, confidentiality, obedience, reasonable
care and diligence and full accounting that are required by law of any
agent relative to his/her principal.
finder's fee
A fee or commission paid to a mortgage broker for finding a mortgage loan
for a prospective borrower.
firm commitment
A lender’s agreement to make a loan to a specific borrower on a specific
property.
first mortgage
A mortgage that is the primary lien against a property.
fixed instalment
The monthly payment due on a mortgage loan. The fixed instalment includes
payment of both principal and interest.
fixed-rate mortgage (FRM)
A mortgage in which the interest rate does not change during the entire term
of the loan.
fixture
Personal property that becomes real property when attached in a permanent
manner to real estate.
flood insurance
Insurance that compensates for physical property damage resulting from flooding.
It is required for properties located in federally designated flood areas.
foreclosure
The legal process by which a borrower in default under a mortgage is deprived
of his or her interest in the mortgaged property. This usually involves
a forced sale of the property at public auction with the proceeds of the
sale being applied to the mortgage debt.
forfeiture
The loss of money, property, rights, or privileges due to a breach of legal
obligation.
fully amortized ARM
An adjustable-rate mortgage (ARM) with a monthly payment that is sufficient
to amortize the remaining balance, at the interest accrual rate, over the
amortization term.
grantee
The person to whom an interest in real property is conveyed.
grantor
The person conveying an interest in real property.
group home
A single-family residential structure designed or adapted for occupancy by
unrelated developmentally disabled persons. The structure provides long-term
housing and support services that are residential in nature.
guaranteed mortgage
A mortgage that is guaranteed by a third party.
home equity line of credit
A mortgage loan, which is usually in a subordinate position, that allows
the borrower to obtain multiple advances of the loan proceeds at his or
her own discretion, up to an amount that represents a specified percentage
of the borrower's equity in a property.
home inspection
A thorough inspection that evaluates the structural and mechanical condition
of a property. A satisfactory home inspection is often included as a contingency
by the purchaser.
homeowners' association
A non-profit association that manages the common areas of a planned unit
development (PUD) or condominium project. In a condominium project, it
has no ownership interest in the common elements. In a PUD project, it
holds title to the common elements.
homeowner's insurance
An insurance policy that combines personal liability insurance and hazard
insurance coverage for a dwelling and its contents.
income property
Real estate developed or improved to produce income.
index
A number used to compute the interest rate for an adjustable-rate mortgage
(ARM). The index is generally a published number or percentage, such as
the average interest rate or yield on Treasury bills. A margin is added
to the index to determine the interest rate that will be charged on the
ARM.. This interest rate is subject to any caps that are associated with
the mortgage.
in-file credit report
An objective account, normally computer-generated, of credit and legal information
obtained from a credit repository.
inflation
An increase in the amount of money or credit available in relation to the
amount of goods or services available, which causes an increase in the
general price level of goods and services. Over time, inflation reduces
the purchasing power of a dollar, making it worth less.
initial interest rate
The original interest rate of the mortgage at the time of closing. This rate
changes for an adjustable-rate mortgage (ARM). Sometimes known as "start
rate" or "teaser."
innocent misrepresentation
Occurs when someone makes a false statement without realizing it.
instalment
The regular periodic payment that a borrower agrees to make to a lender.
instalment loan
Borrowed money that is repaid in equal payments, known as instalments. A
furniture loan is often paid for as an instalment loan.
indemnification
The principal’s duty to compensate the agent for liabilities (damages,
losses or expenses) which the agent incurs in carrying out his/her responsibilities.
insurable title
A property title that a title insurance company agrees to insure against
defects and disputes.
insurance
A contract that provides compensation for specific losses in exchange for
a periodic payment. An individual contract is known as an insurance policy,
and the periodic payment is known as an insurance premium.
insured mortgage
A mortgage that is protected by CMHC or GE Capitol. If the borrower defaults
on the loan, the insurer must pay the lender the lesser of the loss incurred
or the insured amount.
interest
The fee charged for borrowing money.
interest accrual rate
The percentage rate at which interest accrues on the mortgage. In most cases,
it is also the rate used to calculate the monthly payments, although it
is not used for an adjustable-rate mortgage (ARM) with payment change limitations.
interest rate
The rate of interest in effect for the monthly payment due.
interest rate buydown plan
An arrangement wherein the property seller (or any other party) deposits
money to an account so that it can be released each month to reduce the
mortgagor's monthly payments during the early years of a mortgage. During
the specified period, the mortgagor's effective interest rate is "bought
down" below the actual interest rate.
interest rate ceiling
For an adjustable-rate mortgage (ARM), the maximum interest rate, as specified
in the mortgage note.
interest rate floor
For an adjustable-rate mortgage (ARM), the minimum interest rate, as specified
in the mortgage note.
