REAL ESTATE GLOSSARY

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Abandonment:
Vacating a property with the definite intention never returning and relinquishing any further interest or to surrender property rights when ownership for a property becomes a burden or is troublesome to the owner. Abandonment does not relieve contractual obligations and creditors can seek to recover losses, as the property is no longer part of the estate.

Abstract:
A written, condensed history of title to a parcel of real property, recorded in a land registry office.

Abstract Of Title:
A condensed written historical account of all transactions that affect the title to a specific real property from the first sale to present as recorded in chronological order of filling in a land registry or land titles office.

Abuttal:
This boundary abuts a parcel of land by other land, street, river, etc.

Accelerated Weekly Payment:
This mortgage repayment calls for the borrower to make 52 payments per year instead of 48 called for with a four payments per month payment plan. The extra four payments per year have an “accelerating” effect on the total repayment of the principal  amount of the mortgage.

Acceleration Clause:
This clause is written into a mortgage document to protect the lender in the event of any default on mortgage payments; it allows the lender to accelerate the maturity dateor call the principal sum of the outstanding loan amount on the mortgage, plus accrued interest thatbecomes due and immediately payable.

Acceptance:
An offeree’s formal written approval and acceptance of an offer submitted by an offeror to enter into a contract and to be bound by the terms of the offer.

Accountant:
Examines the accounting records as prepared by a bookkeeper.

Accounting Methods:
Individuals and small businesses commonly maintain financial records by the single entry cash method, with profit based on cash received minus funds expended during the same fiscal period. Businesses with inventory are required to use the double entry accrual method which records both accounts payable and accounts receivable.

Accounting Statements:
Used to convey a precise picture of the profitability and financial position of an individual or business. Statements include: income statement, balance sheet, statement of retained earnings, and statement of changes in financial position.

Accredited Appraiser Canadian Institute (AACI):
Thisdesignation denotes a fully accredited membership in the Appraisal Institute of Canada and allows the holder to conduct appraisals and consultations on all types of real property. Not usually involved in residential work, their appraisals can be used for any purpose such as litigation, mortgages, industrial or commercial issues and for expropriations.

Accredited Mortgage Professional (AMP):
Canada’s nationaldesignation for mortgage professionals is issued by the Canadian Association of Accredited Mortgage Professionals (CAAMP) in order to increase thelevel of professionalism through thedevelopment of educational programs and ethical standards of proficiency in Canada’s mortgage industry.

Accrual Method:
A widely adopted business accounting systemof reporting income or expenses based on the date the event occurred, rather than reporting the actual date payment is received or made. All transactions which are legally binding are recorded even though no money has yet changed hands, if services are provided and billed to a customer in the current year, the amount charged is reported as income for the current year even if the customer did not pay until the following year, transactions should be recorded when invoices are prepared. If an invoice is received for goods or services rendered, the transaction should be recorded upon receipt of the invoice although not yet paidA business that maintains an inventory is required to use this method of accounting.

Accrue:
When an amount or value increases over duration of time.

Accrued Interest:
Interest already earned and accumulated for the period of time that has elapsed, but remains unpaid since last interest payment date.

Acquittance:
Québec’s legal term for ‘discharge of mortgage’.

Acre:
An imperial unit of measurement for a parcel of land equal to 180 feet by 242 feet or 43,560 square feet (or 208.71 feet squared).

Acre Foot:
An acre-foot is equivalent to 325,851 gallons of material (water or other) that is needed to cover an acre of land one foot deep.

Act Of God:
This term found in insurance policies, refers to an event caused by natural forces such as hail, rain, tornados, lightning, floods, or earthquakes that cause damage to property.

Action for Possession:
This legal remedy allows a lender take possession of the mortgaged property when a mortgage is in default.

Action of Receiver:
This legal remedy allows a lender to request that the court appoint a receiver who takes possession of the property when a mortgage is in default.

Action on the Covenant for Payment:
This legal remedy allows a lender to sue the borrower, even if the borrower has since sold the property when a mortgage is in default.

Actual Age:
The chronological age, the number of years since the structure was built is differentiated from effective age as used for appraisal purposes.

Add-On Interest:
An interest amount added on to the principal amount of a debt and made payable in equal periodic instalments throughout the term of the loan, also referred to as pre-calculated interest.

Addendum:
A revision or change made to a contract.

Additional Interest:
Interest charged by the bank when a borrower prepays principal or renegotiates terms of their mortgage. The interest compensates the bank for revenue loss.

Additional Principal Payment:
When a borrower pays extra money in addition to the required loan payment to pay down the principal faster and reduce the amount of interest paid.

Additional Property:
A property owned by a borrower other than their property that is being financed.

Adjustable Rate Mortgage (ARM):
With this type of mortgage the interest rate and monthly payments can be altered to rise and fall with market conditions as frequently as once a month, alternatively modifications can be made to the principal balance or the loan term to reflect the rate change.

Adjusted Cost Base:
Refers to an amount applied to determine capital gain or loss following the disposition of real property. This calculation used for real estate investment analysis takes the total of acquisition price, plus amounts paid for improvement, and is then adjusted by subtracting losses and deductions which can include down grading, depreciation, or depletion; the difference between the sale price and the adjusted cost base determines the profit or loss.

Adjustment Date:
The date on which adjustments for items such as taxes, utilities, oil, etc. are calculated.

Adjustment Period:
The duration of time between rate changes in an adjustable-rate mortgage.

Adjustments:
There are two types of adjustments for which a buyer can be charged on closing:
(1) Prepaid services: Where the vendor has prepaid income or expensessuch as accrued property taxes, utilities or rents the buyer is either charged or credited a prorated amount of prepayment based on the date of closing. (2) Interest: The interest amount up to the (IAD) Interest Adjustment Date required to be prepaid by the purchaser. IAD is the point at which the mortgage interest starts accumulating “in arrears”. In Canada all mortgage interest is calculated and paid after the period to which it applies. This differs from the way in which rental and lease payments are calculated, which is “in advance”. If you prepay for 3 weeks you won’t have to make your first payment for almost two months. Also, if you take a biweekly payment term, the longest interest adjustment period is less than two weeks, by definition.

Administrator:
The individual or party appointed by Court Orderto manage the estate of a deceased person who died without a will, or one whohad not appointed an executor by will.

Adverse Possession:
When an individualother than the owner takes physical possession of a property, and if this occupant’s possession has been actual, continuous, hostile, visible, and distinct for a statutory period,without the consent of the legal titleholder, the occupant acquires title to this piece of property and thus becomes the new title owner. Adverse possession is not possible under Land Titles or when Crown property is involved.

Adverse Use:
Using someone else’s property without permission.

Affidavit:
This written statement of declaration is sworn to or affirmed before an authorized officer empowered to administer an oath or affirmation, such as a notary public, or commissioner of oaths.

Agency:
A relationship that arises out of a contract between two parties, either expressed or implied, written or oral. One party is employed and authorized as the agent to act on behalf of and subject to the control of the other party who is referred to as the principal party. The agentis engaged in and conducts certain acts or transactions with a third party on behalf of the principal.

Agent:
A person authorized tolegally represent another individual or corporate body and thus acts on behalf of their client, referred to as the principalparty, when dealing in transactions involving a third party. Unlike an employee who works for the principal, an agent actually works in place of the principal and usually receives a commission or pre-determined fee. A real estate agent conducts property transactions on behalf of vendors and purchasers. In the real estate profession it refers to a broker.

Agreement For Sale:
This agreement between a seller and purchaser is an alternative form of financing for the purchase of real property. Unlike a mortgage, with this type of arrangement the seller of the property finances the purchase, the purchaser can possess the property but legal title to the property remains with the seller until the purchaser completes making all payments to the seller.

Agreement Of Purchase And Sale:
This legally binding written agreement between the owner and a purchaser for the purchase of real estate is prepared when a purchaser offers to buy certain real property andspecifies price and any other terms of sale. The offer may be firm with no conditions attached, but most offers are conditional on certain stipulations that must be fulfilled before the deal can be closed. Professional realtors usually prepare offers and have the knowledge and experience to protect their vendor or purchaser clients with suitable clauses and conditions, which are includedin an agreement. If the vendor and purchaser agree upon terms and conditions as set forth in that agreement, then upon both parties signing the document, the contract becomes legally binding on all parties. Generally, title will not be transferred to the purchaser until the entire agreement amount has been paid.

