GET DOWN WITH THE LINGO
At times, even our most savvy business women or businessmen give us a puzzled look when they hear us speaking in our abbreviated ways. To help you understand our business a little better, Goldilocks Estates would like to share with you a list of real estate vocabulary.
No question is ever stupid, but if you would prefer looking it up quietly, this miny version of a real estate dictionary will prove very useful, especially to our first time homebuyers.
If we are missing a term that you feel should be added, just drop us an email.
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Condition in a mortgage that may require the balance of the loan to become due immediately, if regular mortgage payments are not made or for breach of other conditions of the mortgage.
AGREEMENT OF PURCHASE AND SALE
Known by various names, such as contract of purchase, purchase agreement, or sales agreement according to location or jurisdiction. A contract in which a seller agrees to sell and a buyer agrees to buy, under certain specific terms and conditions spelled out in writing and signed by both parties.
A non-essential condo element that may enhance your property value. For example, a pool or fitness room.
The gradual reduction of a debt by means of a regular payment. Repayments of principal and interest in “blended” amounts. The normal amortization period for a mortgage in Canada is 25 years, but can be as short as 5 years or as long as 40 years sometimes.
ANNUAL GENERAL MEETING
An annual meeting held by condo owners to elect their board of directors
An expert judgment or estimate of the quality or value of real estate as of a given date. Lenders require an independent assessment of the value of the home you are buying before agreeing to finance the purchase.
An increase in value from when the property was first purchased.
ASSUMPTION OF MORTGAGE
An obligation undertaken by the purchaser of property to be personally liable for payment of an existing mortgage. In an assumption, the purchaser is substituted for the original mortgagor in the mortgage instrument and the original mortgagor is to be released from further liability in the assumption, the mortgagee’s consent is usually required. The original mortgagor should always obtain a written release from further liability if he desires to be fully released under the assumption. Failure to obtain such a release renders the original mortgagor liable if the person assuming the mortgage fails to make the monthly payments. An “Assumption of Mortgage” is often confused with “purchasing subject to a mortgage.” When one purchases subject to a mortgage, the purchaser agrees to make the monthly mortgage payments on an existing mortgage, but the original mortgagor remains personally liable if the purchaser fails to make the monthly payments. Since the original mortgagor remains liable in the event of default, the mortgagee’s consent is not required to a sale subject to a mortgage. Both “Assumption of Mortgage” and “Purchasing Subject to a Mortgage” are used to finance the sale of property. They may also be used when a mortgagor is in financial difficulty and desires to sell the property to avoid foreclosure.
A mortgage that combines the amount owing on an existing mortgage with additional funds being advanced. The interest rate would be a combination of the rate on the old loan and the rate in effect at the time of the new financing.
Interim financing to bridge the time gap between the closing date on the purchase of a new home and the closing date on the sale of the current home.
Provincial or locally adopted regulations that control the design, construction, repair, quality of building materials, use, and occupancy of any structure under its jurisdiction.
BUILDING LINE OR SETBACK
Distances from the ends and/or sides of the lot beyond which construction may not extend. The building line may be established by a filed plat of subdivision, by restrictive covenants in deeds or leases, by building codes, or by zoning ordinances.
CERTIFICATE OF TITLE
A certificate issued by a title company or a written opinion rendered by an attorney that the seller has good marketable and insurable title to the property which he is offering for sale. A certificate of title offers no protection against any hidden defects in the title which an examination of the records could not reveal. The issuer of a certificate of title is liable only for damages due to negligence. The protection offered a homeowner under a certificate of title is not as great as that offered in a title insurance policy.
Articles of personal property such as household goods, furnishings, and fixtures that are not permanently affixed to the house
The restriction or denial of repayment rights until the end of the mortgage term.
The numerous expenses which buyers and sellers normally incur to complete a transaction in the transfer of ownership of real estate. These costs are in addition to price of the property and are items prepaid at the closing day. This is a typical list:
BUYER’S EXPENSES SELLER’S EXPENSES
Documentary Stamps on Notes Cost of Abstract
Recording Deed and Mortgage Documentary Stamps on Deed
Escrow Fees Real Estate Commission
Attorney’s Fee Recording Mortgage
Title Insurance Survey Charge
Appraisal and Inspection Escrow Fees
Survey Charge Attorney’s Fee
The agreement of sale negotiated previously between the buyer and the seller may state in writing who will pay each of the above costs.
