Mortgage Terms
A mortgage refers to a loan that is used by a buyer to finance the purchase of a property. It is a legal agreement between a borrower (typically the property buyer) and a lender (often a bank or mortgage lender). The property itself serves as collateral for the loan.
A mortgage broker is a licensed professional who helps borrowers find and secure mortgage loans from various lenders. They work with clients to understand their financial situation, goals, and borrowing needs, then shop around among multiple lenders to find the most suitable mortgage terms and rates.
The mortgagee is the financial institution or individual that provides the mortgage loan to the borrower. This entity or person extends credit to the borrower in exchange for a promissory note and a lien on the property.
The mortgagor is the individual or entity that borrows money from a lender (mortgagee) to purchase a property or to access funds using real estate as security.
A mortgage loan that has a 20% down payment of the purchase price, with the mortgage not exceeding 80% of the appraised value.
A mortgage loan that has less than 20% down payment of the purchase price. This type of mortgage requires loan insurance.
An additional mortgage that uses your home as security and gives the mortgagee the right to take your home if you default on your loan. The first mortgagee gets paid first in cases of default and has the best chance of recovering all of its money and usually come with a higher interest rate.
The process of estimating the value of a property. This valuation is typically conducted by a licensed or certified appraiser who evaluates various factors such as the property’s condition, location, comparable sales in the area, and current market trends. The purpose of an appraisal can vary, including determining the market value for a sale, securing financing from a lender, establishing the value for tax purposes, or assessing the value in case of inheritance or divorce settlements.
With a pre-payment privilege, you have the right to make payments toward the principal portion of your mortgage over and above the monthly payments. A mortgage with a pre-payment option is classified as a closed mortgage. An open mortgage means you can pay the entire principal sum without notice of bonus.
It means transferring the balance of your current mortgage at the existing rates and with the existing terms and conditions, to your new home.
The process of replacing an existing mortgage with a new mortgage loan, typically to take advantage of better terms, lower interest rates, or access equity in the property.
With an assumable mortgage, you, the purchaser, simply assume the obligations of the vendor’s/seller’s mortgage. If the buyer stops making payments, the vendor/seller could be accountable for those payments.
A situation where your mortgage terms allow you to increase the principal amount. Usually, your new rate will be a blended amount of the initial mortgage rate and the prevailing rates. It’s a great option for future renovation.
The final payment of a mortgage loan when it is larger than the regular payment. It usually extinguishes the debt.
Refers to a short-term loan used by a homebuyer or real estate investor to cover the gap between the purchase of a new property and the sale of an existing property. It’s often used when the buyer needs immediate funds to purchase a new property but hasn’t yet sold their current property to generate the necessary cash
This is the amount of time over which the entire debt will be repaid. Most mortgages are amortized over 15, 20, or 25-year periods. The longer the amortization, the lower the payments.
A situation where debt can be repaid in part or full at any time without penalty. This is a great mortgage if you believe interest rates are moving down or if you plan to move in the near future.
A mortgage where the interest rate is fixed for the full term of the mortgage, and you will have to pay a penalty to change the agreement conditions. This type of mortgage is ideal for buyers who suspect that interest rates will rise.
Similar to a closed mortgage, plus the flexibility to convert to a longer closed mortgage at any time without penalty.
A date refers to the anniversary of the date when your mortgage loan was initially funded or when your mortgage agreement officially began. It’s not necessarily the same as the date you closed on the property or the date you signed the mortgage documents, but rather the date when the funds were disbursed to purchase the home or to refinance an existing mortgage. Typically, your mortgage payments are due on the same date each month, based on when your mortgage anniversary date falls.
Written notification from the mortgage lender to the borrower that approves the advancement of a specified amount of mortgage funds under specified conditions.
Refers to the failure of a borrower (typically the buyer or homeowner) to meet their financial obligations under the terms specified in a mortgage or loan agreement.
Typically refers to the release or removal of a mortgage lien from the property once the mortgage loan has been fully paid off or satisfied. When a borrower pays off their mortgage loan, the lender issues a document called a “mortgage discharge” or “release of mortgage.” This document acknowledges that the debt has been satisfied and releases the lender’s claim to the property.
In real estate, a down payment refers to the initial payment made by a buyer toward the purchase price of a property. It generally ranges from 5% to 25% of the purchase price but can be more.