Agreement to Lease:
This legally binding, written agreement details terms under which one party agrees to lease real property to another party.

Air Lot:
A part of a future building, a proposed lot presently located in the sky.

Alienation Clause:
This clause stipulates that the mortgagee may demand payment of the entire outstanding balance including interest upon sale or other transfer of title securing the loan – also known as a “due on sale” clause. The borrower must pay off their mortgage in full upon sale or othertransfer of title.

Amending Agreement:
An agreement between the lender and borrower in which the terms of the registered mortgage are altered, although the amendments may or may not be not be registered on title.

Amenities:
Features such as schools, hospitals, green space, playgrounds, community centers, or shopping malls are beneficial to a neighborhood and make it a more desirable location in which to live. Also, those parts of the condominium or apartment building that are intended to beautify the premises and that are for the enjoyment of occupants rather than for utility; e.g., swimming pool, exercise room and tennis courts.

Amortization:
This gradual retirement of a debt extinguishes a loanis by means ofpartial payments of the principal sum at regular intervals over a specified period of time. With a mortgage, the borrower agrees to gradually pay off the principal balance of the loan in a series of equal blended payments consisting of both interest and principal calculated for payment over uniform blocks of timeduring a target period, the standard being 25 years. The maximum amortization available in Canada is 40 years, but can be as brief as 5 years.

Amortization Of A Mortgage:
Arrangements for paying off a mortgage by regular instalments or period payments made over a specific duration of time.

Amortization Period:
The actual number of years or time over which, equal instalments or periodic constant payments would pay off the entire amount of the mortgage debt in full. The amortization period can be well in excess of the term of the loan. For example, a mortgage may have a five-year term and a standard 25-year amortization period with financing based on a set of fixed payments, but it would take 25 years to reduce the balance to zero, if all regular payments were made on time and the terms (payment, interest rate) remained the same. Repayments of principal and interest are usually made in “blended” amounts. A fully amortized mortgage refers to the complete repayment of debt without a “balloon” payment at the end of the term.

Amortization Schedule:
This timetable details the life of a loan or its amortization and specifies the principal amount owing at the initiation of the loan, periodic payment amounts including how much of each payment is allocated asprincipal reduction and interest paid. It also shows the outstanding, unpaid, principal balance of the loan after each level payment is made.

Amortization Table:
Periodic mortgage payments are calculated utilizing this schedule that shows the numerical factorsused to arrive at the amount of monthly payments required to repay a loan, given a specific rate of interest, the borrowed loan amount, and the number of years in the term.

Amortized Mortgage:
A mortgage loan in which both the interest and principal are paid off in their entirety through a series of scheduled regular, periodic, installments during a specified amount of time leading up to the loan’s retirement or maturity.

Anniversary Date:
The same date in each calendar year during the term of a mortgage, the first anniversary date taking place one year from the origination date that interest starts to run on the mortgage. One year from the interest adjustment date (IAD), which is the date less than one month before the first periodic repayments begin.

Anniversary Period:
The anniversaryperiod that starts each year on a mortgage interest adjustment date or, the effective date of a mortgage renewal or amendment.

Annual Mortgagor Statement:
This annual statement sent to the borrower, details the outstanding principal balance owing on the loan and any amounts paid in tax and interest for the previous year.

Annual Return:
The financial return on investment, for a 12-month period, including changes in unit value and any reinvestment of distributions, but not accounting for sales, redemption, distribution or other optional charges or income taxes payable by any unit holder that would reduce returns.

Annual Shelter Payment Ratio:
Charges for (Principal, Interest and Taxes plus annual Heat costs) as a function of Gross Income of the mortgagor.
Formula:(PIT +H) / GI

Application:
This document requires a prospective borrower to fill out and provide details of personal financial information in order to qualify for a loan.

Application Fee:
Lenders charge a fee to process and review applications filled out by prospective borrowers before loan decisions can be made.

Appointment of a Receiver:
This legal remedy enables a lender as receiver to take possession of a mortgaged property, collect rents, and pay any expenses as required once a mortgage agreement is in default.

Appraisal:
This unbiased,written estimate stipulates the market value of real property and is made by a qualified expert. An independent appraiserknowledgeable about local real estate prices and market trendswill undertake to estimate the realistic, current value of a subject property using various analysis techniques and market research.
This value may or may not be the same as the purchase price of a property. The majority of residential appraisals generate a property value using a Direct Comparison Approach, comparing market data of current and recent selling prices of similar, comparable properties (‘comparables’ or ‘comps’ in real estate jargon) and adding or subtracting the differences in value of similar features in the subject property. This is usually done with at least three ‘comparables’ and either averaged or the middle (‘median’) value used. Another technique used by many appraisers to estimate value is called the Depreciated Cost Approach which is used where there are few comparables available, the estimated land value is added to an estimate of the cost of replacing the building less the depreciation of the property in question to arrive at an overall value for the property. The Income Approach is the method used for valuating income-producing properties such as apartment complexes, plazas and commercial units. The purpose of most appraisals is to estimate market value to serve various functions such as whether it will meet lending criteria for mortgage financing, insurance, estate settlement, divorce or partnership settlement and expropriation.

Appraisal Fee:
This fee is charged by professionals hired to provide educated opinions regarding the monetary worth of a property.

Appraisal Institute of Canada (AIC):
This national professional organization represents professional real estate appraisers and sets the standards and requirements necessary to earn the designations of Accredited Appraiser Canadian Institute (AACI) andCanadian Residential Appraiser (CRA).

Appraisal Report:
This detailed evaluation a property’s value is based on an inspection of the subject property by a qualified individual. Aftera review of comparable properties that have recently sold locally an unbiasedstatement is prepared offering an opinion of value of the adequately described subject property, as of a specified date and supported by pertinent researched data.

Appraised Value:
An educated opinionor estimate of market value; written by a qualified member of the Appraisal Institute of Canada. An appraisal performed for mortgage lending purposes may or may not reflect the market value of the property, or the purchase price of the property, but serves as a value for a property pledged as security for a mortgage loan.  The dollar amount assigned to taxable property, by an assessor, for purposes of equalizing the municipal tax burden.

Appraiser:
A licensed professional qualified by education, training, and experience to estimate the monetary value of real and or personal property. Determining the market value of a property is based on its condition and the selling price of comparable properties recently sold in the surrounding area.

Appreciation:
The increase in market value of realproperty brought about by changes in market conditions or any factor over a period of time.

Approval:
A lender’s positive assessment of a borrower’s ability to repay a mortgage loan of specified principal amount and interest rate.

Approved Lenders, Correspondents:
Mortgage-originating institutions whose mortgages may qualify for insurance as approved by CMHC or any private mortgage insurance company.

Appurtenance:
This additional legal right or privilege is attached to real property itself, belongs to the land and is joined thereto as an adjunction to real property. Adding to greater enjoyment of the land, such as a right-of-way an appurtenance is inherited with the land or runs with the land.

Arbitration:
The process of resolving disputes between people or groups by an independent, unbiased, third party empowered to make a judgment or resolution. Arbitrators areeither agreed on by the disputing parties or provided by law.

Architect:
A professional who designs and supervises the building of structures to ensure specifications are adhered to.

Architectural Fees:
Fees paid to a professional for designing structures.

Arm’s Length Transaction:
This transaction between unrelated parties is freely arrived at in the open market and is unaffected by abnormal pressures as might be found in a transaction between related parties.

Arpent:
This measurement of area equal to approximately 0.845 acres was traditionally used in France, Quebec, and Louisiana, but today, hectares and acres are more common.

Arrears:
A person who said to be “in arrears” is late orbehind in the payments called for and agreed to under a mortgage agreement. An overdue amount comprised of monthly payments plus interest on these payments.

As Is Where Is:
The vendor makes no warranties and a buyer purchases at their own risk.

Asking Price:
The amount of money a vendor markets their property for and will hope to receive.

