Real Estate Terms
Amortization Period The number of years it will take to pay back your mortgage loan.
Assignment Sale An Assignment Sale is when the original purchaser sells and/or transfers all the rights and obligations of the original contract between themselves and the Vendor to another party before the official completion date for the property. Title transfer for the property does not occur until the city issues the necessary permits and the unit is ready for occupancy.
Assumability Allows the buyer to take over the sellers mortgage on the property.
Building Permit A certificate that must be obtained from the 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.
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 a closed term.
Closing Costs Costs, in addition to the purchase price of a home, such as legal fees, transfer fees, and disbursements, that are payable on the closing date. Closing costs typically range from 2 to 4 percent of a home’s selling price.
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 Strata Fee A monthly common payment among owners which is allocated to pay expenses.
Conventional Mortgage A mortgage loan issued for up to 80 percent of the property’s appraised value or purchase price, whichever is less.
Down payment The portion of the house price the buyer must pay up front from personal resources, before securing a mortgage. It generally ranges from 5 to 25 percent of the purchase price.
Duplex A duplex consists of two houses. Each house can be referred to as either a half duplex or a townhouse.
Equity The difference between the homes selling value and the debts against it.
Foreclosure A legal procedure in which the lender gets ownership of the property if the borrower defaults on the mortgage loan.
Gross Debt Service Ratio The percentage of the borrower’s gross income that will be used for monthly payments of principal, interest, taxes, heating costs, and half of any condominium maintenance fees.
High-ratio Mortgage A mortgage that exceeds 80 percent of the home’s appraised value. These mortgages must be insured for payment.
Interest Rate The rate at which you pay interest to the lender. For 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.
Leasehold Property In some cases you might purchase the right to use a residential property for a long, but limited, period of time. The owner of this right of use has a type of ownership called a leasehold interest. This type of ownership is used most often for townhouses or apartments built on city-owned land. It is also found occasionally for single detached houses on farm land, on First Nations reserves, and for apartments where the owner of the freehold interest of an entire apartment block sells leasehold interests in individual apartment units to other ‘owners.’ Leasehold interests are frequently set for periods of 99 years, but regardless of the length of the original term, you will only be able to purchase the remaining portion. Of course, the shorter the remaining portion, the less you, or the person who eventually purchases from you, will be willing to pay for the leasehold interest.
Maturity Date The end of the term, at which time you can pay off the mortgage or renew it.
Mortgage Insurance Applies to high-ratio mortgages. It protects the lender against loss if the borrower is unable to repay the mortgage.
Mortgage Life Insurance Pays off the mortgage if the borrower dies.
Mortgagee The person or financial institution that lends the money.
Mortgagor The borrower of the money.
Open Mortgage Allows partial or full payment of the principal at any time, without penalty.
Portability A mortgage option that enables borrowers to take their current mortgage with them to another property, without penalty. A transfer fee may apply.
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 Voluntary payments in addition to regular mortgage payments.
Principal The amount of debt, not counting interest left on a loan.
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.
Second Mortgage Additional financing. Usually has a shorter term and higher interest rate than the first mortgage.
Strata Ownership The strata form of ownership is designed to provide exclusive use and ownership of a specific housing unit (the strata lot) which is contained in a larger property (the strata project), plus shared use and ownership of the common areas such as halls, grounds, garages, elevators, etc. This type of ownership is used for homes, duplexes, apartment blocks, townhouse complexes, warehouses, and many other types of buildings Because ownership of the common space is shared, the owners also share financial responsibility for its maintenance such as the commonly owned roads, disposal system, landscaping, elevators, management, etc.
Term The length of time the mortgage agreement exists. At the expiry of the term the contract may generally be renewed for a further term and the rate renegotiated.
Title A document that gives evidence of an individual’s ownership of a property.
Variable-rate Mortgage A mortgage in which payments are fixed, but the interest rate moves in response to trends. If interest rates go up, a larger portion of your payment goes to the interest; if rates go down, more goes to cover the principal.
Vendor Take-Back Mortgage When the seller provides some or all of the mortgage financing in order to sell their property.