glossary

Term                                                       Definition

Amortization             The period of time required to reduce a debt to zero
                                   when payments are made regularly. Amortization 
                                   periods are most often 15, 20, or 25 years long.
Anniversary               Most lenders allow borrowers to make a payment
                                   on the anniversary of the mortgage. (For a mortgage
                                   assumed on June 1, a payment can be made every 
                                   subsequent June 1 for the term of the mortgage.) It 
                                   is applied against the principal and is a good way of 
                                   reducing a loan.

Appraisal                   A process that determines the market value of a 
                                   property.
Appraised                 An estimated value of a property that is completed 
Value                         by a certified appraiser for mortgage financing.
Approved                 A lending institution authorized by the Government 
Lender                     of Canada to make loans under the terms of the 
                                 National Housing Act. Only Approved Lenders can 
                                 negotiate mortgages that require mortgage 
                                 insurance.
Assumption             A legal document signed by a homebuyer that 
                                 requires the buyer to assume responsibility for the
                                 obligations of a mortgage by the builder or original 
                                 owner.
Balanced                 Where demand for property equals the supply of 
Market                     available property. Sellers usually accept reasonable
                                 offers and houses generally sell in sufficient time 
                                 periods. Prices remain stable and there is usually a 
                                 good number of homes to choose from.
Blended                  A mortgage payment that includes principal and 
Payment                 interest. It is paid regularly during the term of the 
                                mortgage. The payment total remains the same, 
                                although the principal portion increases over time 
                                and the interest portion decreases.
Building                 A certificate that must be obtained from the
Permit                    municipality by the property owner or contractor
                                before a building can be erected or repaired. It must
                                be posted in a conspicuous place until the job is 
                                completed and passed as satisfactory by a municipal
                                building inspector.
Buyer's                   When there is a higher number of homes to choose 
Market                   from than buyers in comparison. Prices of homes 
                                tend to be lower and they remain available for sale 
                                longer. Buyers usually have more leverage in 
                                negotiating a purchase.
Closed                     A mortgage loan that has a locked-in payment 
Mortgage               schedule, which does not vary over the life of the 
                                closed term. A buyer who uses a closed mortgage will 
                                likely have to pay the lender a penalty if you fully 
                                repay the loan before the end of the closed term.
Closing                   Costs, in addition to the purchase price of a home, 
Costs                      such as legal fees, transfer fees, and disbursements, 
                                that are payable on the closing date. Closing costs 
                                typically range from 2%-4% of a home's selling price.
Closing                  The date on which the sale of a property becomes 
Date                       final.

CMHC                    Canada Mortgage and Housing Corporation. A Crown 
                               corporation that administers the National Housing Act 
                               for the federal government and encourages the 
                               improvement of housing and living conditions for all 
                               Canadians. CMHC also creates and sells mortgage loan 
                               insurance products.
Collateral              A mortgage that secures a loan by way of a promissory
Mortgage              note. The money borrowed can be used to buy a 
                              property or can be used for another purpose, such as a 
                              home renovation or a vacation.
Commitment       Written notification from the mortgage lender to the 
Letter /                 borrower that approves the advancement of a specified
Mortgage             amount of mortgage funds under specified conditions.
Approval

Conditional         An Offer to Purchase that is subject to specified 
Offer /                 conditions, for example, the arranging of a mortgage. 
Conditions of     There is usually a stipulated time limit within which the
Sale                     specified conditions must be met.
Conventional      A mortgage loan up to a maximum of 75% of the 
Mortgage            lending value of the property. Mortgage loan insurance 
                             is not required for this type of mortgage.
Covenant             A clause in a legal document which, in the case of a 
                             mortgage, gives the parties to the mortgage a right or 
                             an obligation. For example, a covenant can impose the 
                             obligation on a borrower to make mortgage payments 
                             in certain amounts on certain dates. A mortgage 
                            document consists of covenants agreed to by the 
                            borrower and the lender.
Conveyancing    The transfer of ownership of any property or real estate 
                            from one person to another.
Deed                   A legal document, which is signed by both the vendor 
                            and the purchaser transferring ownership. This 
                            document is registered as evidence of ownership.
Default               Failure to abide by the terms of a mortgage loan 
                            agreement. A failure to make mortgage payments, 
                           defaulting on the loan, may give cause to the mortgage
                           holder to take legal action to possess (foreclose) the 
                           mortgaged property.
Deposit              A sum of money placed in trust by the purchaser when 
                           an Offer to Purchase is made typically. The real estate
                          representative or lawyer holds the sum until the sale is 
                          closed, and then it is paid to the vendor.
Discharge         A document signed by the lender and given to the 
of Mortgage     borrower when a mortgage loan has been repaid in full.
Down                The portion of the house price the buyer must pay up 
payment           front from personal resources, before securing a 
                          mortgage. It generally ranges from 5%-25% of the 
                          purchase price.
Easement         A right acquired for access to or over, or for the use of, 
                          another person's land for a specific purpose, such as a 
                          driveway or public utilities.
Encumbrance   A registered claim for debt against a property, such as a 
                          mortgage.
Equity               The difference between the price for which a home could 
                          be sold and the total debts registered against the home.
                          Equity usually increases as the outstanding principal of 
                          the mortgage is reduced through regular payments. 
                          Market values and improvements to the property also 
                          affect equity.
FHLI                  First Home Loan Insurance - This is a CMHC product of 
                          particular interest to people looking for their first home. It 
                          allows qualified first-time buyers to purchase a home 
                          with as little as 5% down. In these cases, CMHC will 
                          insure mortgages of up to 95% of the home's purchase 
                          price or the market value of the property, whichever is 
                          less. (Restrictions may apply. Contact your local lender.)