Assessed Value:
Governments; municipal, provincial, or state impose a value or dollar amountuponreal property (land and buildings)through an assessorfor the purpose of equalizing the tax burden.

Assessment:
This municipal notice, sent to property owners, contains the property’s “assessed value” and whenmultiplied by the current “mill rate” the property taxes for the year
can be calculated. Property assessments are established for apportioning annual property taxesto cover the cost of providing services and improvements that the property benefits from. In some municipalities, the mill rate is provided on the assessment notice and in others it is provided separately.

Assessment Fee:
A monthly fee that condominium owners must pay, usually including management fess, costs of common property upkeep, heating costs, garbage removal costs, the owner’s contribution to the contingency reserve fund, and so on. In the case of timeshares, the fee is normally levied annually. Also referred to as maintenance fee.

Assessment Rolls:
A municipal government will prepare an annuallist before the end of the year that stipulates the assessed values of all taxable properties in the municipality, including the name of the property owners or tenants and their addresses.

Assessor: This person is employed by a municipality or other government body and empowered to place valuation on property for taxation purposes.

Asset:
Any item or possession of monetary value that is legally owned by orowed to, an individual or businessthat can be used in determining net worth or for securing financing. Assets can include tangible real or personal property, such as a home, cottage, automobiles,jewelry or other household goods,but less tangible assets can also includecash, term deposits, GIC’s, RRSP’s, stocks, bonds or mutual funds. The properties or economic resources owned by a business can include cash, accounts receivable, mortgages receivable, office equipment, buildings, land, etc.

Asset Mix:
The proportional weighting of diverse assets contained in an investment portfolio such different asset classes include shares, bonds, property, cash, or other investments.

Assignee:
This property purchaser takes the rights or title of another by assignment.

Assignment:
Assignment refers to legal transfer of rightsor interest in real property ora mortgage from one person, the assignor, to another person, the assignee.

Assignment Of Interest:
The legal assignment of interest in a mortgage has full legal effect without having to discharge and re-register theexisting mortgage. This avoids the considerable costs of transferring lenders and of having to discharge and re-register any existing mortgage. This is particularly useful in switch situations and in the case of second mortgage situations where a postponement may be difficult to obtain.

Assignment of Lease:
This document affects a legal transfer of rights to a lease agreement from one party to another and can be absolute or conditional.

Assignment Of Mortgage:
A mortgagee (lender) assigns their interest in a mortgage to a new mortgagee, a legal sale of the mortgage, the transfer of ownership of a mortgage from one party to anotherwith or without an agreement to repurchase.

Assignment Of Rent:
This assignment, normally taken as additional security on rental loans, enforces the diversion of revenue derived from mortgaged property and as suchthe borrower (Mortgagor)grants the lender (Mortgagee) the right to collect future rents on a given occurrence, normally for defaultof payment.

Assignor:
This property owner transfers or assigns the rights ortitle of ownership to another party.

Assumable Mortgage:
This existingmortgage permits a qualified buyer to take over or assume it upon closing of the sale on that property, thus taking over responsibilityfrom the current property owner. Assuming a mortgage usually provides a buyer with a below market interest rate, if present rates are higher and also saves on legal costs associated with registering a new mortgage. “Assumption” requires an amendment to the mortgage document to be registered on title also referred to as a “switch”.It is important for the seller to request from the lender a release form personal covenants associated with the original mortgage.

Assumed Mortgage:
Where the new purchaser of real property assumes liability of an existing mortgage thus negating the need for a new mortgage.

Assumption Agreement:
A legal document signed by a person other than the mortgagor, who covenants to perform or assume responsibility forthe obligations contained in the existing mortgage deed. Words of caution, if someone assumes your mortgage, make sure that you receive a release from the mortgage company to ensure that you are no longer liable for the debt.

Assumption Clause:
This mortgage contract clause permits a purchaser to assume responsibility for an existing mortgage from a vendor.

Assumption Fee:
An administration fee charged by lenders for updating mortgage records when a purchaser assumes an existing mortgage from a vendor.

Assumption Of Mortgage:
The action of apurchaser of real property to take over or assume the responsibilityfor an existing mortgage debtregistered against a property from the vendor at closing to become liable for the schedule of payments of the mortgage by way of a legal agreement.Depending on the terms of the existing mortgage, this action can proceed with or without approval of the existing mortgagee. The original covenantor(s) responsibility pursuant to the mortgage obligation remains intact in such arrangement, so long as the existing documentation remains registered. With builders’ loans, the assumption is usually evidenced by written agreement.

Attachment:
The legal seizure of property as ruled by court order.

Attornment Of Rent:
This legal action empowers aMortgagee in possession to collect and hold rent to protect their rights in case of default by the mortgagor, thus tenants are directed to pay their rents directly to the lender.

Authority:
Legal power or rights given by a principal and accepted by an agent to act on the principal’s behalf in the performance of specific business transactions, duties or negotiations with a third party.

Automated Valuation Models (AVM):
These computer programs provide real estate market analysis and estimates of value based on the specific attributes of a subject property as well as comparable sales data for the surrounding area.

Automatic Payment:
An authorization agreement for a lender to make specified withdrawals from a borrower’s bank account in order to apply the withdrawn funds towards regular monthly payments such as car or mortgage payments.

Avulsion:
This sudden loss or transference of land is caused by flooding or by the change in the course of a river.

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Back Title Letter:
This title insurance company document specifies the condition of title and is presented to the lawyer involved in the real estate transaction.

Backup Offer:
Another offer to purchase a property, which a vendor might consider if a current offer, falls through.

Balance Due On Completion:
The amount of money a purchaser will be required to pay a vendor to complete the transaction, after all adjustments have been made.

Balance Sheet:
A financial statement that details the financial position of an individual, business, condominium corporation, apartment building, or other revenue property, at a specific point in time or on a particular date. The statement lists all of the assets or equity and all liabilities or debts related to the business operation. Assets include what the company owns in current, fixed and miscellaneous assets plus what is owing to the company. Liabilities include what the company owes in current, long term and other liabilities plus shareholders’ equity, capital stock issued, earnings retained by company. The assets must balance or equal the liabilities plus the owners’ equity. Also referred to as the Statement of Financial Position orStatement of Assets and Liabilities.

Balance Sheet Equation:
assets = liabilities + owners equity.

Balloon Mortgage:
This type of mortgage requires the borrower to make periodic payments which amortize over a specified term, when the term ends, a final lump sum payment is due in order to pay off the remaining principal.

Balloon Payment:
Any payment of principal over and above a regular scheduled payment as set out in a loan agreement. This often refers to a final payment due at the end of the term, on the maturity date, which is usually larger than the regular payments made throughout the loan term and pays off the outstanding principal in full, the increased amount is the principal required to discharge a mortgage.

Bank Act:
The Canadian Bank Act regulates all Canadian banking activities conducted through federally chartered institutions, including banks, trust companies, loan companies, and insurance companies.

Bank Draft:
A guaranteed form of payment similar to a certified cheque and usually issued in amounts over $5,000.

Bank Rate:
The rate that the Bank of Canada charges loans to chartered banks is the basis for the prime lending rate charged by lending institutions.

Basis Point:
This is equal to one one-hundredth of one percent (1/100 of 1%)and represents the unit of measure used to describe the incremental change in yield for money debt instruments, including mortgages.

Beacon Score:
This name refers to the credit score published by the Equifax credit bureau as opposed to the Empirica Score published by Trans Union.

Bedroom Community:
A majority of residents living in this suburban area commutes to work in the city.

Before-Tax Income:
An individual’s income before income taxes are paid.

Below Prime:
A variable rate mortgage where its interest rate varies with money market conditions, the rate will usually not exceed prime rate, less 0.375%.

Bidding War:
When multiple buyers submit competing offers on a single property, the price of the property often escalates, resulting in higher profits for the seller.

Binder Insurance:
A temporary agreement where an insurance company agrees to insure an individual while they are awaiting receipt of, and final action on, the application for insurance.

Biweekly Mortgage:
This mortgage requires payments every two weeks; each 26 biweekly payment is equal to one-half of a standard monthly payment. This is advantageous to the borrower because it results in additional annual payments equal to one standard monthly payment more than a regular monthly mortgage, thus a substantial reduction in interest payments because the mortgage is paid off more rapidly.