The day on which the formalities of a real estate sale are concluded. The certificate of title, abstract, and deed are generally prepared for the closing by an attorney and this cost charged to the buyer. The buyer signs the mortgage, and closing costs are paid. The final closing merely confirms the original agreement reached in the agreement of sale.
Canada Mortgage and Housing Corporation, a Crown Corporation which administers the National Housing Act.
If your down payment is less than 25% , you must have mortgage insurance. It insures the lender against the possibility of you defaulting on your mortgage. Canada Mortgage and Housing Corporation is the principal source of mortgage insurance. G.E. Capital also provides mortgage insurance to many of Canada’s financial institutions.
The payment given by the seller of a property to a Real Estate agent for his/her services.The amount is usually a percentage of the sale price and is usually paid at closing.
A letter outlining the amount, terms and conditions under which a lender is willing to offer a mortgage.
Lands or improvements on land that are designated for common use and enjoyment by all occupants, tenants or owners. The lobby, a pool, tennis court or common hallways would all be Common Areas in a condominium or townhouse complex.
The ownership of property by two or more persons, where on the death of one, his share does not automatically go to the other(s) but is credited to his estate.
Interest charged on both the principal amount of a loan as well as on the interest charged in a preceeding period.
The taking of private property for public use by a government unit, against the will of the owner, but with payment of just compensation under the government’s power of eminent domain. Condemnation may also be a determination by a governmental agency that a particular building is unsafe or unfit for use.
In the construction industry, a contractor is one who contracts to erect buildings or portions of them. There are also contractors for each phase of construction: heating, electrical, plumbing, air conditioning, road building, bridge and dam erection, and others.
An apartment building or a group of dwellings owned by a corporation, the stockholders of which are the residents of the dwellings. It is operated for their benefit by their elected board of directors. In a cooperative, the corporation or association owns title to the real estate. A resident purchases stock in the corporation which entitles him to occupy a unit in the building or property owned by the cooperative. While the resident does not own his unit, he has an absolute right to occupy his unit for as long as he owns the stock.
CONTRACT OF PURCHASE AND SALE
A written statement by which a buyer agrees to purchase, and a seller agrees to sell a particular piece of property according to the terms set forth in that agreement.
A first mortgage granted by an institutional lender such as a bank or trust company, where the amount of the loan does not exceed 75% of the lending value of the property.
A short term mortgage, usually 6 months or 1 year, that allows a borrower to lock in to a longer term at any time without penalty.
Transfer of ownership of real estate property from one individual to another.
CREDIT BUREAU REPORT
A report by a credit reporting agency that maintains a history of timely, or untimely, repayment of debt. The lender’s primary source of information regarding the credit history of a borrower
Failure to make mortgage payments as agreed to in a commitment based on the terms and at the designated time set forth in the mortgage or deed of trust. It is the mortgagor’s responsibility to remember the due date and send the payment prior to the due date, not after. Generally, thirty days after the due date if payment is not received, the mortgage is in default. In the event of default, the mortgage may give the lender the right to accelerate payments, take possession and receive rents, and start foreclosure. Defaults may also come about by the failure to observe other conditions in the mortgage or deed of trust.
Decline in value of a house due to wear and tear, adverse changes in the neighborhood, or any other reason.
The option to make twice the normal regular payment at a regular payment due date.
The amount of money to be paid by the purchaser to the seller upon the signing of the agreement of sale. The agreement of sale will refer to the downpayment amount and will acknowledge receipt of the downpayment. Downpayment is the difference between the sales price and maximum mortgage amount. The downpayment may not be refundable if the purchaser fails to buy the property without good cause. If the purchaser wants the downpayment to be refundable, he should insert a clause in the agreement of sale specifying the conditions under which the deposit will be refunded, if the agreement does not already contain such clause. If the seller cannot deliver good title, the agreement of sale usually requires the seller to return the downpayment and to pay interest and expenses incurred by the purchaser.
