Mortgage & Real Estate Glossary

Closed Mortgages

A mortgage that cannot be prepaid or renegotiated for a set period of time without penalties.

Closing Date

The date on which the new owner takes possession of the property and the sale becomes final.

Closing Statement

The financial disclosure statement that accounts for all of the funds received and expected at the closing, including deposits for taxes and mortgage life insurance.

Collateral

An asset, such as term of deposit, Canada Savings Bond, or automobile, that you offer as security for a loan.

Conditions

These are the circumstances or requirements that must be met for a transaction to take place according to the Agreement of Purchase and Sale. For example, a buyer may insert a condition in the agreement that states that the offer is conditional upon the buyer securing financing.

Conditional Sale

A sale in which a buyer or seller is not bound by the agreement until all conditions are met.

Condominium

A form of property ownership wherein the owner has exclusive title to a unit within a project or building, in addition to a share of ownership in the common elements of the building or property. Common elements may include land, clubhouses, garbage removal and upkeep services, road maintenance, swimming pools, and so on. Condominium fees are paid by each unit owner, in addition the mortgage payment, in order to maintain the common elements.

Conventional Mortgage

A mortgage up to 80% of the purchase price or the value of the property. A mortgage exceeding 80% is referred to as a 'Hi-Ratio' mortgage and the lender will require insurance for that mortgage.

Covenant(s) 

A covenant is an agreement, pledge or condition or restrictions that may be included as part of an agreement and registered on title to the real property. For example, a builder may include a covenant that states that storage sheds cannot exceed a dimension of 10 feet by 12 feet.

Credit scoring

A system that assesses a borrower on a number of items, assigning points that are used to determine the borrower's credit worthiness.

D

Deed

A signed legal document bearing witness to a legal transaction, such as the purchase or sale of a property.

Demand Loan

A loan where the balance must be repaid upon request.

Deposit

A sum of money deposited in trust by the purchaser on making an offer to purchase. When the offer is accepted by the vendor (seller), the deposit is held in trust by the listing real estate broker, lawyer, or notary until the closing of the sale, at which point it is given to the vendor. If a house does not close because of the purchaser's failure to comply with the terms set out in the offer, the purchaser forgoes the deposit, and it is given to the vendor as compensation for the breaking of the contract (the offer).

Disbursement

A payment made or disbursed by a professional like a lawyer. For example, a bank disbursement to pay for a mortgage. It may also include photocopies, courier charges and the like.

E

Easement / Right of Way

Access granted to persons other than the owner on a property. For example, a utility company may have a right of way onto your property in order to maintain its power lines, or sometimes a neighbour may be able to use your driveway to access their rear yard parking area.

Equity

The difference between the market value of the property and any outstanding mortgages registered against the property. This difference belongs to the owner of that property.

H

High-ratio mortgage

A mortgage that exceeds 80% of the purchase price or appraised value of the property. This type of mortgage must be insured. To avoid the cost of the insurance, a 1st mortgage up to 80% is arranged and a 2nd mortgage for the balance (up to 90% of the purchase price).

Home inspection 

A technical inspection of a property by a certified home inspector to assess the state of the property and the building structure, and advise you of existing or anticipated problems with the property that may affect your purchase decision.

I

Insurance binder 

A legal document that confirms your insurance policy, policy number, and the lender. You’ll need to obtain proof of insurance for the property prior to closing.

Interest Adjustment Date (IAD)

The date on which the mortgage terms will begin. This date is usually the first date of the month following the closing. The interest cost for those days from the closing date to the first of the month are usually paid at closing. That is why it is always better to close your deal towards the end of the month.

Interest-only mortgage

A mortgage on which only the monthly interest cost is paid each month. The full principal remains outstanding. The payment is lower than an amortized mortgage since one is not paying any principal.

J

Joint Tenancy 

An equal undivided ownership of property by two or more persons. Upon the death of any owner, the survivors take the decedents’ interest in the property.

R

Rate commitment

The number of days the lender will guarantee the mortgage rate on a mortgage approval. This can vary lender to lender anywhere from 30 to 120 days.

Real property 

Real property means land and any item permanently attached to land.

Refinancing 

The process of re-negotiating the terms and conditions of an existing mortgage.

Registry Office/Land Registry Office 

The office where all formal closing transactions take place, are logged and archived.

Renewal

When the mortgage term has concluded, your mortgage is up for renewal. It is open at this time for prepayment in part or in full, then renew with the same lender or transfer to another lender at no cost.

Resale 

The purchase of an existing, previously-owned home. A resale transaction is substantially more involved than the purchase of a new home, as a resale home carries a history of ownership that must be reviewed by your lawyer.

Reserve Fund: A common fund into which all owners of units in a condominium property pay a regular fee for the maintenance of common elements.

S

Search of Title / Title Search 

A process whereby your lawyer searches all archived titles to your property in order to ascertain whether the property’s title is free and clear and can be sold to you as stated.

Second mortgage

A debt registered against a property that is secured by a second charge on the property.

Status Certificate 

A legal document provided by condominium corporations that attests to the physical and financial status of the corporation and a particular unit within it. After a tenant gathers and prepares the necessary information into this Estoppel Certificate, they are “stopped” from taking back or retracting the information contained within.

Switch

To transfer an existing mortgage from one financial institution to another.

T

Tax Adjustment 

An adjustment in the tax account for your property. In most transactions you will see some form of tax adjustment to account for any overpayments or arrears that may exist in the tax account at closing. For example, a seller may have paid taxes for the three months following closing. In that case, a tax adjustment equivalent to three months’ would be provided to the seller by the buyer upon closing.

Tenants in Common 

A tenancy in common, conveys no right of survivorship. When one co-tenant dies, the interest of the defunct co-tenant forms part of his or her estate and can be conveyed to a next-of-kin. Interest is preserved and can be left to anyone the testator wishes in his or her Will.

Tenant Protection Act 

A law that governs the relationship between a landlord and a tenant, as well as a landlord’s responsibilities to tenants and their leases. Even when purchasing a rental property that is new to you, you are bound by this law, which covers leases, rental costs, and more.

Term

The period of time that the financing agreement covers. The terms available are: 6 month,1,2,3,4,5,6,7,10 year terms, and the interest rates will be fixed for whatever term one chooses.

Title 

A legal document that identifies a property and the owner of that property.

Title Insurance 

A no-fault insurance policy that protects you against any current or future claims to the title of your property. Title insurance, along with your lawyer's Search of Title, is designed to protect you from risks such as someone else making a claim to title of your property.

Total Debt Service (TDS) ratio

It is the other mathematical calculations used by lenders to determine a borrower's capacity to repay a mortgage. It takes into account the mortgage payments, property taxes, approximate heating costs, and 50% of any maintenance fees, and any other monthly obligations (i.e. personal loans, car payments, lines of credit, credit cards debts, other mortgages, etc.), and this sum is then divided by the gross income of the applicants. Ratios up to 40% are acceptable.

V

Variable Rate Mortgage

A mortgage for which the interest rate fluctuates based on changes in prime.

Vendor take back (VTB) Mortgage

A mortgage wherein the seller provides a part or all mortgage financing to the buyer. For example, a parent may sell a property to one of his/her children, as well as financing that child’s mortgage on the property.