Blanket Insurance:
This type of policy only covers common areas owned in common by the individual owners of a co-op, or condominium and does not cover the actual structures or their contents.

Blanket Mortgage:
This single mortgage document is registered against two or more individual titles to parcels of real property;multiple properties form security for a loan and enable the lender to gain recourse against all of the properties in the event of default on the loan. Also known as an Inter-Alia mortgage in British Columbia, it uses collateral as equity.

Blend and Extend:
A closed mortgage can often be “opened” for the purpose of extendingthe term in order to secure a lower rate and protect against future rate increases. Most lenders will blend the penalty for breaking (usually anInterest Rate Differential) with the rate for the new extended term.

Blended Mortgage Payment:
This method of repayment requires the mortgage to be paid in equalinstalments on a periodic basis (e.g. weekly, biweekly, monthly) throughout the term of a mortgage. Payments consist of both principal and interest components in which part of the money received is applied toward the principal of the loan and part is applied toward interest payments. Although the total regular payment remains constant in amount,the principal portion of payment increases, while the interest portion decreases over the term of the mortgage.

Blended Rate Mortgage:
A mortgage that combines the amount the borrower owes under an existing mortgage with a new mortgage for additional mortgage money required by the borrower. The interest rate for the new amount borrowed is a “blend” – or combination – of the interest rate of the old mortgage and the interest rate for the additional amount to be borrowed with the differing interest rates consolidated into one new mortgage. The calculation to determine the final rate takes into account both the interest rates and the amount of principal for each of the component loans. A closed mortgage can often be “opened” for the purpose of extending the term. Most lenders will blend the penalty for breaking (usually an Interest Rate Differential) with the rate for the new extended term. The idea is to get a lower rate and protect against rate increases in the future.

Blueprint:
Generally a photographic print of an architectural plan or technical drawing rendered as white lines on a blue background (cyanotype) and used for obtaining permits and as a reference during the construction process.

Board Foot:
The term of measurement for a plank of lumber equaling 1 inch thick, 1 foot long, and 1 foot wide.

Boilerplate:
Stock clauses and formulaic language used in standard legal documents.

Bona Fide:
Authentic and genuine in nature,in good faith with valuable consideration and with absence of notice of any problems and without any intention to deceive

Bond: A binding agreement to strengthen the covenant of performance.

Bonus:
Often appearing as a hidden fee, this is an extra monetary inducement to lenders to put out money into mortgages. This sum is paid by the borrower, or retained by the lender, from the advance of mortgage money as part of the consideration for the making of the loan.It may also be the extra funds paid by the borrower to the lender as consideration for prepayment of all or part of the principle outstanding and is expressed in so many months interest on pre-payments.

Bonus Of Interest:
When stipulated in the mortgage document, a lender may require the payment of a bonus on non-scheduled repayments, usually expressed in terms of so many months interest.

Book Value:
The original cost, less reserves for depreciation, this capital amount for an asset is shown on the books of account.

Book Value of a Mortgage:
The outstanding mortgage loan amount at any given point in time is determined by deducting the amount of repaid principal from the original principal loan amount.

Bookkeeping:
This work is routine and primarily clerical in nature where a bookkeeper records financial transactions.

Boot:
When two properties of different values are exchanged,funds arepaid to make up the difference.

Borrower:
This person obtains a loan from a lender.

Boundary:
The legal border of a specific parcel of land and divides adjacent properties.

Breach Of Contract:
One party’s failure to fulfill an obligation or toperform any promise that forms the whole or part of the agreed termsas set out in the a legal agreement and without a legal excuse or reason. Breach confers a right of action on the offended party to mitigate or remedy any damages.

Breach Of Covenant:
The violation of a condition stipulated in a contract or property deed.

Breach Of Warranty:
A vendor’s failure to fulfill an obligation that is subsidiary or collateral to a legal agreement, entitles the purchaser to damages only, but does not permit the purchaser to rescind the contract.

Breakage Costs:
Monies paid to compensate the lender for the prepayment of a closed mortgage in part or in full prior to maturity of the term.

Bridge Financing:
A short-term loan made to help a buyer with mismatched closing dates. The loan will bridge the gap of time between completing the purchase of a new property and the pending closing of the sale of their existing property.The currently held property is used as collateral and the bridge loan is used to pay closing on the new property before the current property is sold. In new construction, bridge loans are used to bridge between formal or scheduled advances for cash to pay for immediate expenses.

Bridge Loan:
A short-term, high interest loan intended to offset financial hardship until a more permanent long-term loan is secured.

Broker:
An individual or firm that legally represents another party and is licensed by a provincial regulatory body to perform a service or act as an intermediary between parties in a transactionon behalf of their client in exchange for a fee or other consideration. A mortgage broker will secure the best possible mortgage rate on behalf of their client. A real estate broker legally trades in real estate on behalf of their client in exchange for compensation.

Brokerage:
A company concerned with bringing parties together for a business transaction and the execution of contracts involving sales, exchanges or rentals.

Brokerage Fee:
Paid to a registered mortgage broker for arranging financing.

Budget:
The annual estimate of a condominium corporation or apartment building’s projected expenses and revenues required for balancing those expenses. There are operating budgets and capital budgets. (See also capital budget.)

Buffer Zone:
This parcel of land separates two pieces of property that are often zoned for different use.

Builder Upgrades:
An option offered by builders to include refined features or upgraded materials at an extra cost to the purchaser. Such custom features allow the purchaser to add a personal touch to their home as opposed of accepting the standard issue features normally included by the builder.

Builder’s Lien:
A lien which is registered against the title of property as security for the payment of a contractor’s bill for materials or work done on that particular property.

Builder’s Loan:
A loan designated for the financing of construction projects differs from normal loans as funds are advanced in stages, also referred to as draws, during the building process in order to protect the lender from construction abandonment.

Builder’s Risk Insurance:
Issued for a building under construction insurance coverage includes fire and extended coverage that increases automatically as the construction progresses and terminates at completion.

Building And Loan Association:
A financial organization whose mandate is to assist its membership with the financial dealings related to real estate transactions.

Building Code:
Regulations and guidelines established by all levels of government that specify a set of minimum standards and regulationsfor design and building construction with regard to the safety of buildings with reference to public health, fire protection and structural sufficiency.

Building Inspector:
This local civil servant enforces building code to ensure that construction and renovations adhere to the standards determined and regulated by government.

Building Moratorium:
This government decree enforces a temporary halt or permanent stop to construction.

Building Permit:
A document issued by local government authorizing work to commence on the construction of a new building or the repair an existing structure. Once plans are approved the work is subject to associated inspection procedures to ensure zoning, structural, mechanical, fire and other standards are adhered to.

Building Restrictions:
Local government can impose “zoning” regulations to restrict characteristics such as size, height, building material, colour, use, or placement of commercial and residential structures.

Building Scheme:
This group of restrictive covenants, set by a vendor or landlord, is attached to multiple lots and restricts their use and is agreed to by the purchasers or tenants as part of the purchase or lease agreement.

Built-Ins:
Items permanently attached to a building such as appliances, cupboards, or shelving can also be referred to as fixtures and are considered part of the real property.

Bundle Of Rights:
Legal rights associated with ownership of real property including the right to use, sell, lease, enter, or give away the property and also the right to refuse to exercise any of these rights.Infringement on any of these rights will affect the property value.

Business Entity Concept:
A business is an entity, separate and distinct from the person who owns it. A business is treated as though it owns the business assets and in turn owes both the creditors and its owner, the amounts of their claims. Business resources and activities are kept separate from those of its owner.

Buy-Down:
An option to make a lump-sum payment to a lender when a loan is first initiated as consideration for the reduction in the interestrate charged on a loan during the term of the mortgage or to temporarily reduce the borrower’s monthly payments during the first few years of the mortgage from that which would normally be charged. New homebuilders will often offer this option as a marketing feature, particularly on high ratio second mortgages.