Equity refers to the difference between the current market value of a property and the amount still owed on its mortgage or other liens. It is calculated by subtracting the outstanding mortgage balance and any other debts secured by the property from the property’s current market value.
Interest rates in real estate refer to the cost of borrowing money to finance the purchase of property. Interest rate is the percentage charged by a lender to a borrower for the use of borrowed funds, typically expressed as an annual percentage rate
A home loan where the interest rate remains constant throughout the entire term of the loan. With a fixed-rate mortgage, the interest rate is set at the beginning of the loan and remains unchanged for the entire duration of the loan term, regardless of fluctuations in the broader economy or interest rate changes in the market.
Type of home loan where the interest rate can fluctuate over time based on changes in an underlying benchmark or index.
Refers to the amount of money borrowed through a loan, excluding interest or other charges. Principal is the initial amount of money borrowed from a lender to purchase a property or secure a mortgage. It represents the actual amount of debt owed by the borrower to the lender, excluding any interest or fees that may accrue over time.
The term of a mortgage is the length of time that the mortgage conditions, including the interest rate you pay, are carried out. Terms are usually between six months and ten years. At the end of the term, you either pay off the mortgage or renew it, possibly renegotiating its terms and conditions.
In real estate, “power of sale” refers to a legal provision that allows a lender (typically a mortgagee or a lien holder) to sell a property when the borrower (mortgagor) defaults on their mortgage payments or breaches other terms of the mortgage agreement.
Offer Related Terms
A contract between a property owner (seller) and a real estate brokerage firm or agent grants the brokerage the authority to represent the seller and market the property for sale. The primary purpose of a listing agreement is to establish the terms and conditions under which the real estate brokerage will market and sell the seller’s property. It outlines the rights and responsibilities of both parties during the listing period.
Stands for Comparative Market Analysis. It is an evaluation of similar, recently sold homes (comparables or “comps”) that are near a home intended to be bought or sold. Real estate agents usually create CMAs for their clients to help them figure out the best price at which to list a home or to make a competitive offer on a home.
A conditional offer refers to an offer that is contingent upon certain conditions being met before it becomes firm. Usually, the conditions on the purchase are a home inspection, financing or subject to sale of the buyer’s existing home.
Refers to a situation where the seller and the buyer have agreed to the terms outlined in the offer. Typically, the terms are purchase price, financing terms, contingencies (if any), and closing timeline.
A counteroffer in real estate refers to a response made by a seller or buyer to an initial offer, which proposes different terms than those originally suggested.
In real estate, a deposit refers to an amount of money provided by a buyer to demonstrate serious intent and commitment when making an offer to purchase a property. The deposit amount can vary depending on local customs, market conditions, and the specifics of the transaction. It is typically a percentage of the purchase price (Typically 5%).
Is the final step in the process of transferring ownership of a property from the seller to the buyer. The main purpose of closing is to legally transfer ownership of the property from the seller to the buyer.
A buyer’s agent in real estate represents the interests of the homebuyer during the purchasing process.
A seller’s agent in real estate represents the interests of the seller during the purchasing process.
Multiple representation in real estate refers to a situation where a real estate agent or brokerage represents both the buyer and the seller in the same transaction. Often synonymous with dual agency, where a single real estate agent or brokerage firm represents both parties.
Chattels refer to movable personal property that can be included in the sale of a property but are not permanently attached to the real estate and include items such as furniture, appliances, rugs, curtains, artworks, and movable fixtures that are not considered part of the real property itself. They can be easily removed without causing damage to the structure or land.
Fixtures in real estate refer to items that were originally personal property but have become permanently attached or affixed to the land or structures on the land and are included with the property. Some examples are stoves, ovens, dishwashers, light fixtures that are attached to the ceiling or walls, heating and air conditioning systems that are integrated into the property, built-in cabinets, shelving units, and plumbing fixtures like sinks, toilets, and bathtubs.
Refers to parts of a property or development that are jointly owned and shared by multiple owners or residents within that property or development.
In real estate, a deed is a legal document that transfers ownership of real property (real estate) from one party to another. It serves as evidence of the transfer of ownership rights of real property from a grantor (seller) to a grantee (buyer). It legally conveys the title (ownership) of the property.
A document that outlines the financial details and adjustments related to the purchase or sale of a property. The Statement of Adjustment is used to calculate and finalize the financial obligations between the buyer and seller at the closing of a real estate transaction.