Foreclosure      A legal procedure in which the lender gets ownership of 
                          the property if the borrower defaults on the mortgage 
                          loan.
Gross Debt      The percentage of the borrower's gross income that will
Service             be used for monthly payments of principal, interest, 
Ratio                 taxes, heating costs, and half of any condominium 
                          maintenance fees.
High-Ratio       A mortgage loan in excess of 75% of the lending value of
Mortgage /      the property. This type of mortgage must be insured - for 
Insured            example, by CMHC - against payment default.
Mortgage
Loan

Holdback        An amount of money withheld by the lender during
                        construction of a house to ensure that construction is 
                        satisfactory at every stage. A standard holdback is 10% of
                        the total cost of the building project.

Interest          The cost of borrowing money for a given period of time. 
                       Interest is usually paid to the lender in installments along 
                       with repayment of the principal loan amount.
Interest          A date from which interest on the mortgage advanced is 
Adjustment   calculated for regular payments. This date is usually one 
Date ( IAD )    payment period before regular mortgage payments begin. 
                       Interest due between the date the mortgage is advanced 
                       and the IAD is due on closing.
Interest          The rate at which you pay interest to the lender. For
Rate                example, when the mortgage balance is $100,000, and the
                       interest rate is 6 per cent, one single annual payment will
                       include $6,000 interest. More frequent payments will result 
                       in different amounts.
Lending         The purchase price or appraised value of a property, 
Value             whichever is less.
Loan-to-        The ratio of the loan to the lending value of a property 
Value             expressed as a percentage. For example, the loan-to-value
Ratio             ratio of a loan for $25,000 on a home which costs $100,000
                      is 25%.
Lien               A claim against a property for money owing. A lien may be
(Mechanics)  filed by a supplier or a subcontractor who has provided 
                      labour or materials but has not been paid. A lien must be 
                      properly filed by a claimant. It has a limited life, prescribed 
                      by statutes that vary from province to province. If the lien
                      holder takes action within the prescribed time, the 
                      homeowner may be obliged to pay the amount claimed by 
                      the lien holder. Alternatively, the lien holder may force a 
                      sale of the property to pay off the debt.
Maturity       The last day of the term of the mortgage agreement. On this 
Date             day the mortgage loan must be paid in full or the agreement
                     renewed.
Mortgage     Security for a loan to purchase property. It is the purchaser's 
                     personal guarantee to repay the loan and a pledge of the
                     property as security for the loan.
Mortgage     Insurance to pay off your mortgage in full if you die. Many 
Life               lenders offer this insurance and add the premium to your 
Insurance     mortgage payments. However, you may want to compare 
                      rates for equivalent products from an insurance broker.
Mortgage      Insurance required by lenders for high-ratio mortgages
Loan              (more than 75% of the purchase price). It is available from
Insurance      CMHC or a private insurer for a cost of between 0.5% and 
                       3% of the amount of the mortgage.
Mortgage      A regularly scheduled payment that is blended to include 
Payment       both principal and interest.
Mortgagee    The lender who provides the mortgage loan.
Mortgagor    The borrower who pledges the property as security for the 
                       loan.
Net Worth     A person's total financial worth, calculated by subtracting 
                       total liabilities from assets.
NHA               Insurance required by lenders for high-ratio mortgages 
Premium      (more than 75% of the purchase price). It is available from 
                      CMHC or a private insurer for a cost of between 0.5% and 
                      3% of the amount of the mortgage. The premium can be 
                      added to your mortgage loan and paid off as part of your 
                      regular mortgage payments, or paid off in a lump sum at 
                      the time of purchase to save interest charges on the 
                      premium itself.

