GLOSSARY

A
Active Listings
The total number of homes currently listed for sale on the MLS®

Amortization 
The number of years it takes to repay the entire amount of a mortgage.

Appraisal   
An estimate of a property's market value, used by lenders in determining the amount of the mortgage.

Appreciation 
The increase of a property's value over time.

Assessment   
The value of a property, set by the local municipality, for the purposes of calculating property tax.

Assumable Mortgage
A mortgage held on a property by the seller that can be taken over by the buyer, who then accepts responsibility for making the mortgage payments.

B
Benchmark property  
A property against which other properties can be evaluated.

Blended Mortgage 
A combination of two mortgages, one with a higher interest rate than the other, to create a new mortgage with an interest rate somewhere between the two original rates.

Blended Mortgage Payments 
Blended payments are a way of repaying a loan that sets equal monthly payments of principal and interest (blended) over an agreed-upon amortization period. By contrast, in a principal + interest arrangement, the borrower pays back the same amount of principal each month, plus a steadily decreasing interest payment.

Buy-Down  
When the seller reduces the interest rate on a mortgage by paying the difference between the reduced rate and market rate directly to the lender, or to the purchaser, in one lump sum or monthly installments.

C
Closed Mortgage  
A mortgage that cannot be prepaid, renegotiated or refinanced during its term.

Closing 
The real estate transaction's completion, when the parties involved agree that all legal and financial obligations have been met, and the deed to the property is transferred from the seller to the buyer.

Closing Costs 
Expenses in addition to the purchase price for buying and selling a property.

Closing Date
The date on which the title and keys to the property are transferred from the seller to the buyer, and the money is paid.

Common Elements 
The portions of a condominium development owned in common (shared) by the unit owners.

Condominium  
Shared ownership in property. Owners have title (ownership) to individual units and a proportionate share in the common elements.

Conventional Mortgage
A mortgage loan that does not exceed 80 % of the lending value of the property.

Counteroffer 
One party's written response to the other party's offer during negotiation of a real estate purchase between buyer and seller.

D
Debt Service Ratio
The percentage of a borrower's gross income that can be used for housing costs, including mortgage payment and taxes. (and condominium fees, when applicable)

Discharge a Mortgage
To pay off a mortgage.

Down Payment
The part of the purchase price of a property that the buyer pays in cash and does not finance with a mortgage.

E
Easement 
A legal right to use or cross (right-of-way) another person's land for limited purposes. A common example is a utility company's right to run wires or lay pipe across a property.

Encroachment
An intrusion onto an adjoining property. A neighbour's fence, storage shed, or overhanging roof line that partially (or even fully) intrude onto your property are examples of encroachments.

Equity
The difference between the price for which a property can be sold and the mortgage(s) on the property. Equity is the owner's stake in the property.

Estoppel Certificate
A written statement of a condominium unit's current financial and legal status.

F
First Mortgage
The first security registered on a property. Additional mortgages secured against the property are "secondary" to the first mortgage.

Foreclosure 
A legal process by which the lender takes possession and ownership of a property when the borrower doesn't meet (defaults on) the mortgage obligations.

G
Gross Debt Service Ratio 
A general rule is that your housing costs (mortgage payments, taxes, heating costs, and 50% of condominium fees, if applicable) should not be more than 32% of your gross monthly income.

Grow op 
A marijuana-growing operation, usually located in a house.

H
High-ratio Mortgage 
A mortgage that exceeds 80% of the loan-to-value ratio; must be insured by either the Canada Mortgage and Housing Corporation or a private insurer to protect the lender against default by the borrower who has less equity invested in the property.

Housing  
HST referendum deadline extended to August 5

I
Interest 
The cost of borrowing money.

J
Joint Tenancy 
A form of ownership in which two or more individuals (often spouses) have an equal share in the ownership of a property. In the event of one owner's death, his or her share is automatically transferred to the surviving owner(s), apart from the deceased's will.

L
Leverage 
Controlling a large asset with a relatively small amount of cash. In real estate, $20,000 down payment (or less) can be used to purchase (control) a $100,000 home, for example.

Lien  
Any legal claim against a property, filed to ensure payment of a debt.

Listing Agreement 
The contract between the listing broker and an owner, authorizing the REALTOR® to facilitate the sale or lease of a property.

Listing Broker 
The REALTOR® who signs a contract with an owner to sell the property.

M
Maintenance Fee 
A monthly fee paid by condominium owners for maintaining the development's common areas.

Mortgage     
A contract between a borrower and a lender. The borrower pledges a property as security to guarantee repayment of the mortgage debt. Lenders consider both the property (security) and the financial worth of the borrower (covenant) in deciding on a mortgage loan.

Mortgage Broker 
A person or company having contacts with financial institutions or individuals wishing to invest in mortgages.