The process of examining public records to confirm a property’s legal ownership and to uncover any claims, liens, encumbrances, or restrictions that may affect the property’s title. The primary purpose of a title search is to verify that the seller legally owns the property and has the right to transfer ownership to the buyer.
Zoning laws are local government regulations that control the use of land and buildings within specific geographic areas. These laws divide a municipality or jurisdiction into different zones or districts, each with its own set of permitted uses, building requirements, and restrictions.
Home Styles
Often referred to as a condo, is a type of residential property ownership where individuals own their individual units within a larger complex or building.
Freehold property refers to real estate ownership where the owner has full and unconditional ownership rights to the land and the buildings or structures on that land.
Typically refers to a type of housing structure that stands alone and is not physically connected to any adjacent properties
A two-story home encompasses two full levels of living space. The ground level often houses the main living area, while the second floor typically contains the primary suite and additional bedrooms. Some two-story homes may also feature a basement level.
Also referred to as a single-level, this style is characterized by a long and low design, with the majority or all of the living space situated on the ground level. Many single-level homes have a basement that can be finished to provide additional living space. In some cases, a lower-level walk-out allows for direct access from the exterior.
A semi-detached home consists of two single-family dwellings that share a common wall and have mirror-image layouts. These homes usually have separate street addresses and can be owned by different homeowners. It is important to consider shared expenses, such as maintenance of house siding, and windows, and the upkeep of common spaces like the yard, landscape, or a shared driveway, as these responsibilities fall on the homeowners.
A townhouse is an individually owned unit that is part of a row of 3 or more attached houses.
An individually owned unit that is part of a row of 3 or more attached houses which also have a condominium fee that covers shared monthly expenses for the upkeep of the exterior and any shared facilities(refers to a condo townhouse).
Refers to a type of residential building where multiple townhouse units are vertically stacked on top of each other within a single structure.
A duplex is a home that comprises two separate dwellings, either side by side or stacked on top of each other. These dwellings typically have identical layouts or mirror-image designs. A duplex typically has one street address with unit numbers, and it is owned by a single property owner.
Link-detached homes are somewhat similar to semi-detached homes but with a slight difference. They are typically detached houses where the garage or another part of the building is connected to the neighbouring property via a covered walkway or link. They provide more separation and privacy compared to traditional attached homes but still have some shared structural elements, such as a garage wall or a connecting pathway.
This architectural style features a steeply pitched roof and a clean, minimalist design. Dormers can be added to the roof to introduce windows or create usable space on the upper level.
Is a style of house that features multiple levels that are staggered or “split” at the front and back of the home, rather than the traditional side-by-side split found in a typical split-level home. This home style may typically consist of two short sets of stairs leading up and down from the entry point. It may or may not have living space at the entry-level.
Refers to the phase before construction begins on a new residential or commercial development. During this stage, developers undertake planning, design, and preparatory activities to set the groundwork for the construction process. Developers offer pre-construction sales to buyers, typically with deposits and staged payments tied to construction milestones.
Other Real Estate Terms
Appreciation in real estate refers to an increase in the value of a property over time. Appreciation is the rise in the market value of a property, typically resulting from increased demand, improvements to the property or surrounding area, inflation, economic growth, and market conditions.
Refers to the process of determining the value of a property for taxation purposes. This valuation is typically conducted by a local government or municipal authority and is used to calculate property taxes that the owner must pay.
A situation where demand for properties equals the supply of available properties and usually produces reasonable offers and houses generally sell in sufficient periods. Prices remain stable and there are usually a good number of them to choose from.
A situation where there are more properties for sale than there are buyers, giving buyers more negotiating power.
A situation where there are fewer properties for sale than there are buyers, giving sellers more negotiating power.
Market value in real estate refers to the estimated price at which a property would likely sell under typical market conditions, assuming a knowledgeable buyer and seller and a reasonable time frame for the sale. Market value is the most probable price a property should bring in a competitive and open market, given a reasonable amount of time for marketing and sale.
MLS stands for Multiple Listing Service. It is a comprehensive database created and maintained by real estate professionals to share information about properties for sale. It is a centralized database that allows real estate agents and brokers to share information about properties they have listed for sale
Refers to the attractiveness of a property when viewed from the street or curb. It encompasses visual appeal and a first impression that a property makes on potential buyers. Primarily focuses on the exterior appearance of a property, including the condition and aesthetic appeal of the landscaping, exterior walls, roof, windows, doors, driveway, and front entryway.
