Here’s a handy glossary of Real Estate terms to help you in your home search.
Adjustment Date: The day you become responsible for the fees or cost associated with the property. Your lawyer will prepare a statement of adjustments pro-rating any pre-paid taxes, monthly maintenance fees if applicable and any other costs that may have been paid in advance or owing.
Agreement of Sale: Also known as Purchase Agreement, Agreement of Purchase and Sale, Land Agreement etc. A written contract signed by the buyer and seller stating the terms and conditions under which a property will be sold.
Amortization: The period of time required to reduce a debt to zero when payments are made regularly.
Appraisal: For mortgage lending purposes, it is a process for estimating the market value of a particular property.
Assignee: The person to whom an interest or right in real property is transferred.
Assignment: The transfer of any right, claim or interest to another person or corporation.
Assignor: The person transferring an interest or right in real property.
Blended Payment: A mortgage payment that includes principal and 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.
Closed Mortgage: A mortgage that cannot be prepaid or renegotiated before the term’s end unless the lender agrees and the borrower is willing to pay an interest penalty. Many closed mortgages limit prepayment options such as increasing your mortgage payment or lump sum prepayment (usually up to 20% of your original principal amount).
Completion Date: The day the seller received your funds in exchange for you receiving title to the property. The title is registered under your name at the Provincial Land Titles Office on that day. The date must fall on a normal business day, Monday to Friday.
Conditional Offer: An Offer to Purchase that is subject to specified conditions, for example, the arrangement of a mortgage. There is usually a stipulated time limit within which the specified conditions must be met.
Conventional Mortgage Loan: A mortgage loan up to a maximum of 80% of the lending value of the property for which a lender does not require mortgage loan insurance.
Counter Offer: When one party to an Offer to Purchase (buyer or seller) does not accept some or all of the terms and conditions offered by the other party and in turn “counter” offers alternate terms and conditions. During the course of negotiation through offering and counter offering the buyer and seller work towards achieving terms and conditions acceptable to both parties.
Curb Appeal: How attractive the home looks from the street. The first impression you have of a home is important. A home with good curb appeal will have attractive landscaping and a well-maintained exterior.
Default: Failure to abide by the terms of a mortgage loan agreement. A failure to make mortgage payments (defaulting the loan) may give cause to the mortgage holder to take legal action to possess (foreclose) the mortgaged property.
Deposit: The amount of money a buyer initially puts down at the time a Contract of Purchase and Sale is entered into to show sincerity of intent and to provide for potential liquidated damages in favour of the seller if the buyer does not perform according to the terms agreed to in the Contract. The funds are usually placed in the buyer’s realtors trust account and forms part of the purchase monies. A deposit in the amount of 5% of the purchase price is common real estate practice in Greater Vancouver.
Down Payment: The portion of the home price that is not financed by the mortgage loan. The buyer must pay the down payment from his/her own funds or other eligible sources before securing a mortgage. It generally ranges from 5% to 20% of the purchase price but can be more.
Easement: This is where someone else has the right for access to or over 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 (owner): The difference between the price for which a home could be sold and the total debts registered against it. Owner 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.
Estoppel Certificate: Also called a certificate of status, it is a certificate that outlines a condominium corporation’s financial and legal state. Fees may vary and may be capped by law
Foreclosure: The legal process where the lender takes possession of your property and sells it to cover the debts you have failed to pay off. When you default on a loan and the lender feels that you are unable to make payments, you may lose your home to foreclosure.
Gross Debt Service (GDS): The percentage of the borrower’s gross income that will be used for monthly payments of principal, interest and taxes, heating costs and half of condominium fees.
High-Ratio Mortgage: A mortgage loan higher than 80% of the lending value of the property. This type of mortgage may have to be insured by CMHC or a private insurance company against payment default.
Lien: A claim against a property for money owing. A lien may be filed by a supplier or a subcontractor who has provided labour or materials but has not been paid.
Loan-to-Value Ratio: The ratio of the loan amount to the lending value of a property expressed as a percentage. For example, the loan-to-value ratio of a loan for $90,000 on a home which costs $100,000 is 90%.
Maintenance Fee: Charge to a unit holder in a condominium or co-operative complex for that person’s share of costs for keeping the common areas of the complex in a good state of repair.
Maturity Date: The last day of the term of the mortgage. On this day, the mortgage loan must either be paid in full or the agreement renewed.
MLS — Multiple Listing Service: A multiple listing service is a real estate agents’ cooperative service that contains descriptions of most of the homes that are for sale. Real estate agents use this computer-based service to keep up with properties they are listing for sale in their area.
Mortgage: The balance of the purchase price (purchase price – down payment = mortgage amount) borrowed from a lender which is secured by the lender by a charge against the property title and your personal guarantee to repay the loan.
Mortgagee: The lender who provides the mortgage loan.
Offer to Purchase: A written contract setting out the terms under which the buyer agrees to buy. Upon acceptance by the seller, it forms a legally-binding contract subject to the terms and conditions stated in the document.
Open Mortgage: A mortgage that can be prepaid or paid off or renegotiated at any time and in any amount without interest penalty. The interest rate on an open mortgage is usually higher than a closed mortgage with an equivalent term.
Possession Date: Usually the same date as the adjustment date. The day you are entitled to the legal possession of the property you have purchased (you get the keys!). In BC, possession usually occurs a day or two after completion.
Subject Clause: A condition(s) that must be satisfied before a contract becomes firm (unconditional). Examples are subject to financing, inspection or receipt and approval of condominium bylaws and financial statements. The conditions must be removed from the contract in writing by a certain date in order for the contract to become “firm”.
Principal: The amount of money actually borrowed.
Property Taxes: Taxes charged by the municipality where the home is located based on the value of home. In some cases the lender will collect a monthly amount to cover your property taxes, which is then paid by the lender to the municipality on your behalf.
Survey or Certificate of Location: A document that shows property boundaries and measurements, specifies the location of buildings on the property and states easements or encroachments.
Term: The length of time during which you pay a specific interest rate on your mortgage loan. You may not have paid off your entire mortgage principal at the end of a term because your amortization period will likely be longer than the term.
Title (Freehold or Leasehold): A freehold title gives the holder full and exclusive ownership of the land and building for an indefinite period. A leasehold title gives the holder the right to use and occupy the land and building for a defined period.
Total Debt Service Ratio (TDS): The percentage of gross monthly income required to cover the monthly housing payments and other debts, such as car payments.
Vendor Take Back Mortgage: This is where the vendor rather than a financial institution finances the mortgage. The title of the property is transferred to the buyer who makes mortgage payments directly to the seller. These types of mortgages, sometimes referred to as take-back mortgages, can be helpful if you need a second mortgage to by a home.