The deposit is the money given to the seller or his agent by the potential buyer upon the signing of the agreement of sale to show that he is serious about buying the house. If the sale goes through, the deposit money is applied against the downpayment. If the sale does not go through, the earnest money will be returned to the buyer if he or she is unable to remove the conditions set forth in the contract. A release of monies form must be signed by both the seller and buyer before the deposit is returned to the buyer.
A right- of- way granted to a person or company authorizing access to or over the owner’s land. An electric company obtaining a right- of- way across private property is a common example
An obstruction, building, or part of a building that intrudes beyond a legal boundary onto neighboring private or public land, or a building extending beyond the building line.
A legal right or interest in land that affects a good or clear title, and diminishes the land’s value. It can take numerous forms, such as zoning ordinances, easement rights, claims, mortgages, liens, charges, a pending legal action, unpaid taxes, or restrictive convenants. An encumbrance does not legally prevent transfer of the property to another. A title search is all that is usually done to reveal the existence of such encumbrances, and it is up to the buyer to determine whether he wants to purchase with the encumbrance, or what can be done to remove it.
The value of a homeowner’s unencumbered interest in real estate. Equity is computed by subtracting from the property’s fair market value the total of the unpaid mortgage balance and any outstanding liens or other debts against the property. A homeowner’s equity increases as he pays off his mortgage or as the property appreciates in value. When the mortgage and all other debts against the property are paid in full the homeowner has 100% equity in his property.
Funds paid by one party to another (the escrow agent) to hold until the occurrence of a specified event, after which the funds are released to a designated individual. In a mortgage transaction an escrow account usually refers to the funds a mortgagor pays the lender at the time of the periodic mortgage payments. The money is held in a trust fund, provided by the lender for the buyer. Such funds should be adequate to cover yearly anticipated expenditures for mortgage insurance premiums, taxes, hazard insurance premiums, and special assessments. When a transaction is referred as being in escrow another term frequently used in the Okanagan is a ‘pending sale’.
FIXED RATE MORTGAGE
The interest rate remains the same for the term of the mortgage.
A legal term applied to any of the various methods of enforcing payment of the debt secured by a mortgage, or deed of trust, by taking and selling the mortgaged property, and depriving the mortgagor of possession.
GROSS DEBT SERVICE RATIO (GDS)
The percentage of annual gross income of the mortgagor that is required to maintain annual mortgage payments, property taxes and hydro.
HIGH RATIO MORTGAGE
A mortgage loan that exceeds the normal limit of 75% LTV (loan to value) of a conventional mortgage. Typically made possible by a mortgage insurance plan, e.g. CMHC or GE Capital.
INTER ALIA MORTGAGE
“Inter Alia” is Latin for “Amongst other things”. An Inter Alia Mortgage is a mortgage that is secured by more than one property. A single mortgage document is executed and registered against each property that is used as security.
INTEREST ADJUSTMENT DATE
The date on which the mortgage really begins, usually the first of the month. The interest owed for the number of days between the closing date and the last day of the month is paid on the closing date by cheque or by deduction from the mortgage advance and covers
A charge paid for borrowing money.
Property held by two or more persons with an undivided interest. If one owner dies, the property passes automatically to the other(s).
LEASE TO PURCHASE OPTION
Buying a piece of property by renting for a specified period, usually one year, with the provision that you will purchase the property at the end of that period for a predetermined sale price.
Outstanding debts of an individual. Mortgages, loans, credit card balances.
A claim by one person on the property of another as security for money owed. Such claims may include obligations not met or satisfied, judgments, unpaid taxes, materials, or labor.
LTV (Loan to value)
The ratio between the mortgage loan amount and the value of the property usually expressed as a percentage, i.e. 75% LTV. The value of the property for lending purposes is the purchase price or appraised value, whichever is lower.
A defect identified in a home that is not visible to the naked eye.
The value of a property based on what the market will bear. Determined by a comparison of the subject property to others in a similar area that have sold recently.
A lien or claim against real property given by the buyer to the lender as security for money borrowed. Under government- insured or loan- guarantee provisions, the payments may include escrow amounts covering taxes, hazard insurance, water charges, and special assessments. Mortgages generally run from 10 to 30 years, during which the loan is to be paid off.
