Tools & Resources: Glossary

Amortization Period
The actual number of years it will take to pay back your mortgage loan.

 

Appraised Value
An estimate of the value of the property and not always the Purchase Price. Conducted for the purpose of mortgage lending by a certified appraiser. Ttheir appraisal is not to be confused with a building inspection.

 

Assignment Sale
An Assignment Sale is when the original purchaser sells and/or transfers all the rights and obligations of the original contract between themselves and the Vendor to another party before the official completion date for the property. Title transfer for the property does not occur until the city issues the necessary permits and the unit is ready for occupancy.

 

Assumability
Allows the buyer to take over the sellers mortgage on the property.

 

Building Permit
A certificate that must be obtained from the municipality by the property owner or contractor before a building can be erected or repaired. It must be posted in a conspicuous place until the job is completed and passed as satisfactory by a municipal building inspector.

 

Cash Flow
A revenue or expense stream that changes a cash account over a given period.

 

Closed Mortgage
A mortgage that locks you into a specific payment schedule. A penalty usually applies if you repay the loan in full before the end of a closed term.

 

Closing Costs
Costs, in addition to the purchase price of a home, such as legal fees, transfer fees, and disbursements, that are payable on the closing date. Closing costs typically range from 2 to 4 percent of a home's selling price.

 

Condominium
The owner has title to a single unit, as well as a share in the common elements such as elevators or surrounding land.

 

Condominium Fee
A monthly common payment among owners which is allocated to pay expenses.

 

Conventional Mortgage
A mortgage loan issued for up to 80 percent of the property's appraised value or purchase price, whichever is less.

 

Cooperative Ownership
In the cooperative form of ownership, each owner owns a share in a company or cooperative venture, which, in turn, owns a property containing a number of housing units. Each shareholder is assigned one particular unit in which to reside.

 

D.O.M.
The amount of days a property has been listed for sale.

 

Deed
A legal document, which is signed by both the vendor and the purchaser transferring ownership. This document is registered as evidence of ownership.

 

Down payment
The portion of the house price the buyer must pay up front from personal resources, before securing a mortgage. It generally ranges from 5 to 25 percent of the purchase price.

 

Duplex
A duplex consists of two houses. Each house can be referred to as either a half duplex or a townhouse.

 

Equity
The difference between the homes selling value and the debts against it.

 

Foreclosure
A legal procedure in which the lender gets ownership of the property if the borrower defaults on the mortgage loan.

 

Freehold Interest
A freehold interest (also known as a fee simple) is the more precise term for what we ordinarily refer to as 'ownership' of a property. The owner of the freehold interest has full use and control of the land and the buildings on it, subject to any rights of the Crown, local land-use bylaws and any other restrictions in place at the time of purchase.

 

Gross 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 half of any condominium maintenance fees.

 

High-ratio Mortgage
A mortgage that exceeds 80 percent of the home's appraised value. These mortgages must be insured for payment.

 

Holdback
An amount of money withheld by the lender during construction of a house to ensure that construction is satisfactory at every stage. A standard holdback is 10 percent of the total cost of the building project.

 

Interest Rate
The rate at which you pay interest to the lender. For example, when the mortgage balance is $100,000, and the interest rate is 6 per cent, one single annual payment will include $6,000 interest. More frequent payments will result in different amounts.

 

Laneway House
A laneway house is a detached dwelling located typically in the area where the garage would be on a single-family lot.

 

Leasehold Interest
In some cases you might purchase the right to use a residential property for a long, but limited, period of time. The owner of this right of use has a type of ownership called a leasehold interest. This type of ownership is used most often for townhouses or apartments built on city-owned land. It is also found occasionally for single detached houses on farm land, on First Nations reserves, and for apartments where the owner of the freehold interest of an entire apartment block sells leasehold interests in individual apartment units to other 'owners.' Leasehold interests are frequently set for periods of 99 years, but regardless of the length of the original term, you will only be able to purchase the remaining portion. Of course, the shorter the remaining portion, the less you, or the person who eventually purchases from you, will be willing to pay for the leasehold interest.

 

Maturity Date
The end of the term, at which time you can pay off the mortgage or renew it.

 

Months of Inventory 
Amount of inventory at hand (number of active listings) divided by average monthly sales. It's an indication of the theoretical length of time it would take to sell all of the properties in a given market if all other factors remain unchanged.

 

Mortgage Insurance
Applies to high-ratio mortgages. It protects the lender against loss if the borrower is unable to repay the mortgage.

 

Mortgage Life Insurance
Pays off the mortgage if the borrower dies.

 

Mortgagee
The person or financial institution that lends the money.

 

Mortgagor
The borrower of the money.

 

Open Mortgage
Allows partial or full payment of the principal at any time, without penalty.

 

Portability
A mortgage option that enables borrowers to take their current mortgage with them to another property, without penalty. A transfer fee may apply.

 

Pre-approved Mortgage
Qualifies you for a mortgage before you start shopping. You know exactly how much you can spend and are free to make a "firm" offer when you find the right home.

 

Prepayment Privileges
Voluntary payments in addition to regular mortgage payments.

 

Principal
The amount of debt, not counting interest left on a loan.

 

Refinancing
Paying off the existing mortgage and arranging a new one or re-negotiating the terms and conditions of an existing mortgage.

 

Renewal
Re-negotiation of a mortgage loan at the end of a term for a new term.

 

Second Mortgage
Additional financing. Usually has a shorter term and higher interest rate than the first mortgage.

 

Seller's Agent
The Seller's Agent represents the seller -- either as a Listing Agent under the listing agreement with the seller or by cooperating as a Sub-Agent, typically through the MLS® system. In dealing with prospective buyers -- customers-- the Seller's Agent can provide a variety of information and services to assist the buyer in his/her decision-making. The Seller's Agent does not represent the buyer.

 

Strata Ownership
The strata form of ownership is designed to provide exclusive use and ownership of a specific housing unit (the strata lot) which is contained in a larger property (the strata project), plus shared use and ownership of the common areas such as halls, grounds, garages, elevators, etc. This type of ownership is used for homes, duplexes, apartment blocks, townhouse complexes, warehouses, and many other types of buildings Because ownership of the common space is shared, the owners also share financial responsibility for its maintenance such as the commonly owned roads, disposal system, landscaping, elevators, management, etc.

 

Subprime Mortgage
A subprime mortgage is granted to borrowers whose credit history is not sufficient to get a conventional mortgage. Often these borrowers have impaired or even no credit history. These can also include interest-only loans.

 

Term
The length of time the mortgage agreement exists. At the expiry of the term the contract may generally be renewed for a further term and the rate renegotiated.

 

Title
A document that gives evidence of an individual's ownership of a property.

 

Title Search
An examination of municipal records to determine the legal ownership of the property. Usually is performed by a title company.

 

Variable-rate Mortgage
A mortgage in which payments are fixed, but the interest rate moves in response to trends. If interest rates go up, a larger portion of your payment goes to the interest; if rates go down, more goes to cover the principal.

 

Vendor Take-Back Mortgage
When the seller provides some or all of the mortgage financing in order to sell their property.