Basic Real Estate Definitions from A-Z
Amortization: It refers to the time for reducing the amount of debt when fixed payment schedule is observed. Amortization period usually takes 15 to 25 years.
Anniversary: The mortgage’s anniversary is the period of time when borrowers pay their debt since lenders allow them. It is an ideal method of loan reduction and this works against principal.
Appraisal: A written professional opinion of the property’s market value which is not easy to determine such as business or home. It is a requirement when properties are insured, financed, taxed or sold.
Appraised Value: The value of property’s evaluation at a given period of time. It is commonly accomplished by an expert appraiser during the process of mortgage origination.
Approved Lender: An institution in the Government of Canada established for lending purposes that allows mortgage negotiation provided that there is mortgage insurance.
Assumption: An essential document requiring the homebuyer to sign and assume all mortgage responsibilities by the real owner or builder.
Balanced Market: There is balance in the market if there is stable price and a variety of home property to choose from and it usually takes almost 6 months for the homes to be sold.
Blended Payment: A method of loan repayment wherein the loan will be paid in an equal amount of installment. This involves borrowed sum interest and principal. The total of payment is still the same, even though a part of the principal will increase over time while the portion of interest will decrease.
Building Permit: Also known as construction permit which is a legal document essential for new constructions or pre-existing structures. Either the contractor or property owner is responsible to obtain this certificate from the respective municipality.
Buyer’s Market: Refers to the situation in which buyers got more leverage in purchase. Here, there is sufficient number of home properties available than the buyers.
Closed Mortgage: This kind of mortgage got pre-payment limits in which buyers are allowed to repay only 15 percent of original mortgage principal balance each year. Paying more than 15 percent a year means compensation charges.
Closing Costs: The fees referred to at the end of transaction in real estate.
Closing Date: The final negotiation phase wherein the property ownership is hereby transferred into the buyer.
CMHC: Or Canada Mortgage and Housing Corporation. Canada’s Crown corporation established through National Housing Act of 1944 and it play a crucial role in all housing programs in Canada. This corporation supports rental and social housing and designed programs for families with lower income.
Collateral Mortgage: A type of mortgage designed to secure mortgage loans through promissory notes. The cash borrowed may be used for property purchase or any purpose like vacation or home renovation.
Commitment Letter/Mortgage Approval: A written document sent by a lender to notify the borrower approving the mortgage fund advancement under specific conditions.
Conditional Offer/Conditions of Sale: The arrangements made for a property sale stated by a company or person offering the property or goods in which its buyer should agree to certain conditions.
Conventional Mortgage: A kind of mortgage loan that reaches 75 percent of the property’s lending value but does not require mortgage loan insurance.
Covenant: A deed of real property or written contract with a promise of agreement to a joint use for easy real property access.
Conveyancing: Transferring interest of ownership from a party to another in a real property. It comes in a form of written document like lease or deed used to transfer legal property title from a seller to a buyer.
Deed: Refer to the legal documents undersigned by the purchaser and vendor to transfer ownership.
Default: This term is heard when there is failure to observe the conditions under mortgage loan negotiation. It could be failure to complete mortgage payments which forces the mortgage holders to foreclose or possess the property.
Deposit: The cash entrusted by a purchaser. The lawyer or representative in real estate will hold this money until the closing.
Discharge of Mortgage: The legal document provided by lenders to present to the borrowers when the loan is paid in full.
Down payment: A payment given along with purchase of any costly service or good. It usually represents a portion of full amount of the purchase. In certain situations, this payment is done to make expensive properties or assets more cost effective.
Easement: The legal rights to utilize the land property of others for a particular limited purpose. People who are granted with this right has also a legal right to utilize such property. However, the legal land title is still with the real land owner.
Equity: It is represented with an accounting equation: equity is equal to assets minus liabilities. In real estate, it is the difference between the balance that the owner owes on mortgage and the property’s existing fair market value.
FHLI: Or completely known as First Home Loan Insurance.
Foreclosure: The act of forfeiting the property rights of a homeowner due to his or her failure to repay the mortgage with outstanding balance.
Gross Debt Service Ratio: A kind of debt services measure that a financial lender is using as a basis in providing preliminary assessments regarding the potential of a borrower in payment of debt.
High-Ratio Mortgage/Insured Mortgage Loan: It is applicable to individuals who got 20 percent less down payment to place on a home purchase. In Canada, there are certain requirements in order to qualify for a mortgage insurance.
Holdback: The delay in a title registration of a property
Interest: Additional charge for a privilege of lending money, usually charged in an annual rate of percentage.
Interest Adjustment Date (IAD): The period of time from which interests are summed up if the transaction closed while mortgage funds had been given by a lender prior to regular mortgage payment. It is commonly used terms in a real estate transaction.
Lending Value: The property’s appraised value or the amount during purchase.
Loan-to-Value Ratio (LTV ratio): The lending ratio for risk assessment used by different lenders and financial institutions prior to mortgage approval. An assessment with high loan-to-value ratio is typically perceived as at high risk. Thus, if mortgage has been accepted, loans will force borrower to borrow more or they have to buy mortgage insurance.