Trained professionals with a wealth of knowledge and experience to find the mortgage that best suits your needs, at the best rate available, from a large selection of lenders that include most major banks, trust companies, credit unions. A mortgage broker works for you, not for the lender. Many financial institutions pay finders fees to mortgage brokers who refer business to them making it possible for you to get the best mortgage product at no cost to you.
A written notice from the bank or other lending institution saying it will advance mortgage funds in a specified amount to enable a buyer to purchase a house.
A mortgage with a provision that permits borrowing additional money in the future without refinancing the loan or paying additional financing charges. Open- end provisions often limit such borrowing to no more than would raise the balance to the original loan figure
The lender in a mortgage agreement.
The borrower in a mortgage agreement.
The value of ones assets minus their liabilities.
A mortgage which allows for extra payments, principal reductions or full payment at anytime without
The ability to transfer your mortgage including rate and terms, from your existing property to a new property.
Payment of mortgage loan, or part of it, before due date. Mortgage agreements often restrict the right of prepayment either by limiting the amount that can be prepaid in any one year or charging a penalty for prepayment
The basic element of the loan as distinguished from interest and mortgage insurance premium. In other words, principal is the amount upon which interest is paid.
A lenders commitment to offer to hold a specific rate for a certain length of time. Rate commitments can vary from 30 to 180 days.
REAL ESTATE BROKER
A middle man or agent who buys and sells real estate for a company, firm, or individual on a commission basis. The broker does not have title to the property, but generally represents the owner.
The process of the same mortgagor paying off one loan with the proceeds from another loan.
Private restrictions limiting the use of real property. Restrictive covenants are created by deed and may “run with the land,” binding all subsequent purchasers of the land, or may be “personal” and binding only between the original seller and buyer. The determination whether a covenant runs with the land or is personal is governed by the language of the covenant, the intent of the parties, and the law in the State where the land is situated. Restrictive covenants that run with the land are encumbrances and may affect the value and marketability of title. Restrictive covenants may limit the density of buildings per acre, regulate size, style or price range of buildings to be erected, or prevent particular businesses from operating or minority groups from owning or occupying homes in a given area.
A mortgage registered against real property which is already encumbered with one mortgage. Date and time of registration determines which is first and which is second.
A charge (usually monthly) by a Strata Corporation to cover the costs of maintenance, repair, cleaning etc. of common areas. This fee will usually include a reserve to cover major repairs such as reroofing and heating system replacement.
A map or plat made by a licensed surveyor showing the results of measuring the land with its elevations, improvements, boundaries, and its relationship to surrounding tracts of land. A survey is often required by the lender to assure him that a building is actually sited on the land according to its legal description.
TAX HOLD BACK
When your property taxes are included with your mortgage payments, your lender will withhold funds from your disbursement to cover interim or final taxes payable to the municipality. The amount depends on the month that the mortgage was funded and the dates when interim and final taxes are due. Tax hold backs are used to pay for the current year’s taxes while your monthly tax installments are accumulated in an account to pay the tax bills for the following year.
The length of time a mortgage has been committed for. The interest rate usually remains constant during this term unless the commitment states otherwise.
As generally used, the rights of ownership and possession of particular property. In real estate usage, title may refer to the instruments or documents by which a right of ownership is established (title documents), or it may refer to the ownership interest one has in the real estate.
A check of the title records, to make sure the buyer is purchasing a house from the legal owner and there are no liens, overdue special assessments, or other claims or outstanding restrictive covenants filed in the record, which would adversely affect the marketability or value of title.
TOTAL DEBT SERVICE RATIO (TDS)
Percentage of gross annual income of a borrower required to maintain annual payments of mortgage, property taxes, hydro and other debts such as loans, credit card payments, child support and leases.
A party who is given legal responsibility to hold property in the best interest of or “for the benefit of” another. The trustee is one placed in a position of responsibility for another, a responsibility enforceable in a court of law.
VARIABLE RATE MORTGAGE
A mortgage where the interest rate varies during the term of the mortgage, usually based on the prime bank rate or the GIC rate of the lender.
WEEKLY AND BI-WEEKLY PAYMENTS
You can usually choose to make your mortgage payments once a week or once every two weeks. This accelerates the reduction of your mortgage because you are making the equivalent of one extra monthly payment per year.