Buy-Down Mortgage:
A mortgage product offered by a lender at a below-market interest rate in exchange for an initial lump-sum payment towards interest. This type of mortgage may be necessary in order to qualify buyers for financing with a specific lender. After the stated period expires, the interest rate rises to a predetermined level or converts to an adjustable rate. This mortgage enables a borrower to buy a home from a developer at a below-market interest rate for a limited number of years. The developer may compensate the lender for its lost revenues from the buy-down agreement and will offset that expense by increasing the price of the home.

Buyer’s Agent:
This realtor/agent acts contractually on behalf of the buyer and is paid a commission to locate an appropriate property and to assist with negotiations involved with closing the real estate transaction. Traditionally the realtor is the agent ofthe vendor who pays all realtor fees out of the proceeds of the sale; a Buyer Agency Agreement  (with full disclosure to thesellers or their agent) permits a realtor to negotiate on behalf of the buyer, with no legal conflict of interest. The vendor still pays the buyer’s agent fees, but this matter is always specified and acknowledged in an Offer to Purchase.

Bylaws:
These regulations or secondary laws govern internal affairs of an organization or city.

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Call Option:
This mortgage clause permits the lender to demand repayment of any outstanding mortgage principal upon request.

Canada Mortgage And Housing Corporation (CMHC):
CMHC is a federal CanadianCrown Corporation that administers the “National Housing Act” (NHA), through which federal housing policies and programs are implemented.CMHC provides Canada’s only public sector mortgage insurancefor the insuring of mortgages made by an approved lender under a variety of programs, i.e.mortgages that are greater than 80% of the purchase price or value of the property, to protect NHA approved lenders from losses resulting from borrower default.The cost of that insurance is paid for by the borrower and is generally added to the mortgage principal amount. These mortgages are often referred to as “Hi-Ratio” mortgages. CMHC services include providing housing information and assistance to consumers, the administration of government housing initiatives and working with community organizations, the private sector, non-profit agencies and all levels of government to assist in developing innovative solutions to today’s housing issues and challenges.

Canadian Association of Accredited Mortgage Professionals (CAAMP):
Canada’s national organization representing the mortgage industry administers the Accredited Mortgage Professional (AMP) designation and has implemented a code of conduct for members designed to increase professionalism and decrease the likelihood of fraud.

Canadian Real Estate Association (CREA):
This association of members of the real estate industry is principally made up of real estate agents and brokers.

Canadian Residential Appraiser (CRA):
This designation, awarded by the Appraisal Institute of Canada (www.aicanada.ca), grants those with the designation the right to appraise the value of individual, undeveloped residential sites and housing containing no more than four self contained units.

Cancellation Clause:
A lease or contract provision that specifies circumstances under which parties involved may terminate the agreement.

Cap Rate:
A limitation on the highest interest rate or payment the lender may charge a borrower in a variable rate mortgage. A rate cap limits the interest rate increase for the duration of the term. A periodic cap limits periodic changes to the interest permitted during the loan agreement. A lifetime cap, governs the total increase that can be imposed during the life of the loan. The less desirable “payment cap” limits the amount of monthly payment the borrower will be required to make, regardless of the effective interest rate. When the maximum payment is not adequate to cover a month’s interest, the loan balance will increase rather than decrease, a condition known as negative amortization, as the unpaid monthly interest is added to the principal outstanding and interest is charged on it. A rate cap committed to on a commitment letter or a mortgage pre-qualification is also referred to as a “rate hold”. On a “protected variable rate mortgage” it is the maximum rate that will be paid by the borrower during the mortgage term.A lender will usually acquire insurance called a “hedge” to insure against rate increases during the cappingperiod.

Capital:
The amount of money a borrower has invested in a property.

Capital Budget:
An estimate of expenses required for covering both improvements and replacements, and the corresponding revenues needed to balance them, usually projected over a 12-month period. This is different from an operating budget.

Capital Expenditure:
A cost incurred when renovating or making a permanent improvement to a property.

Capital Gains:
The positive difference between the adjusted cost base of investment capital property and proceeds from disposition received when sold for more than was paid. Profits realized by a vendor when real estate or other capital assets are sold, are taxed more favourably than earned income. Dependent on tax bracket and duration of ownership, tax would be payable at approximately one-third to one-half lower tax rate than would be payable on the same amount of earned employment income.

Capital Gains Tax:
Tax due on the profits acquired from the disposition of real estate or capital assets.

Capital Loss:
The negative difference between the adjusted cost base of investment capital property and proceeds from disposition received when sold for less than was paid.

Capital Improvement:
Any permanent structure or asset added to a property that increases property value.

Capital Reserve Requirements:
Government regulation specifies the amount of retained capital that lenders must hold in order to back up the loans they grant.

Capitalization:
An estimate for converting a property’s annual net operating income into a capital value for a rental or commercial property using the rate of return on investment.

Capitalization Rate:
The rate of return anticipated by a prudent investor, estimated on what an investment property will generate in relation to an owner’s investment and expressed as a percentage. Considerations are made for the nature of the property involved, the rate of return available from alternative investments at the time the investment in the property is being contemplated, and annual depreciation of the building.

Capitalized Value:
Property value as based on net income accruing to the owner.

Capped Rate Variable Mortgage:
This variable rate mortgage includes a limit to interest rate increases or decreases as set by the lender, mortgagee.

Carrying costs:
The expenses of living in and maintaining a home and property, including mortgage payments, property taxes, heating, repairs, maintenance fees, etc.

Cash Back:
This mortgage feature provides the borrower with cash back, as a percentage of the mortgage principal loan amount and is generally used to cover closing costs.

Cash Method:
Under this accounting system nothing is recorded until cash is actually received or paid out thus no fees are recorded until actually received and no expenses are recorded until actually paid. Used by most individuals, this form of accounting records income received and expenses spent during a fiscal year, if an individual works and invoices a client in the current year, but does not receive payment until the following year, the funds are counted as income for the following year and subject to that year’s taxes; not for the current tax year when the work was done.

Caution:
This notice is registered on title to protect the interests of a person who is not the registered owner, but claims a proprietary interest in the real property or in the mortgage. Thus, the registered owner cannot commit to any dealings regarding the land or mortgage without consent of the cautioner.

Caveat:
A notice registered against title to property warning those reviewing the title that a claim has been made.

Caveat Emptor:
“Let the buyer beware”. A buyer must examine goods or property prior to being purchased and thereafter buy at their own risk.

Central Bank:
Established by national governments to regulate currency and monetary policy on both a national and international basis. Canada has the Bank of Canada; the United States has the Federal Reserve Board; and the U.K. has the Bank of England.

Certificate Of Charge:
Provincial government acknowledgment of registration of a mortgage document as filed in a land titles office.

Certificate Of Location (Survey):
A document prepared by a qualified surveyor specifying the exact size and location of the property and structureson the property. It includes a description of the type, size and the exact location of building(s) and improvements.

Certificate of Occupancy (Permit):
A municipality issues this certificate once a property has been constructed under the authority of a building permit, meets building code requirements, and is suitable to be occupied.

Certificate Of Search Or Abstract Of Title:
A document setting out instruments registered against the title to the property, e.g. deed, mortgages, etc.

Certificate of Title: Provincial government acknowledgment of registration of title deed in a land titles office.

Cessation Of Charge:
The discharge of a mortgage filed under the Land Titles System.

Chain Of Title:
This sequence of conveyances and encumbrances affects ownership or title to land pursuant to applicable property legislation. Chain of title is uncovered through a lawyer’s title searchand spans from the date of the original crown patent or as far back as records are availableup to the present.

Charge:
The official name used for the mortgage document when title is registered under the Land Titles Act.

Chattel:
This moveable possession, personal propertyor any tangible item can be removed from the property without causing injury or damage to the freehold estate, such as furniture, personal possessions, etc. A furnace, before it is installed, is a moveable possession, but once installed it is not.

Chattel Mortgage:
A mortgage registered against moveable possessions, or personal property such as furniture, appliances or equipment that may be removed without damage to the real property as collateral security to a mortgage on real estate.

Chronological Age:
The actual age of improvements versus effective age of improvements that have undergone repairs or renovations.

Clear title:
A title that is free of liens and legal questions with regard to ownership of the subject property.