investment property
A property that is not occupied by the owner.
joint tenancy
A form of co-ownership that gives each tenant equal interest and equal rights
in the property, including the right of survivorship.
judgement
A decision made by a court of law. In judgements that require the repayment
of a debt, the court may place a lien against the debtor's real property
as collateral for the judgement's creditor.
judgement lien
A lien on the property of a debtor resulting from the decree of a court.
judicial foreclosure
A type of foreclosure proceeding used in some states that is handled as a
civil lawsuit and conducted entirely under the auspices of a court.
land
The earth’s surface, a column of air above it, and the structures attached
to it, such as buildings.
land use districts
The Land Use Bylaw divides the municipality into a number of districts such
as residential, commercial, industrial, and special.
late charge
The penalty a borrower must pay when a payment is made a stated number of
days (usually 15) after the due date.
latent defects
Hidden defects that may have reasonably caused the buyer not to purchase
the property if the defects had been make known.
lawful consideration
The obligations that each party has in a contract must be lawful.
law of property act
Provincial legislation relating to real estate transactions including foreclosures.
This Act replaces the Judicature Act.
lease
A written agreement between the property owner and a tenant that stipulates
the conditions under which the tenant may possess the real estate for a
specified period of time and rent.
leasehold estate
A way of holding title to a property wherein the mortgagor does not actually
own the property but rather has a recorded long-term lease on it.
lease-purchase mortgage loan
An alternative financing option that allows low- and moderate-income home
buyers to lease a home from a non-profit organization with an option to
buy. Each month's rent payment consists of principal, interest, taxes and
insurance (PITI) payments on the first mortgage plus an extra amount that
is earmarked for deposit to a savings account in which money for a down
payment will accumulate.
legal description
A property description, recognized by law, that is sufficient to locate and
identify the property without oral testimony.
legal intention
An element of a contract which means that the parties must intend to create
a binding agreement.
liabilities
A person's financial obligations. Liabilities include long-term and short-term
debt, as well as any other amounts that are owed to others.
liability insurance
Insurance coverage that offers protection against claims alleging that a
property owner's negligence or inappropriate action resulted in bodily
injury or property damage to another party.
licensing
The procedure which an agent undergoes to become legally qualified to act
in the capacity of a real estate agent.
lien
A legal claim against a property that must be paid off when the property
is sold.
line of credit
An agreement by a commercial bank or other financial institution to extend
credit up to a certain amount for a certain time to a specified borrower.
listing agreement
An oral or written agreement between a property owner and an agent, authorizing
the agent to offer real property for sale or lease.
liquid asset
A cash asset or an asset that is easily converted into cash.
loan
A sum of borrowed money (principal) that is generally repaid with interest.
loan origination
The process by which a mortgage lender brings into existence a mortgage secured
by real property.
margin
For an adjustable-rate mortgage (ARM), the amount that is added to the index
to establish the interest rate on each adjustment date, subject to any limitations
on the interest rate change.
market value
The highest possible estimated price which a property will bring
if exposed for sale in the open market, allowing a reasonable time
to find a knowledgeable buyer. It is the expression of the objective
concept of value.
maturity date
The date on which the principal balance of a loan, bond, or other
financial instrument becomes due and payable.
maximum financing
A mortgage amount that is within 5 percent of the highest loan-to-value
(LTV) percentage allowed for a specific product. Thus, maximum
financing on a fixed-rate mortgage would be 90 percent or higher,
because 95 percent is the maximum allowable LTV percentage for
that product.
merged credit report
A credit report that contains information from three credit repositories.
When the report is created, the information is compared for duplicate
entries. Any duplicates are combined to provide a summary of a
your credit.
mill
One one-thousandth of a dollar or one-tenth of a cent. A measure
used to indicate the property tax rate.
modification
The act of changing any of the terms of the mortgage.
monthly fixed instalment
That portion of the total monthly payment that is applied toward
principal and interest. When a mortgage negatively amortizes, the
monthly fixed instalment does not include any amount for principal
reduction.
monthly payment mortgage
A mortgage that requires payments to reduce the debt once a month.
mortgage
A legal document that pledges a property to the lender as security
for payment of a debt.
mortgage banker
A company that originates mortgages exclusively for resale in the
secondary mortgage market.
mortgage broker
An individual or company that brings borrowers and lenders together
for the purpose of loan origination. Mortgage brokers typically
require a fee or a commission for their services.
mortgagee
The lender in a mortgage agreement.
mortgage insurance
A contract that insures the lender against loss caused by a mortgagor's
default on a government mortgage or conventional mortgage. Mortgage
insurance can be issued by a private company or by a government
agency such as the CMHC. Depending on the type of mortgage insurance,
the insurance may cover a percentage of or virtually all of the
mortgage loan.
