The Home Buyer‘s/Seller‘s Glossary of Terms


Agreement of Purchase and Sale
A contract by which one party agrees to sell and another agrees to purchase.

Amortization
Period of time required to reduce debt to zero when payments are made regularly.

Appraisal
Process by which the mortgage lending value of a property is determined.

Assumability
Allows the buyer to take over the seller‘s mortgage on the property.

Bridge Financing
Interim financing to bridge between the closing date on the purchase of the new home and the closing date on the sale of the current home.

Broker
An intermediary between the buyer and seller who is licensed to carry out such activities.

Building Permit
Certificate that must be obtained from the municipality by the property owner or contractor before the building can be erected or renovated.

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

Closed Mortgage
A mortgage that locks you into a specific payment schedule. A penalty usually applies if you repay the loan in full before the end of the closed term.

Commitment
A notice from a mortgage lender to a prospective borrower that the lender will advance mortgage funds of a specific amount under certain conditions.

Condition
A condition is a contract that calls for the happening of some event, or performance of some act before the agreement becomes binding.

Conditional Offer
An offer to purchase subject to specific conditions. These conditions could be the arranging of a mortgage, obtaining a home inspection, or the selling of a present home. Usually a time limit in which the specified conditions must be met is stipulated

Condominium
The owner has title to a single unit, as well as a share in the common elements such as elevators or surrounding land.

Condominium Fee
A common payment among owners which is allocated to pay expenses.

Conventional Mortgage
A mortgage loan of up to a maximum of 75% of the lending value of the property for which a lender does not require loan insurance.

Debt Service Ratio
The percentage of the borrower's income that will be used for monthly payments.

Default
Non-payment of installments due under the terms of the mortgage.

Deposit
Payment of money in consideration as a pledge for fulfillment of the contract.

Down payment
The buyer‘s cash payment towards the property. The difference between the purchase price and the amount of the mortgage loan.

Discharge
The removal of all mortgages and financial encumbrances on the property.

Easement
The right acquired for access to or over another person's land for a specific purpose, such as for a driveway or public utilities.

Equity
The difference between the home‘s selling value and the debts against it.

High Ratio Mortgage
Loan that exceeds 75% of the properties lending value, and which is insured through a mortgage insurance plan.

Holdback
An amount of money withheld by the lender during the progress of construction of a house to ensure that construction is satisfactory at every stage. The amount of holdback is generally equivalent to the estimated cost to complete construction.

Interest Rate
The value charged by the lender for the use of the lender's money. Expressed as a percentage.

Land Transfer Tax, Deed Tax or Property Purchase Tax
A fee paid to the municipal and /or provincial government for the transfer of property from seller to buyer.

Naturity Date
The end of the term, at which time you can pay off the mortgage or renew it.

Mortgage Insurance Premium
A premium, which is added to the mortgage and paid by the borrower over the life of the mortgage. The mortgage insurance insures the lender against loss in the case of default on the part of the borrower.

Mortgage Life Insurance
A form of reducing term insurance recommended for all mortgagors. In the event of a death of the owner or one of the owners, the insurance pays the balance owing on the mortgage. The intent is to protect survivors from losing their home.

Mortgagee
Financial institution lending mortgage loan.

Mortgagor
Person(s) borrowing mortgage loan.

Offer to Purchase
A written contract setting forth the terms under which a buyer agrees to purchase a property. Upon acceptance by the seller, it forms a contract, which will form the basis for the final document to be prepared by a lawyer or notary. It includes the legal and/ or municipal description (this may consist of lot numbers as well as street address), legal owners, purchase price, deposit, closing date, requisition date, mortgage and terms of repayment, and lists of specific items included and not included as part of the sale.

Open Mortgage
Allows partial or full payment of the principal at any time, without penalty.

P & I & T
Principal, interest and taxes due on a mortgage.

P & I
Principal and interest due on a mortgage.

Penalty
A sum of money paid to a lender for the privilege of prepaying a mortgage in part of full.

Power of Sale
The right of a mortgage to force the sale of the property without judicial proceedings should a default occur.

Prepayment Option
The right to prepay specified amount of the principal balance. Penalty interest may be incurred on prepayment options.

Prepayment
Full or partial payment of all or part of the principal, separate from the regular payments called for under a mortgage agreement.

Principal
The amount owing to a lender at any time.

Portability
A mortgage option that enables borrowers to take their current mortgage with them to another property, without penalty.

Pre-Approved Mortgage
Qualifies you for a mortgage before you start shopping. You know exactly how much you can spend and are free to make a firm: offer when you find the right home.

Prepayment Privileges
Voluntary payments in addition to regular mortgage payments.

Rate (interest)
The return the lender receives for loaning you the money for the mortgage.

Real Estate
Includes real property, leasehold and business whether with or without premises, fixtures, stock in trade, good chattels in connection with the operation of the business.

Refinancing
Paying off the existing mortgage and arranging a new one or re-negotiating the terms and conditions of an existing mortgage.

Renewal
Re-negotiation of a mortgage loan at the end of a term for a new term.

Roll-Over Mortgage
A mortgage loan where the interest rate is established for a specific term. At the end of this term, the mortgage is said to "roll over" and the borrower and lender may agree to extend the loan. If satisfactory terms cannot be agreed upon, the lender is entitled to be prepaid in full. In this case, the borrower may seek alternative financing.

Sales Representative
A licensed employee of a Real Estate Broker authorized to trade in real estate.

Second Mortgage
Additional financing. Usually has a shorter term and higher interest rate than the first mortgage.

Status Certificate
On May 5th 2001 a new Condominium Act became law. The " Estoppel Certificate" is now called the "Status Certificate" The new act requires the Status Certificate to be delivered within 10 days of a request for it. The cost is $100.00. Make sure that the time period for any condition on examination of the Status Certificate does not begin to run until you have actually received the Status Certificate. The Status Certificate provides a lot of information of interest to a potential buyer, including:

a.  Whether or not the vendor is in arrears for common expense
      payments,
b.   Whether or not an increase in common expenses is being
      contemplated,
c.   The current budget for the Condo Corporation,
d.   Any legal actions involving the Corporation,
e.   Whether or not the Corporation is contemplating and substantial
       additions, alterations, improvements or renovations,
f.   The identity of the property manager,
g.   A list of the current officers and directors of the Corporation,
h.   Copies of the Declaration, By-Laws and Rules of the Corporation,
      as well as copies of any management agreement and all
      insurance policies.

Survey
The accurate mathematical measurement of land and building there on.

Term
The length of time, which you pay a specific interest rate on your mortgage loan. At the end of the term you may repay the balance of the loan or re-negotiate at current rates and conditions.

Title
Evidence of ownership.

Variable-Rate Mortgage
A mortgage with fixed payments, but fluctuates with interest rates. The changing interest rate determines how much of the payment goes towards the principal.

Vendor Take Back Mortgage
Where the seller of a property provides some or all the mortgage financing in order to sell the property.

Vendor
Seller of real property.

Zoning Laws
Municipal laws restricting the use of land for specific purposes.

Linda Comrie

Sales Representative
Re/Max Realtron Reality Brokrage

Toronto, ON

Direct:

(416) 471-1171

Office:

(416) 222-8600

Fax:

(416) 222-1237

eMail Address:

LindaComrie@rogers.com