Closed Mortgage:
This type of mortgage agreement contains a restriction that denies repayment rights prior to the maturity of the mortgage. This mortgage cannot be prepaid renegotiated or refinanced before maturity, except according to its terms. In the absence of a contracted privilege, it can’t be paid out, even with a penalty, prior to the expiry of the term, unless the lender agrees and the borrower is willing to pay additional prepayment charge as compensation. In some cases, a closed mortgage may be discharged at a defined cost, usually Interest Rate Differential (IRD), but sometimes with a punitive penalty such as full interest to maturity. Rarely, some lenders may allow limited prepayment privileges without additional interest.

Closing:
This is the time at which a real estate transaction is concluded legally in a registry office. Closing involves the final exchange of consideration and legal completion of the transaction and may involve a house purchase, a mortgage registration, or both.

Closing Costs:
Various expenses over and above the purchase price of buying and selling real estatewhich are associated with purchasing a home which are payable when the sale is closed. These costs can include, but are not limited to, legal/notary fees and disbursements, property land transfer taxes, property insurance,as well as adjustments for items prepaid by the vendorsuch as property taxes or condominium common expenses, if any. Purchasers should budget for approximately 1.5% of the purchase price to cover closing costs.

Closing Date:
The date on which the purchase or sale of a property becomes final and the new owner takes possession of the property; at that time all costs and charges to close the deal are payable, funds are transferred from the purchaser to the vendor.

Closing Statement:
This document indicates the complete financial history of the transaction, including the amount of deposit, down payment, balance due on closing, mortgage terms, etc.

Cloud On Title:
Any encumbrance or claim that detrimentally affects or impairstitle of real property, such as executed judgment, mortgage, or lien, legally registered against the property.

CMHC: Canada Mortgage and Housing Corporation, is the Crown agency that administers Canada’s National Housing Act.

CMHC Or GEMICO Insurance Premium:
Mortgage insurance insures the lender against loss in case of default by the borrower. Mortgage insurance is provided to the lender by CMHC or GEMICO with applicable premium paid by the borrower.

Co-Applicant:
When more than one person is named on a loan application as joint borrowers.

Co-Insurance:
A sharing of risk between the insurance company and the insured party which depends upon the relationship of the amount of the insurance carried versus the amount of insurance required at the time of a loss.

Collateral:
A customer’s pledge of property or other asset is offered as security for a loan,when borrowing from a financial institution. Financial institutions usually require security such as term deposits, Canada Savings Bonds, an automobile, or real estateas a guarantee to support a loan in the event that the borrower defaults on their loan. Collateral can also take the form of guarantees provided by third parties referred to as guarantors.

Collateral Mortgage:
This mortgage secures a loan by way of a promissory note. Where a lender requires additional security, the loan may be secured with collateral in the form of an additional mortgage either registered against real property or personal property. The money borrowed is generally used for a purpose other than the purchase of a home, such as a vacation or home renovations and collateral may include property that is necessary or convenient to the continued use of the primary security or property unrelated to the primary security. This type of mortgage often secures a revolving loan, sometimes referred to as a “Home Equity Loan” or an “Equity Take Out Mortgage”. A mortgagee may secure the loan by means of cross collateralization or cross default, where a default on one loan constitutes a default on another, as such both loans can be secured by a blanket mortgage, but a borrower’s equity in both properties is at risk.

Collateral Security:
Additional property pledged as security in addition to and subordinate to the direct security in order to reduce risk to a mortgagee.

Collateralized Mortgage Loan:
This type of mortgage is secured by an additional security.

Commercial Property:
Property utilized for commerce or trade such as stores or office buildings.

Commission:
Financial remuneration paid to an agent upon the sale or lease of property, usually based on an agreed percentage of the amount involved in the transaction.

Commitment:
This written notice issued by a mortgage lender to a prospective borrower advises of the lender’s approval to advance a specified amount as a mortgage loan under specified conditions which, when accepted by the borrower, forms a binding contract. The commitment may have conditions attached that must be met prior to the contract being finalized.

Commitment Fee:
A fee charged by a lender for keeping an agreed amount of funds available to a borrower for a specified period of time.

Commitment Letter:
A written letter of commitment from a lender to a borrower outlining the amount, terms, and conditions under which a lender is prepared to accept a mortgage on a specific property; thus committing to lend mortgage funds as long as specified conditions are met within an agreed upon time period before closing. A key component of the commitment, particularly in a period of volatile interest rates, is the “rate hold”, where a lender may “cap” a rate for a defined period, such as 60 days or 90 days. Commitments on financing for new homes, which usually have longer closing dates, can be negotiated between the lender and the builder and be held for as long as 6 months, and even a year. In order to be legally binding on all parties, the borrower must sign the commitment to the lender.

Commitments With Guarantee:
A lender may waive a firm take-out commitment if a financially strong builder can offer a guarantee of repayment of a construction loan, secured with their own collateral or that of associates.

Common Areas:
These lands or improvements are designated for common use and enjoyment by all occupants, tenants and owners and can include a pool, tennis court, hot tub, common halls, elevators, hallways and parking lots.

Common Law:
A major part of the legal system of principles and rules of action based originally on unwritten common customs. This segment of the law was formulated and developed from rulings by judges based on tradition, custom and precedent and formsthe legal framework administered by common law courts.

Common Tenancy:
The ownership of property by two of more persons, upon the death of a registered owner, their share is credited to their own estate and does not pass to the other registered owner(s).

Comparable Properties:
In the appraisal process of a property, three properties that have sold recently with similar or comparable characteristics such as size, style, age, condition and on similar lots to the subject property and from the same or similar neighbourhood are typically used to arrive at a comparativemarket value.

Comparative Method of Appraisal:
This method of appraisal bases the value of the subject property on that of comparable properties in the area.

Compensation:
A payment or reward offered in exchange for performance of service.

Completion:
When a Real Estate transaction is legally concluded in the Registry Office, the Purchaser pays the agreed upon amount on this date and the Vendor receives it.

Completion Certificate:
A document signed by the purchaser acknowledging that work has been satisfactorily completed, releasing the contractor from further responsibility.

Completion Loan:
The total amount of a loan is paid as a single disbursement following the satisfactory completion of the property.

Compliance Letter:
Required in many municipalities throughout Canada before a property transfer can take place. This is an acknowledgement from the building department that the property either has, or is clear of outstanding work-orders. Work-orders are specific clean-up or fix-up requirements that the owner must complete, particularly before a transfer of ownership.

Compound Interest:
Interest charged not only to the principal sum, but also to unpaid interest amounts chargedfrom preceding periods that have accumulated as new principal.

Compounding:
The frequency with which interest is computed and added to the principal to arrive at a new actual balance, the asset generates earnings that are reinvested to generate their own additional earnings. Essentially, if you are a borrower, the less frequent the compounding, the better deal for you. As a lender the more often the frequency of compounding, the more that will be earned. In Canada, lenders generally compound mortgages semi-annually.

Component Financing:
A finance technique also known as split financing, which divides real estate into separate interests to enable each interest to be financed independently.

Condition:
A clause in a contract stipulating a requirement that is fundamental to an offer, this obligation must be waived or fulfilled for the agreement to be legally binding. A breach of condition or inability to meet a condition, allows a buyer or seller to get out of the contract with the full amount of a deposit being returned or paid back.

Condition Precedent:
This clause in a contract stipulates a condition or the happening of a specified event or fulfilment of some act, which must occur before the agreement can become binding on the involved parties.

Condition Subsequent:
This clause in a contract stipulates a condition or a future event upon the happening of which the contract becomes no longer binding on the involved parties, thus providing an option to allow the termination of the contract under defined circumstances.

Conditional Offer:
An offer to purchase a property, but subject to specified conditions. These conditions may relate to the arranging of satisfactory mortgage financing, a satisfactory inspection or the sale of a present home. A time limit in which to satisfy the conditions should be stipulated in the offer to purchase.

Condominium:
A system of ownership of property whereby each individual owner holds negotiabletitle to his or her dwelling unit or a segregated specified amount of space in a multiple-occupancy building. At the same time the common elements or jointly used property such as elevators, hallways, the land and cost of operation are held as proportioned shares with other fellowowners in a form of common ownership.