mortgage insurance premium (MIP)
The amount paid by a mortgagor for mortgage insurance, either to
a government agency such as the CMHC or to a private mortgage insurance
company.
mortgage life insurance
A type of term life insurance often bought by mortgagors. The amount
of coverage decreases as the principal balance declines. In the
event that the borrower dies while the policy is in force, the
debt is automatically satisfied by insurance proceeds.
mortgagor
The borrower in a mortgage agreement.
multidwelling units
Properties that provide separate housing units for more than one
family, although they secure only a single mortgage.
multiple listing service (MLS)
An arrangement among real estate practitioners, usually local real
estate board members, whereby each agent presents his/her listings
to the other members who may negotiate the transactions. If a sale
results, the commission is divided between the seller's agent bringing
the listing and the agent making the sale.
negative amortization
A gradual increase in mortgage debt that occurs when the monthly payment is not
large enough to cover the entire principal and interest due. The amount of
the shortfall is added to the remaining balance to create "negative" amortization.
net cash flow
The income that remains for an investment property after the monthly
operating income is reduced by the monthly housing expense, which
includes principal, interest, taxes, and insurance (PITI) for the
mortgage, homeowners' association dues, leasehold payments, and
subordinate financing payments.
net worth
The value of all of a person's assets, including cash, minus all
liabilities.
non-conforming use
A use that was legal at one time, but whose use has later became
illegal by reason of a change to the Land Use Bylaw.
non-liquid asset
An asset that cannot easily be converted into cash.
notice of default
A formal written notice to a borrower that a default has occurred
and that legal action may be taken.
offer
The purchase price that the buyer suggests to the seller that he/she
would be willing to pay for a particular piece of property. The
seller may accept, reject or alter the buyer's offer.
original principal balance
The total amount of principal owed on a mortgage before any payments
are made.
owner financing
A property purchase transaction in which the property seller provides
all or part of the financing.
partial payment
A payment that is not sufficient to cover the scheduled monthly payment on a
mortgage loan.
patent defects
Defects that should be obvious to the buyer when inspecting the property.
permitted use
Land use classifications which are specifically allowed for in a
designated category under Land Use Bylaws.
personal property
Any property that is not real property.
P.I.T.
When you arrange for your mortgage, you can have the payments arranged
so your Principal, Interest and Taxes are made together. Your other
choice is PI which is Principal and Interest. If you choose PI,
you are responsible to make the Land Tax payments on your own.
People choose PIT as form of payment so they do not get a large
lump sum bill when the taxes are due.
power of attorney
A legal document that authorizes another person to act on one's behalf.
A power of attorney can grant complete authority or can be limited
to certain acts and/or certain periods of time.
prearranged refinancing agreement
A formal or informal arrangement between a lender and a borrower
wherein the lender agrees to offer special terms (such as a reduction
in the costs) for a future refinancing of a mortgage being originated
as an inducement for the borrower to enter into the original mortgage
transaction.
preforeclosure sale
A procedure in which the investor allows a mortgagor to avoid foreclosure
by selling the property for less than the amount that is owed to
the investor.
prepayment
Any amount paid to reduce the principal balance of a loan before
the due date. Payment in full on a mortgage that may result from
a sale of the property, the owner's decision to pay off the loan
in full, or a foreclosure. In each case, prepayment means payment
occurs before the loan has been fully amortized.
prepayment penalty
A fee that may be charged to a borrower who pays off a loan before
it is due.
pre-qualification
The process of determining how much money a prospective home buyer
will be eligible to borrow before he or she applies for a loan.
prime rate
The interest rate that banks charge to their preferred customers.
Changes in the prime rate influence changes in other rates, including
mortgage interest rates.
principal
(1)The amount borrowed or remaining unpaid.
The part of the monthly payment that reduces the remaining balance
of a mortgage, or
(2)the person or company (seller) who employs an agent.
principal balance
The outstanding balance of principal on a mortgage. The principal
balance does not include interest or any other charges. See remaining
balance.
private mortgage insurance
Mortgage insurance that is provided by a private mortgage insurance
company to protect lenders against loss if a borrower defaults.