Lien (Mechanics): the payment guarantee to contractors, construction firms and builders that repair or build structures.
Maturity Date: The period of time on which the principal costs of drafts, acceptance bonds, notes or debt instruments become due. This will be repaid to an investor to stop the interest payments as well.
Mortgage: The debt instrument which is secured by a particular property collateral while the borrowers are obliged to repay with pre-determined payment set. It is used by businesses and individuals to obtain huge real estate purchase without providing full payment of the whole purchase value up front.
Mortgage Life Insurance: A kind of insurance policy developed for mortgage debt repayment in the event of borrower’s death. Such policy is different from typical life insurance policy. In this policy, the mortgage life insurance will not pay unless its borrower is deceased while the mortgage is existing.
Mortgage Loan Insurance: Another type of insurance policy designed to protect the title holder or mortgage lender in the event of a borrower’s death or default on payment. It is sometimes called as mortgage title insurance or PMI or private mortgage insurance.
Mortgage Payment: The regular schedule of payment which involves interest and principal repaid by a borrower to his lender. The amount of payment may or may not involve property insurance or real estate tax.
Mortgagee: The entity that is lending cash to the borrower to purchase real estate properties.
Mortgagor: A company or an individual who is borrowing money for the purpose of buying a real property piece.
Net worth: The cost by which an asset exceeds liabilities. This is the concept used by businesses and individuals to know the worth of entity.
NHA Premium: The kind of insurance that lenders need for higher ratio mortgages and it is more than 75 percent of the price of the purchase.
Offer to Purchase: Regulating the way that the property should be paid for to ensure that it will fit the budget and will be in line with the bank agreement or negotiation.
Open Mortgage: Refers to the loan which is secured by the real estate property that may be paid off even with no penalty prior to the maturity date. An open mortgage has carried a higher interest rate compared to ordinary mortgages. This is also referred to as the mortgage that gone matured or has opened to the foreclosure because of non-payment.
Option Agreement: A signed document or agreement between a brokerage firm and an investor seeking for options account. Such agreement is for verification of the experience of the investor and for guarantee that an investor completely understood the risks involved in the transaction.
P.I.T.: This stands for principal, interests, and taxes. These are the important components of mortgage payment in monthly rate.
P.I.T.H: Stands for Principal, Interest, Taxes and Heating. These are cost used in calculating the GDS or Gross Debt Service ratio.
Portability: The option is available on the mortgage which allows the mortgagor to bring their recent mortgage loan with them to other property with no penalty.
Pre-Approved Mortgage: If the lender likes the prospective mortgage for a particular amount, depending on the amount of the cash prepared by the lender which will be given to a borrower. It allows the purchasers to look for houses which they already know in which they could bring financing and not those houses which are potentially so expensive, or outside of a borrower’s way to finance.
Prepayment Prvileges: Permits the borrower to make some voluntary payment on a mortgage loan, aside from regular and scheduled mortgage payment.
Principal: This is the amount of cash that was borrowed.
Land Transfer Tax or Property Purchase: The toll paid to provincial or municipal government to transfer property to a buyer from a seller.
Realtor®: The trademark name for any real estate representative who is the organization’s member of persons that has been engaged in the deal of purchasing or selling real estate like the Canadian Real Estate Association.
Refinance: It is the word for paying off the mortgage or some other listed nuisance and place for a new mortgage, with another lender at times.
Regular Mortgage: Having this form of mortgage that you pay between 10 and 25 percent of the price of the house as down payment. The balance will be the amount of needed mortgage loan. A high ratio mortgage needs mortgage loan insurance.
Renewal: In the end of the mortgage term, the borrower will re-negotiate the loan for another term.
Second Mortgage: The supplementary mortgage on the property which comes with mortgage already.
Seller’s Market: Many buyers are searching for houses. There’s a smaller record of houses available for sale and more buyers look to purchase.
Condominium Fee or Strata: The payment that has been made by condominium and townhouse owners in a specific complex which has been allocated to pay for expenses like maintenance, management and repair costs.
Statement of Adjustment: The balance sheet declaration which indicates credits to a vendor.
Survey: It’s the document which shows the measurements and boundaries of the property, specifies the buildings’ site on the property and shows encroachments and easements.
Term: It is the span of time through which the mortgage pays the interest rate on mortgage loan. The whole mortgage principal is typically not paid in the term’s end.
Title: The freehold title is giving the holder ownership of the buildings and land for uncertain period of time. The leasehold title is giving the holder the privilege to utilize and then occupy the land and the buildings for the defined span of time.
TDS or Total Debt Service Ratio: This percentage of the gross yearly income needed to cover all the payments for housing or other debts like car payments.
Variable-rate Mortgage: The form of mortgage that comes with fixed payment yet declining interest rates. The change in the recent interest rates does not change the amount of mortgage payment, yet determine the way the amount of payment has been applied versus the principal amount including the amount of interest to a lender.
Vendor Take-Back Mortgage: The mortgage financing organized between the buyer and seller of a property. Typically, this form of loan is the second mortgage that the seller wants to arrange at lower market rates to permit the buyer to buy the house.
Zoning by Laws: The regional or municipal laws which specify and restrict the land use.