Real estate is complicated.
Here's a low-down on the lingo. Because it's better to be in the know...
Real estate is a complicated matter and so is the language. If you don't know the lingo you could be left in the dark. Here is a glossary of terms provided courtesy of Ryan McCann and Associates to help get you started.
let a realtor be your guide.
A
- Adjustments
Expenses such as property taxes and utilities that have been prepaid by the seller and need to be pro-rated and charged to the purchaser.
- Agent
An individual or a company representing a buyer and/or seller.
- Agreement of Purchase and Sale
a document outlining the terms and conditions under which a property is offered for purchase and sale.
- Amortize
Mortgage payments that include both principal and interest, made in installments.
- Amortization Period
The number of years required for reducing a mortgage debt to zero.
- Amortization Schedule
A table that shows how much of each periodic mortgage payment is principal and interest.
- Appraisal
Determining the market value of a property by an independent appraiser. This value is not necessarily the same as the selling price.
- Appreciation
The amount by which a property has increased in value.
- Approved Lender
A lending institution approved by the government to grant mortgage loans under the terms of the National Housing Act.
- Asking Price
The price at which a property is listed for sale.
- Assumption Agreement
A buyer assumes responsibility of an original owner's or builder's mortgage.
B
- Balloon
The amount that is still to be paid on maturity of a mortgage.
- Blanket Payment
A combined mortgage payment for more than one property.
- Blended Payments
Regularly scheduled mortgage payments consisting of principal and interest.
- Breaking Costs
A fee paid to the lender if a closed mortgage is paid before the maturity date.
- Broker
A person licensed to operate a business providing real estate services to buyers and sellers.
- Buyer's Agent (or Broker)
An individual or a firm working primarily in the interests of the buyer.
- Buyer Brokerage Agreement
A contract outlining arrangements between a buyer and his agent.
C
- Chattels
Chattels in a home are items that may be connected by pipes and wires, such as refrigerators, stoves, washers and dryers. Also see "Fixtures."
- Clear Title
Ownership of real property that is free of any mortgages, liens or other liabilities.
- Client(s)
The buyer and/or seller represented by a real estate broker or agent.
- Closed Mortgage
A mortgage that cannot be renegotiated or paid off before maturity, without paying a penalty to the lender.
- Closing
When the deal is finalized and the title to the property is transferred to the buyer.
- Closing Date
The date when the property changes hands.
- Closing Costs
All expenses related to the transfer of title to a property. These might include lawyer's fees, insurance premiums, surveys, title search or title insurance, appraisal cost, mortgage application fees, and others.
- CMHC
Canada Mortgage and Housing Corporation, a government agency providing mortgage insurance and information.
- Collateral
A property assigned as security for a loan.
- Collateral Mortgage
A loan secured by a mortgage, but the money can be used for buying a property or for any other purpose.
- Commission
The amount or percentage payable to brokers or agents upon completion of a purchase and sale.
- Common Elements
Refers to all the property of a condominium development except the units owned by individual parties.
- Condition
In a real estate document this term refers to something that must happen before the contract becomes firm.
- Conditional Offer
An offer to purchase, but with conditions such as the selling of a present home or being able to arrange proper financing.
- Condominium
A development where the land and all common elements of buildings are owned collectively by all unit owners and only a specific unit belongs to an individual owner. Refers to a type of ownership as opposed to a specific type of property (i.e, townhouse, apartment etc.).
- Conventional Mortgage Loan
A first mortgage where the amount cannot be more than 75% of the appraised property value.
- Convertible Mortgage
A short-term mortgage that can at any time be converted into a longer term closed mortgage without penalty.
- Conveyance
The legal transfer of title to real estate property.
D
- Debt-Service Ratio
The difference between gross household income and total debt payments.
- Deed (or Title)
A registered document that serves as evidence of ownership.
- Default
Failing to make a mortgage payment when due or not fulfilling other terms and conditions of the mortgage.
- Deposit
Money paid in trust, usually to a lawyer, when an offer to purchase is made.
- Discharge of Mortgage
A document stating that a mortgage loan has been paid in full.
- Discount Broker
A real estate firm that charges less than the normal commission rate.
- Down Payment
The amount a buyer must put up himself, the difference between the full price of the property and the amount of the mortgage.
- Dual Agent
A real estate broker or agent who represents both the buyer and the seller.
E
- Easement
The right of use of another person's land for a specific purpose or reason.
- Encumbrance
A legal claim against the property, a debt or a mortgage.
- Equity
The value of a property less the amount of the mortgage and/or other claims against the property, if any.
F
- Financial Institutions
Banks, Trust Companies, Credit Unions, Mortgage Lenders, Insurance Companies, etc.
- Financing
Looking after monetary matters, such as deposits, down payments and mortgage arrangements.
- Fire and Property Insurance
Evidence of such insurance is required by the lender and has to be arranged by the purchaser before closing.