Condominium Corporation:
Unlike a private business corporation, it usually does not enjoy limited liability, and any judgment against the corporation for the payment of money is usually a judgment against each owner. The objects of the corporation are to manage the property and any assets of the corporation, and its duties include effecting compliance by the owners with the requirements of the Act, the declaration, the by-laws, and the rules. Incorporated automatically at the time of registration of the project under some Condominium Act it is composed of an association of unit owners.

Condominium Council:
The governing body of the condominium corporation elected at the annual general meeting of the corporation and comprised of unit owners.

Connection Charges:
Some local utility companies (hydro, gas, oil) charge a fee on closing to connect new buyers up to their service. More normal, however, is an extra charge on the first billing.

Consideration:
The exchange of something of value as compensation, promised or given by a promisee to a promisor with some loss or responsibility suffered by the promisee, has the effect of making an agreement a legally enforceable contract. The party wanting to enforce a contract must provide some benefit in return for the promise to complete the contract.

Constant Annual Percent:
The percentage required for paying principal and interest to amortize a loan.

Constant Payment Mortgage:
This mortgage is paid by equal periodic amounts consisting of blended principal and interest payments. Possibly self-liquidating, the mortgage would be fully amortized or entirely paid off at maturity. If partially amortized, at maturity there remains a principal balance due at maturity referred to as balloon mortgage.

Construction Advance:
Funds advanced to a borrower under a construction loan agreement.

Construction Budget:
An estimated “total” sum of money allocated for building a structure.

Construction Lien:
A claim filed and registered against the estate or interest of the owner in a property for payment outstanding for labour, services, or materials supplied to the property.

Construction Loan:
An interim or short-term loan usually with 6 month to 2 year term andused to finance construction costs; the lender makes periodic payments to a developer or builder as work advances towards completion.

Construction Loan Agreement:
This agreement between a lender and a developer sets out terms for an agreement including: amount of loan, interest rate or formula, method of drawing funds, conditions for advancing future loans or draws, borrower’s representation and covenants regarding the borrower’s obligation to construct in accordance to plans and specifications, property description, purposes of loan advances, overruns, obligations of the parties, lender’s right of inspection and control of construction, default, and lender remedies.

Construction To Permanent Loan:
A loan that finances construction, and morphs into a long-term, permanent ortraditional mortgage, as distinct from a construction loan which is followed by a separate long-term mortgage agreement. The requirement for a permanent takeout commitment forms the most common type of construction loan whereby the construction lender will require a “bankable” commitment from a recognized lender that a permanent loan will be made on completion of the building. A lender may advance construction loan financing if underwritten by a commitment backed by guarantees from the builder.

Contiguous Lots:
Parcels of property located next to each other.

Contract:
A lawful agreement between two or more legally competent parties to do or refrain from doing some lawful and genuinely intended act, in exchange for receipt of lawful consideration which binds the parties to a performance. Mutual consent is given to all terms and requirements set out in exchange for something of value referred to as consideration. In real estate, the Agreement of Purchase and Sale is the legal contract by which negotiated terms for the transfer of title to a piece of property are set out by the buyer and seller. This document describes the property, details included or excluded items related to the property, specifies the price, apportions closing costs between the parties and sets forth a closing date. Once buyer and seller agree upon terms and sign the document, the property is said to be “under contract.”

Contract For Deed:
An agreement for sale of property where the seller holds title, but permits the purchaser to take possession prior to final payment, title is sub-sequentially transferred to the purchaser upon final payment being received.

Contract of Purchase and Sale:
This contract involves the sale of a property and outlines the complete duties of the promisor and the promisee in the real estate transaction.

Contractor:
An individual whose responsibilities include the completion of work, securing appropriate insurances, paying suppliers and workers, and for supervising the quality of all services performed at a specified price as agreed to in a contract.

Contractual Lien:
A legal claim against property filed in the land registry office by a person for labour, services or materials supplied which the property owner has not paid for.

Conventional Mortgage:
A first mortgage based on collateral for the mortgage, the credit of the borrower andgranted by an institutional lender such as a bank, mortgage, loan, or trust company. The principal amount of the loan must within a Loan to Value ratio of up to 80% of the property’s appraised value or purchase price, whichever is lower, thus aborrower must have 20% or more available for the down payment. A mortgage that exceeds the 80% limit of the appraised lending value of the property falls within the conditions of the National Housing Act and is referred to, as a “Hi-Ratio” mortgage for which the lender will require the borrower to insure the mortgageagainst defaultthrough CMHC or GE Capital.

Conversion:
Changing the use of a structure to some other use, such as converting a rental apartment into a condominium apartment.

Conversion Clause:
A provision included in an adjustable-rate loan agreement that provides the borrower with an option toconvertthe loan to a fixed-interest rate loan, usually for an additional fee being paid to the lender.

Convertible ARM:
This adjustable rate mortgage (ARM) provides the borrower with an option toconvert to a closed fixed-rate mortgage under certain conditions.

Convertible RateMortgage:
Usually a short-term mortgage that offers the same security as a closed mortgage, but the borrower has the option toconvert to a closed fixed-rate mortgage of a longer term, at any time without penalty.

Co-Ownership:
Property held at the same time by several persons such as in joint tenancy or tenancy-in-common.

Corporation:
This type of legal entity exists apart from a person but possesses the rights and liabilities of an individual.

Covenant:
A solemn or written agreement, this is a formal and legally binding stipulation (in Common Law it must be under seal), a clausecontained in a contract or property deed intended to limit or restrict certain uses andcreates an obligation; it may be positive, stipulating the performance of some act or it may be negative or restrictive, forbidding the commission of some act.

Covenantee:
In a mortgage deedthis means the Lender.

Covenantor:
In a mortgage deedthis means the Borrower.

Creative Financing:
Lenders will structure a mortgage loan in an unusual or innovative way to enable a buyer to purchase property.

Credit:
The ability to borrow money from a financial lender or buy products and services under specified conditions involving repayment schedules and rates of interest (or rent) to be paid to the lender or service provider. This report documents a borrower’s repayment history. On a financial statement, a credit represents funds that are deposited into an account; the opposite of a credit is a debit.

Credit Bureau:
These agencies provide financial institutions, with credit information concerning existing or potential customers hoping to obtain credit services. The agency gathers customer information from other companies involved in lending money or providing credit in order to create financial profiles of individuals. Credit reports are sold to organizations with legitimate requirements for the information and are also made available the individuals being reported upon.

Credit Card:
Provides a customer with a revolving source of credit with a pre-established limit. The borrower is required to pay interest on any outstanding balances. By maintaining responsible up to date payments, a borrower can establish a good credit rating; an important aspect of acquiring future loans or securing a mortgage agreement.

Credit Rating:
Also referred to as a credit score, this rating represents judgment of a person’s ability to repay debts based on a person’s current and projected income and past debt payment history.

Credit Report:
Subject to provincial privacy legislation relating to the gathering and reporting of credit information, these transcripts provided by lenders, detail an individual’s payment history, how individuals manage credit card payments and any loan repayments. Reports also indicate how much credit a person still has available and whether or not the person has recently applied for any loans. Credit reporting bureausprovide reports to banks and other lenders; individuals can order a copy of their own report, which are available through their local credit bureau.

Credit Reporting Bureau:
These agencies prepare the credit history reports used by lenders to determine potential borrower’s financial worthiness; data for these reports is obtained from credit bureaus and other sources.

Credit Risk:
Lenders assume risk of loss when entering into financial contracts, it is always possible that a borrower may become delinquent and fail to fulfill obligations, hence the use of borrower credit reports to gage levels of credit risk.

Credit Score:
This statistical point rating reflects a person’s credit history. A borrower’s tabulated points, between 300 and 900, will impact rates and terms assigned to loans being offered. A higher score means less risk to the lender and will result in more favorable terms being offered to the borrower. One in four Canadians score between 750 and 799.Equifax’s credit score is known as the Beacon Score, while Trans Union’s score is called the Empirica Score.

Credit Scoring:
A system that assesses a borrower on a number of factors while assigning points that are used to determine the borrower’s credit worthiness.

