Abstract of Title:
Registry System: A condensed history of the title to a parcel of land. The abstract consists of a synopsis of every recorded instrument affecting the title the that land arranged in chronological order of recording.
Accelerated bi-weekly mortgage payments:
Mortgage payments which are made every 2 weeks for a total of 26 payments per year. Not to be confused with semi-monthly morgage payments.
Ammenity:
A feature of the home or property that serves as a benefit to the buyer but that is not necessary to the use;may be natural (such as locationk woods, water) or man-made (such as a swimming pool or garden).
Amortization period:
The actual number of years it will take to pay back your mortgage loan. In Canada the amortization period does not generally exceed 25 years.
Annual Percentage Rate:
Calculated by using a standard formula. The APR shows the cost of a loan, expresses as a yearly interest rate, it includes the intrest, points, mortgage insurance and other fees associated with the loan.
Appraised value:
Any estimate of the value of the property, conducted for the purpose of mortage lending by a certified appraiser. This appraisal is ot to be confused with a building inspection.
ARM
Adjustable Rate Mortgage: A mortgage loan subject to changes in interest rates, when rates change, ARM monthly payments increase or decrease at intervals determined by the lender. The change in monthly payment amounts is usually subject to a cap.
Arms length:
A transaction between unrelated entities where a willing seller (the seller is not compelled to sell) transacts with a willing buyer (the buyer is not compelled to buy).
Assumability:
An asssumable mortgage allows the buyer to take over the seller's mortgage on the property.
Balloon Mortgage:
A mortgage that typically offers low rates for an initial period of time, aftert that time period elapses, the balance is due or is refinanced by the the borrower
Bankruptcy
A ferderal law whereby a person's assets are turned over to a trustee and used topay off outstanding debts. This usually occurs when somone owes more than they have the ability to pay.
Building Code:
Bases on agreed upon safety standards within a specific area, a building code is a regulation that determines the design, construction and materials used in building.
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.
Certificate of Title:
A document provided by a qualified source (such as a Title Company) that shows the property legally belongs to the current owner. Before the title is transferred at closing, it should be clear and free of all liens or other claims.
Closing Costs:
Customary costs above and beyond the sale price of the proerty that must be paid to cover the transfer of ownership at closing. These costs generally vary by geographic location and are typically detailed to the borrower at the submission of a loan application.
Compound period:
The number of times per year in which the interest rate is compounded. In Canada, mortgages are generally compounded semi-annual, which is twice a year.
Condominium bee:
A common payment among owners which is allocated to pay expenses associated with the development.
Conventional mortgage:
A mortgage loan issued for up to 80% of the property's appraised value or purchase price, whichever is less.
Debt to Income Ratio:
A comparison of gross income to housing and non-housing expenses.
Default:
The inability to pay monthly mortgage payments in a timely manner or to otherwise meet the mortage terms.
Down payment:
The buyer's cash payment toward the property. The difference between the purchase price and the amount of the mortgage loan.
Equity:
The difference between the price for which a property could be sold less the total debt registered against the property.
Effective interest rate:
This is the acutal interest rate paid on a loan or mortgage. In Canada, mortgages typically have a higher effective interest rate because of the fact that interst rates are compounded semi-annually or twice per year.
Fair Market Value"
The hypothetical price that a willing buyer and seller will agree upon when they are acting freely, carefully and with complete knowledge of the situation.
First mortgage:
The first mortgage in the mortgage agreement that is considered to be in the first place and will have first claim on assets in the even of default.
Fixed rate mortgage:
A mortgage in which the rate of interest has been fixed for a specific period of time. This specific period of time is generally known as the term.
GDS ratio:
The percentage of gross annual income required to cover payments associated with housing. Payments include mortgage principal, interest, property taxes. and sometimes includes secondary financing, heating, condo fees or pad rent.
High ratio mortgage:
A mortgage that exceeds 75% of the home's appraised value or purchase price whichever is lower. These mortgages must be insred for payment.
Home Inspection:
An examination of the structure and mechanical systems to dertermine a home's safety. Makes the potential homebuyer aware of any repairs that may be needed.