- Fixed Rate Mortgage
The interest rate remains unchanged for the term of the mortgage.
- Fixtures (or Chattels)
Fixtures are items that have been attached and have become part of the property, such as built-in closets, carpeting and light fixtures. Also see "Chattels".
- Flat Fee Broker
A real estate firm charging a set amount, instead of a percentage of the purchase price.
- FSBO
For Sale By Owner. Pronounced FIZZBO. Also known as a Private Sale.
- Foreclosure
A legal procedure for the lender to take possession of the property if the borrower defaults on the mortgage loan.
G
- Gross Debt Service
The payment amount needed to cover principal, interest and taxes.
- Gross Debt Service Ratio
A measurement of principal, interest and taxes as a percentage of gross household income.
H
- High-ratio Mortgage
A mortgage loan that is in higher than the standard criteria for lending values.
I
- Inspection (or Property Inspection)
Checking the house for structural or other defects by the buyer or by an expert hired by the buyer.
- Interest Rate
The percentage paid to a lender for the use of the money borrowed.
J
K
L
- Land Survey
A certificate of location indicating boundaries of a property.
- Lender
A person or a company in the business of lending money. Also known as a mortgagee.
- Lending Value
The purchase price or the estimated market value of real estate.
- Leverage
Monies borrowed to purchase real estate property.
- Listing Agreement
A written agreement between the seller and his agent.
M
- Maturity Date
The date on which the term of a mortgage ends.
- Mechanic's Lien
A claim against a property by someone who has provided materials and/or labour and has not been paid.
- Mortgage
A legal instrument assigning property as security for a loan.
- Mortgage Broker
An individual or a firm bringing lender and borrower together.
- Mortgage Insurance
By law, any mortgage for which the down payment is less than 25%, must be insured to protect the lender.
- Mortgage Life Insurance
Insurance that guarantees the mortgage will be paid in full if the borrower dies.
- Mortgage Payment
Scheduled payments that include principal and interest.
- Mortgagee
An individual or a financial institution lending money secured by a mortgage.
- Mortgagor
A borrower who gives title to his property as security for a mortgage loan.
N
- Negative Amortization
When installment payment amounts are less than the interest rate on the mortgage. The principal increases and the borrower owes more than the original sum borrowed.
- Net Worth
Total assets minus total liabilities equal a person's financial net worth.
O
- Offer to Purchase
A signed document outlining the terms under which a buyer agrees to purchase a property.
- Option Agreement
A written agreement stating that for a specific deposit amount an individual has first rights to buy a property within a certain period of time.
P
- PIT Payment
Principal, Interest and Tax payments to be made on a regular basis, as outlined in the mortgage agreement.
- Principal
The actual amount of the mortgage loan, not including interest.
- Principal Balance
The remaining balance due on a mortgage loan.
- Private Sale
A sale arranged directly between a vendor and a purchaser, without the involvement of any agents.
- Property Disclosure Statement
This document summarizes the seller's knowledge of the property. It is not mandatory in most jurisdictions.
Q
R
- Realtor
A person licensed to engage in the business of buying and selling real estate.
- Refinancing
Paying off an existing mortgage and arranging a new mortgage, often with a different lender.
- Representations and Warranties
Legal clauses sometimes built into a buy/sell contract. Be sure to have them reviewed by your lawyer before signing the document.
- Reserve Fund
Refers to that portion of condominium fees being collected and held by a condominium corporation to meet future repair and maintenance expenses.
- Reverse Mortgage
Money borrowed by senior citizens using their home as collateral. This loan has to be repaid from the proceeds of the estate when the owner dies.
S
- Second Mortgage
A loan in addition to the first mortgage, usually at a higher interest rate.
- Seller's Agent
A real estate person or firm working mainly on behalf of the seller.
T
- Term
Defines the length of time a mortgage agreement is in effect before it has to be paid off or renegotiated.
- Time of the Essence
Date and time limits on a contract are strictly enforced.
- Title (or Deed)
The proof of ownership of a property.
- Title Defect
An undischarged mortgage, a lien, or a fundamental error in the legal description might constitute a title defect.
- Title Insurance
A policy of insurance that protects ownership and mortgage concerns. Title insurance can also include surveys, taxes, building and zoning issues, and other local authority searches.
- Title Search
An investigation of real property records at the local Land Registry Office or Land Titles Office.
U
V
- Variable-Rate Mortgage
A mortgage where installment amounts remain constant, but interest rates fluctuate. If interest rates are low, more money goes towards payment of principal, or the opposite if interest rates are high.
- Vendor
The seller of a property.
- Vendor Take-Back (or VTB)
A financial arrangement between the seller and the buyer of a property. This often consists of a second mortgage the seller is willing to hold.
W
X
Y
Z
- Zoning Bylaws
Local or regional laws governing land use for specific purposes.
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