Most lenders generally require MI for a loan with a loan-to-value
(LTV) percentage in excess of 75%.
promissory note
A written promise to repay a specified amount over a specified period
of time.
property disclosure statement
A statement made by the seller regarding the property condition and
any other information about the property that could be important
to a buyer.
public auction
A meeting in an announced public location to sell property to repay
a mortgage that is in default.
purchase and sale agreement
A written contract signed by the buyer and seller stating the terms
and conditions under which a property will be sold.
radon
A radioactive gas found in some homes that in sufficient concentrations can cause
health problems.
rate-improvement mortgage
A fixed-rate mortgage that includes a provision that gives the borrower
a one-time option to reduce the interest rate (without refinancing)
during the early years of the mortgage term.
real estate
The physical land and improvements made to it, including structures
thereon.
real estate agent
A person licensed to negotiate and transact the sale of real estate
on behalf of the property owner.
real property
Land and appurtenances, including anything of a permanent nature
such as structures, trees, minerals, and the interest, benefits,
and inherent rights thereof.
real property report
The legal outline of the property and location of all buildings on
the land (formerly called the Survey Certificate). Click here for
more information on Real Property Reports.
realtor
A real estate broker or an associate who holds active membership
in a local real estate board that is affiliated with the National
Association of Realtors.
rescission
The cancellation or annulment of a transaction or contract by the
operation of a law or by mutual consent. Borrowers usually have
the option to cancel a refinance transaction within three business
days after it has closed.
refinance transaction
The process of paying off one loan with the proceeds from a new loan
using the same property as security.
relaxation permit
A permit issued by the municipality to grant permission to keep a
development intact in spite of the fact that it is contrary to
a municipality's land use provision.
remaining balance
The amount of principal that has not yet been repaid. See principal
balance.
remaining term
The original amortization term minus the number of payments that
have been applied.
repayment plan
An arrangement made to repay delinquent instalments or advances.
Lenders' formal repayment plans are called "relief provisions."
residential tenancies act
Provincial legislation that amends the former Landlord and Tenants
Act. It applies to the rental of residences such as houses, suites,
apartments and rooming houses.
restrictive covenant
A registered limitation against the land title. In Alberta, such
a restriction would normally be found in the form of a caveat registered
against the title at the Land Titles Office.
right of first refusal
A provision in an agreement that requires the owner of a property
to give another party the first opportunity to purchase or lease
the property before he or she offers it for sale or lease to others.
right of ingress or egress
The right to enter or leave designated premises.
right of survivorship
In joint tenancy, the right of survivors to acquire the interest
of a deceased joint tenant.
second mortgage
A mortgage that has a lien position subordinate to the first mortgage.
secondary mortgage market
The buying and selling of existing mortgages.
secured loan
A loan that is backed by collateral.
security
The property that will be pledged as collateral for a loan.
seller agency
The relationship whereby the agent represents the seller on a client
basis.
seller take-back
An agreement in which the owner of a property provides financing,
often in combination with an assumable mortgage.
single agency
The practice of representing either the buyer or the seller, but
never both in the same transaction.
subagency
The relationship whereby a person is empowered by an agent to act
on his/her behalf or on behalf of the client.
subdivision
A housing development that is created by dividing a tract of land
into individual lots for sale or lease.
survey
A drawing or map showing the precise legal boundaries of a property,
the location of improvements, easements, rights of way, encroachments,
and other physical features.
sweat equity
Contribution to the construction or rehabilitation of a property
in the form of labour or services rather than cash.
tenancy in common
A type of joint tenancy in a property without right of survivorship.
Contrast with tenancy by the entirety and with joint tenancy.
third-party origination
A process by which a lender uses another party to completely or partially
originate, process, underwrite, close, fund, or package the mortgages
it plans to deliver to the secondary mortgage market.
title
A legal document evidencing a person's right to or ownership of a
property.
title insurance
Insurance that protects the lender (lender's policy) or the buyer
(owner's policy) against loss arising from disputes over ownership
of a property.
title search
A check of the title records to ensure that the seller is the legal
owner of the property and that there are no liens or other claims
outstanding.
total debt service ratio
Total obligations as a percentage of gross monthly income. The total
expense ratio includes monthly housing expenses plus other monthly
debts.
trade equity
Equity that results from a property purchaser giving his or her existing
property (or an asset other than real estate) as trade as all or
part of the down payment for the property that is being purchased.
transfer of ownership
Any means by which the ownership of a property changes hands. Lenders
consider all of the following situations to be a transfer of ownership:
the purchase of a property "subject to" the mortgage,
the assumption of the mortgage debt by the property purchaser,
and any exchange of possession of the property under a land sales
contract or any other land trust device.
trust account
A bank account into which the deposit in a real estate transaction
is placed, in accordance to the Real Estate Act.
unattached goods
Moveable personal property that goes with the seller (also known as chattels).
unsecured loan
A loan that is not backed by collateral.
utility right of way
A type of easement granted to a public utility which allows the utility
to enter onto the property for the purpose of repairing or replacing
the utility service.
vested
Having the right to use a portion of a fund such as an individual
retirement fund. For example, individuals who are 100 percent vested
can withdraw all of the funds that are set aside for them in a
retirement fund. However, taxes may be due on any funds that are
actually withdrawn.
waiver
The act of giving up a known right or claim to something. In this
case, it refers to the waiving of a condition of the Purchase Contract.