Offer to         A written contract setting out the terms under which the 
Purchase       buyer agrees to buy. If accepted by the seller, it forms a 
                       legally binding contract subject to the terms and conditions
                       stated in the document.
Open             A type of mortgage loan where the borrower can make a 
Mortgage      partial or full payment of the principal amount at any time,
                      without penalty.
Option           A document stipulating that, in exchange for a deposit, a 
Agreement    specified individual is to be given the first chance to buy a 
                       property at or within a specified period of time. An option
                       holder who does not buy at or within the specified period 
                       loses the deposit and the agreement is cancelled.
P.I.T.               Principal, Interest, and Taxes - payments due on a regular
                       basis under the terms of a mortgage agreement. Generally, 
                       payments are made monthly and include one-twelfth of the
                       estimated annual municipal and school taxes. Since these 
                       taxes change from year to year, this section of the   
                       mortgage will change accordingly.

P.I.T.H.           Principal, Interest, Taxes, and Heating - costs used to
                       calculate the Gross Debt Service ratio (GDS).
Portability       An option available on a mortgage that enables the 
                        mortgagor to take their current mortgage loan with them 
                        to another property without penalty.

Pre-                  When a lender approves the potential mortgagor for a 
Approved        specified amount, based on how much money the lender 
Mortgage        is prepared to lend to the borrower. This allows buyers to
                         shop for homes that they already know they can obtain 
                         financing for and not homes that are potentially too 
                         expensive, or out of the borrowers means to finance.
Prepayment     Allows the borrower to make voluntary payments on the 
Privileges         mortgage loan, in addition to the regular, scheduled 
                          mortgage payments.
Principal           The amount of money borrowed.
Property            A toll paid to the provincial and/or municipal 
Purchase or      government(s) for transferring property to the buyer             
Land                  from the seller.
Transfer Tax

Realtor®           A trademark name for a real estate representative who is 
                          a member of an organization of persons engaged in the 
                          business of buying and selling real estate, such as the 
                          Canadian Real Estate Association.
Refinance         To pay off a mortgage or other registered encumbrance 
                          and arrange for a new mortgage, sometimes with a 
                          different lender.
Regular             With this type of mortgage, you pay between 10% and 
Mortgage          25% of the cost of the home as a down payment. The
                          remaining balance is the amount of the mortgage loan 
                          required. A high-ratio mortgage requires mortgage loan
                          insurance. CMHC offers it for a premium of 0.5%-3% of 
                          the mortgage amount. This fee can be added to your 
                          mortgage payments or paid in full on closing.
Renewal            At the end of a mortgage term, the borrower 
                          re-negotiates the loan for a new term.
Second              An additional mortgage on a property that already has a 
Mortgage          mortgage.
Seller's              More buyers are looking for homes than there are homes
Market              for sale. There is a smaller inventory of homes available 
                          for sale and many buyers looking to purchase. House 
                          prices generally increase and homes sell quickly.
Strata or           A payment made by all owners of condominiums or 
Condo              within a particular complex that is allocated to pay 
Fee                   expenses such as maintenance, repairs and management
                         costs.
Statement of     A balance sheet statement that indicates credits to the 
Adjustment(s)   vendor - for example, the purchase price - and any 
                           prepaid taxes and credits to the buyer, such as the 
                           deposit, and the balance due on closing.
Survey               A document that illustrates the property boundaries and 
                          measurements, specifies the location of buildings on the 
                          property, and indicates any easements or 
                          encroachments.
Term                 The length of time during which a mortgagor pays a 
                          specific interest rate on the mortgage loan. The entire 
                          mortgage principal is usually not paid off at the end of 
                          the term because the amortization period is normally 
                          longer than the term.
Title                    Legal possession. A freehold title gives the holder 
(freehold or       of land and buildings for an indefinite period of time. A 
leasehold)          leasehold title gives the holder a right to use and occupy 
                           land and buildings for a defined period of time. In a 
                           leasehold arrangement, actual ownership of the land, 
                           sometimes along with the buildings, remains with the 
                           landlord.
Total Debt         The percentage of gross annual income required to cover
Service              all payments for housing and all other debts, such as car 
Ratio ( TDS )      payments.
Variable-rate     A type of mortgage with fixed payments but fluctuating 
Mortgage          interest rates. The change in current interest rates doesn't
                          alter the amount of the mortgage payment, but 
                          determines how much of each payment is applied against
                          the principal amount and how much goes to pay interest 
                          to the lender.
Vendor             Mortgage financing arranged between the seller of the 
Take-Back        property and the buyer. Often this type of loan is a 
Mortgage         second mortgage, which the seller is willing to arrange at 
                         below market rates to allow the buyer to purchase the 
                         house. Most of these arrangements are not renewable or 
                         transferable to the next owner of the house.
Zoning             Municipal or regional laws that specify or restrict land use.
Bylaws



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