An easement in real estate refers to the legal right of one party to use or access a portion of another party’s property for a specific purpose without possessing it outright.
In real estate, a lien refers to a legal claim or encumbrance placed on a property by a creditor to secure a repayment of a debt or obligation.
Refers to the value of an individual’s or entity’s assets minus liabilities. It provides a measure of an entity’s financial health and is often used to assess an individual’s or organization’s ability to withstand financial risks and obligations. Net worth in real estate provides a comprehensive snapshot of an individual’s or entity’s financial position by comparing total assets against total liabilities.
Refers to a designated pool of money set aside by a condominium corporation to cover the cost of future repairs, maintenance, and capital improvements for common areas and shared amenities within a community or building. A well-funded reserve fund enhances financial stability and reduces the need for special assessments or borrowing in emergencies.
In the context of condominium ownership, it refers to a document that provides essential information about the financial and operational status of a condominium corporation. Typically requested by potential buyers or their legal representatives during the purchase process. It details the condominium corporation’s financial status, including the operating budget, reserve fund balance, and any outstanding debts or liabilities.
A detailed map or drawing of a property that outlines its boundaries, dimensions, and physical features. The primary purpose of a survey is to accurately define the boundaries of a property. It identifies the exact location of property lines, corners, and any encroachments or easements affecting the land.
Fees Associated with Home Ownership:
It is a tax imposed by some provincial or municipal governments in Canada on the transfer of land or real estate from one party to another. The tax is typically payable by the purchaser of the property and is based on the purchase price.
Property taxes are taxes imposed by local governments on real estate properties. If the Vendor has paid a portion of the taxes in advance, you will be responsible for reimbursing the Vendor on closing which may be added to your mortgage payments.
Type of insurance that provides financial reimbursement to the owner or renter of a structure and its contents in the event of damage or theft. It covers a wide range of property, including homes, buildings, personal belongings, and even business assets. Your lender will insist that you have insurance on your property because your home is used as security for the mortgage.
Service charges typically refer to fees or additional costs that a service provider charges for delivering a particular service. You’ll be charged for telephone, cable, Internet, and a variety of other services that you hook up at your new home.
Each real estate transaction requires the assistance of a legal professional to review the Offer to Purchase, search the title, draw up the mortgage documents, and take care of the details on the day of closing. Lawyers fees range widely depending on the complexity of the transaction.
Whether you’ve decided to do it yourself or hire a moving company, this term refers to the cost associated with moving.
These are payments made by condominium owners to the management company responsible for maintaining the common areas and amenities of the condominium complex. The amount of condo fees can vary widely depending on factors such as the size of the complex, the amenities offered, the location, and the overall condition of the building
If you’re moving into a condominium complex(not necessarily a high-rise) this certificate outlines the condominium corporation’s financial and legal state. It typically costs around $100 and is usually paid for by the seller if agreed to in the Offer to Purchase.
An easement in real estate refers to the legal right of one party to use or access a portion of another party’s property for a specific purpose without possessing it outright.
In real estate, a lien refers to a legal claim or encumbrance placed on a property by a creditor to secure a repayment of a debt or obligation.
Refers to the value of an individual’s or entity’s assets minus liabilities. It provides a measure of an entity’s financial health and is often used to assess an individual’s or organization’s ability to withstand financial risks and obligations. Net worth in real estate provides a comprehensive snapshot of an individual’s or entity’s financial position by comparing total assets against total liabilities.
Refers to a designated pool of money set aside by a condominium corporation to cover the cost of future repairs, maintenance, and capital improvements for common areas and shared amenities within a community or building. A well-funded reserve fund enhances financial stability and reduces the need for special assessments or borrowing in emergencies.
In the context of condominium ownership, it refers to a document that provides essential information about the financial and operational status of a condominium corporation. Typically requested by potential buyers or their legal representatives during the purchase process. It details the condominium corporation’s financial status, including the operating budget, reserve fund balance, and any outstanding debts or liabilities.
A home inspection fee is a charge imposed by a professional home inspector for evaluating the condition of a residential property and is usually paid by the buyer. For a few hundred, you’ll receive a complete written report about the condition of the structure.