Mortgage Insurance 
Government-backed or privately-backed insurance protecting the lender against the borrower's default on high-ratio (and other types of) mortgages.

Mortgage Insurer  
In Canada, high-ratio mortgages (those representing greater than 80% of the property value) must be insured against default by either CMHC or private insurers. The borrower must arrange and pay for the insurance, which protects the lender against default.

Mortgage Life Insurance 
Insurance that pays off the mortgage debt, should the insured borrower die.

Mortgage Payment 
The regular installments made towards paying back the principal and interest on a mortgage.

Mortgage Prepayment Penalty 
Is a fee paid by the borrower to the lender in exchange for being permitted to break a contract (a mortgage agreement); usually three months' interest, but it can be a higher or it can be the equivalent of the loss of interest to the lender.

Mortgage Term
The length of time a lender will loan mortgage funds to a borrower. Most mortgage terms run from six months to five years, after which the borrower can either repay the balance (remaining principal) of the mortgage, or renegotiate the mortgage for another term.

Mortgagee 
The lender.

Mortgagor  
The borrower.

Multiple Listing Service® (MLS®) 
A system for relaying information to REALTORS® about properties for sale.

N
New Listings 
The total number of listings added to the MLS® in a month.

O
Open Mortgage
A mortgage that can be prepaid or renegotiated at any time and in any amount without penalty.

P
Partially Open Mortgage 
(Also called a "partially closed" mortgage.) Allows the borrower to prepay a specific portion of the mortgage principal at certain times with or without penalty.

Portability 
A mortgage feature that allows borrowers to take their mortgage with them without penalty, when they sell their present home and buy another one.

Pre-Approved Mortgage 
Tentatively approved by a financial institution for a specified amount, interest rate and monthly payment.

Prepayment Privilege 
A mortgage feature that allows the borrower to prepay a portion or all of the principal balance with or without penalty. This privilege is frequently restricted to specific amounts and times.

Principal   
The mortgage amount initially borrowed, or the portion still owing on the mortgage. Interest is calculated on the principal amount.

R
Rate (Interest) 
The return the lender receives for advancing the mortgage funds required by the borrower to purchase a property.

REALTORS®         
Real estate professionals who are members of a local real estate board and the Canadian Real Estate Association. Only these professionals can call themselves REALTORS®.

Refinancing  
The process of obtaining a new mortgage, usually at a lower interest rate, to replace the existing mortgage.

Reserve Fund 
The portion of a condominium maintenance fee that is set aside to cover major repair and replacement costs.

S
Sales
The number of homes transacted through the Multiple Listing Service® (MLS®) in one month.

Sales-to-active listings ratio
Measures supply and demand by looking at the total supply of homes for sale compared to sales during the month.

Second Mortgage 
A second financing arrangement, in addition to the first mortgage, also secured by the property. Second mortgages are usually issued at a higher interest rate and for a shorter term than the first mortgage.

Secondary Financing 
Second, third, fourth, etc. mortgages, secured by a property "behind" the first mortgage.

Sellers’, buyers’ and balanced markets 
Terms used to show whether the market is putting upward, downward, or no pressure on home prices. Sellers’ markets typically occur when the sales-to-active listings ratio dips below the 12 per cent mark, while buyers’ markets tend to occur when it surpasses 20 per cent for sustained periods.

T
Take-Back Mortgage 
(also referred to as Vendor-Take-Back Mortgage) When sellers use their equity in a property to provide some or all of the mortgage financing in order to sell the property.

Term  
(also referred to as Mortgage Term) The length of time a lender will loan mortgage funds to a borrower. Most mortgage terms run from six months to five years, after which the borrower can either repay the balance (remaining principal) of the mortgage, or renegotiate the mortgage for another term.

Term Mortgage
A non-amortizing mortgage under which the principal is paid in its entirety upon the maturity date. Sometimes called a straight loan.

Title
The legal evidence of ownership of a property.

Title Search       
A detailed examination of the ownership documents to ensure there are no liens or other encumbrances on the property, and no questions regarding the seller's ownership claim.

Total Debt Service Ratio
The maximum percentage of a borrower's income that a lender will consider for all debt repayment (other loans and credit cards, etc.) including a mortgage.

U
Unit
Term used to describe the individual home or apartment held by the owner within a condominium development.

V
Variable-rate Mortgage
A mortgage for which payments are fixed, but whose interest rate changes in relationship to fluctuating market interest rates. If market rates go up, a larger portion of the payment goes to interest. If rates go down, a large portion of the payment is applied to the principal.

Vendor Take-Back Mortgage
When sellers use their equity in a property to provide some or all of the mortgage financing in order to sell the property.

W
Weekly Payments 
Mortgage payments made weekly or 52 times per year.

Z
Zoning Regulations  
Strict guidelines set and enforced by municipal governments regulating how a property may or may not be used.