Home Warranty:
To increase consumer protection for new home buyers, the Homeoner Protection Act regulates residential builder licensing. Mandatory third-party home warranty insurance was implemented in 1999. As a result, all new homes constructed with building permits must be built by licensed builders (HPO) and covered by a policy of home warranty insurance. The 2-5-10 minimum stardard coverage includes: 2 years on labour and materials, 5 years on the building envelope (including water penetration), and 10 years on the structure.
HVAC:
Heating, ventilation and air conditiong, a homes's heating and cooling system.
Interest:
A fee charged for the use of money
Judgement:
A legal decision, when require debt payment, a judgement may include a property lien that secures the creditor's claim by providing a collateral source.
Lien:
A legal claim against property that must be satisfied when the property is sold.
Loan-to-Value Ratio:
A percentage calculated by dividing the amount borrowed by the price or appraised value of the home to be purchased. The higher the LTV, the less cash a borrower is required to pay as a dowm payment.
Lock-in:
Since interest rates can change frequently, many lenders offer an interest rate lock-in that guarantees a specific interest rate if the loan is closed within a specific time.
Loss Mitigation:
A process to avoid foreclosure. The Lender tries to help a borrower who has been unable to make loan paymets and is in danger of defaulting on the locan.
Margin:
An amount the lender adds to an index to determine the interest rate on an adjustable rate mortgage.
Mortgage:
A loan on the property that secures the promise to repay the loan.
Mortgage Broker:
A firm that originates loans and resells them to secondary mortgage lenders.
Mortgage Insurance:
A policy that protects lenders agains some or most of the losses that can occur when a borrower defaults on a mortgage loan. Insurance is required for high ratio mortgages exceeding 75% of value. Two organizations currently offer insurance to approved lenders: GE Mortgage Insurance and Canada Morgage and Housing Corporation (CMHC)
Notary Public:
An officer appointed by the Province with authority to take the acknowledgement of persons executing documents and with witness the signature with a notarial seal.
Offer:
Indication by a potential buyer of a willingness to purchase a home at a specific price, generally put forth in writing.
Open Mortgage:
A morgage containing some form of prepayment privilege for the partial or toal reduction of principal with or without penalty. Use caution as the term open is often subject to certain qualifications and restrictions.
Option to Purchase:
A right given by the owner of a property to another to buy certain property within a limited time at an agreed price.
Pre-Approval
Where the lender commits to lend to a potential borrower: commitment remains as long as the borrower still meets the qualification requirements at the time of purchase.
Premium:
An amount paid on a regular schedule by a policyholder that maintains insurance coverage.
Principal:
The amount borrowed from a lender which does not include interest or additional fees.
Possession:
Possession or possession date is the date which the buyer obtains possession of the property. Contracts usually refer to it as completion or closing date or the day that the title passes to a new owner. Vacant possession may or may not occur at this time depending on the type of porperty and terms of the contract.
Power of Attorney:
Delegated written authority to a person to act legally including the signing of documents on behalf of another.
Prepayment Clause:
A clause inserted in a mortgage giving the borrower the privilege of paying the morgage debt in advance of the maturity date.
Privacy Code:
The Privacy Code of the Canadian Real Estate Association consists of ten principles regarding the collection, management and use of personal information
Pro Forma Statement
A financial statement that showed projected costs and income of an existing or new project.
Property Condition Disclosure Statement (PCDS or PDS)
A disclosure statement designed for sellers when offering their propety for sale and sets out particulars concerning the condition of the property. The PCDS usually addresses issues such as overal condition, improvements, structural deficiencies, environmental problems, water and wast systems and any relevant legal matters.
R-2000:
An energy efficiency program launched in the 1980's to encourge energy efficiency and environmental responsibility in home construction. R-2000 is managed by the Offoc of Energy Efficiency (Natural Reources Canada). It includes technical performance standards and energy efficiency requirements set out in building codes.
Rain Sreen Technology:
A construction principle involving the use of the latest innovations in construction to ensure that wind driven rain does not penetrate interior wall components. This is usually done by leaving air space between the excterior wall and interior sheathing allowiing water to pass through the wall and run down the inner face ot the exterior.
Real Estate Board:
A non-profit corporation in a town, city or administrative disctirc which acts for the benefit of its members.