Credit Union:
A financial lending institution structured as a non-profit cooperative, owned operated and controlled by their memberswho utilize its services. Membership is usually based on a common bond of association such as employment or ethnic and social origins. Credit unions usually offer lower rates and fees than Chartered Banks and rely on financial reserves to absorb unexpected losses from loan defaults or other financial setbacks. In the event of the failure of the institution, depositors’ funds are generally insured by the Canada Deposit Insurance Corporation to a maximum of $60,000 per depositor.

Creditor:
This person or party is owed a debt by another party.

Cross Collateralization:
When a lender advances multiple loans on different properties that are secured by various liens held in support of one or more advances made by a lender to a borrower, an event of default on one property constitutes a default on another.

Cross Default Clause:
When a borrower has multiple mortgages, each agreement contains mutual clauses which state that in the event of a default under one mortgage it constitutes a default under the other(s).

Cul-De-Sac:
This dead-end street ends in a broad circle for vehicles to turn around.

Curable Defect:
A problem with property that can be remedied such as peeling paint as opposed to a property located in a crime-ridden neighborhood which can not.

Curb Appeal:
The initial appearance and appeal of a property upon a cursory look being taken from the street.

Current Assets:
Goods or assets that may be easily converted into cash, sold or consumedat any time or in the normal course of business (i.e. within a one year period or less) such as cash on hand or in the bank; marketable securities such as stock, bonds, short-term investment certificates, etc.; receivables – money owing to the company for goods sold or services rendered; inventories – merchandise on hand for sale or materials for manufacturing new merchandise; prepaid expenses – payments already made for services to be received in the near future. Also represents rents, taxes and insurance premiums that are paid in advance.

Current Liabilities:
Debts and obligationsincurred by a company during the daily course of business such as bills for supplies, services, commissions, salaries, bank loans and interest’ owing, taxes due and unpaid, dividends declared and unpaid, etc. that are accounts payable and expected to be paid within a one year period or less.

Current Ratio:
This is a measure of a company’s ability to pay its current liabilities, calculated by dividing current assets by current liabilities.

Custom Builder:
A contractor that builds or remodels houses based on plans provided by a homeowner.

Custom Home:
A unique house built according architectural drawings and specifications.

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Damages:
Determined by the courts, this financial compensation or indemnity ispaid by one party for injury to another party, usually for a loss owing as a result of a breach of contract, or a tort civil wrong and intended to restore both parties to the position that each would have held if the contract had been performed satisfactorily.

Date Of Completion:
The specified date in an agreement of purchase and sale, when the purchaser is to deliver the balance of money due and the vendor is to deliver a duly executed deed and vacant possession of the property, unless otherwise agreed,also referred to as the closing date.

Date of Maturity:
With mortgage agreements, it is the last day of the term of the mortgage.

Days On The Market:
The period of time between date of listing and today’s date, date of sale, or date of a property being taken off the market.

Debt Service:
The total costrequired for paying for use of mortgage money, includingamounts for principal and interest; payments made under a mortgage on a periodic basis, payment amounts can be equal, constant payments, or made as variable payments.

Debt-Service Ratio:
This calculation, used to determine if a borrower can afford a loan, compares the borrower’s gross income to the percentage of it that will be required to cover monthly payments of principal, interest, taxes, heating costs and condominium fees.

Debt-to-Assets Ratio:
This ratio, calculated by dividing total liabilities by total assets, is used to identify how much of a company’s operations are funded through borrowing.

Debt-to-Equity Ratio:
This ratio, calculated by dividing total liabilities by owner equity, is used to assess how much of a company’s operations are funded through borrowing, compared to how much is money being provided by the owners.

Debit:
Funds deducted from an account, the opposite of a credit.

Debtor:
This party owes a debt.

Dedication:
When the owner of land grants it for public use and its acceptance for such use by duly authorized public officials.

Deed (Certificate Of Ownership):
This legal written document contains an agreement that once it has been signed, sealed, and contains proof of its delivery,conveys ownership or title of real property to the purchaser, it becomes effective only on the date of delivery. Prepared by a lawyer or notary it contains a legal, detailed description and title to property, and must be duly executed and delivered. When signed by a vendor and purchaser it conveys title i.e. transferring ownership oran interest in real propertyto the purchaser. This document is then filed and registered against the property at municipal offices as evidence of the purchaser’s ownership of the property. Different terminology may be used in different provincial jurisdictions.

Deed Restriction:
An imposed restriction stipulated in a deed for the purpose of limiting use of the land.

Default:
The failure to fulfill contractual obligations, such asa borrower’s failure to repay an outstanding debt as agreedunder a loan agreement, or failure to meet and fulfil an obligation or condition as specified in a mortgage agreement.

Defendant:
The party being sued is required to make answer to the suit.

Deferred Income:
This accounting method deals with income that is received but not yet earned.

Deficiency:
Insufficient payment, often relating to the amount recovered under a power of sale or foreclosure action on a mortgage.

Deficiency Judgment:
This court order requires a borrower to repay the balance owed on a loan or mortgage if the proceeds from the sale of the security are insufficient to pay off the entire loan.

Deficiency Notice:
If a municipality has required work to be done on a home to meet municipal regulations, but the work has not been done to the satisfaction of the municipality, this notice formally advises the owner of the problem and will include a deadline to rectify the issue.

Deficiency Settlement:
A monetary settlement by a mortgage lender or insurer in the event that the net proceeds received under a Power of Sale or Judicial Sale are insufficient to satisfy the lender’s total claim.

Delayed Participation Loan:
A lender will dispose of a loan to several other participants putting up their respective shares later.

Delinquency:
A financial obligation or debt is in arrears for having overduepayment, but not yet in default.

Delinquent Mortgage:
A mortgage where payments have not been made as specified in the loan agreement.

Demand Loan:
A loan repaid upon request, usually within a few days notice to the borrower.

Demand Note:
This notice sent by the lender to the borrower, demands payment to be made on all arrears, together with all costs, usually within a few days of delivery of the notice to the borrower.

Demise:
To give, transfer or convey an estate through a line of descent or according to a will or by lease to another party for a term of years, or for the remaining duration of the life of the recipient party.

Demographics:
The statistics and characteristics of a human population or part of it, especially its size, growth, density, distribution, and statistics pertaining to birth, marriage, disease, death,age, religion, ethnicity, occupation, etc.

Deposit:
This payment of money or other valuable consideration is given as pledge for fulfilment of a contract or agreement; itserves as a promise to fulfil contractual obligations. A sum of money deposited in trust by the purchaser when making an offer to purchase, these funds are a symbol of the purchaser’s serious commitment to buy, the sum is payable as a first instalment on the purchase as a pledge for a contract, the balance being payable upon completion of the transaction.If the vendor accepts an offer, a deposit is held in trust by the vendor’s broker, lawyer or notary until the closing of the transaction or sale, at which time the deposit is applied towards the down payment. If a house sale does not close because of the purchaser’s failure to comply with terms set out in the offer, the purchaser forfeits the deposit, which is given to the vendor as compensation for the breaking of the contract (the offer). Also refers to funds credited to an account.

Depreciated Reproduction Cost:
This appraisal method calculates the cost of replacing a structure, minus depreciation.

Depreciation:
The decrease in market value of an asset or property over time can be due to any cause, the opposite of appreciation. Also used to indicate capital cost allowance for tax filing purposes.

DirectComparison:
This appraisal technique bases value of a subject property on the current selling prices of similar properties and is also referred to as the market data approach.

Derivative Mortgage: Placing a mortgage on mortgage, the Mortgagee assigns his mortgage to a lender to secure loan.

Discharge Document:
Once the receipt, acknowledging the completion of payments on a mortgage loan, has been processed and officially registered to the title, it then becomes the discharge document.

Discharge Of Mortgage/ Charge:
This legaldocument is executed by the mortgagee (lender), and given to the mortgagor (borrower) once a mortgage loan has been repaid in full at, or after the maturity date. The document must be registered with the municipality to confirm full repayment of the mortgageand clear the property’s title, thus releasing the mortgagor from all obligations and covenants contained in the mortgage agreement.

Disclose Defects:
To communicate or make known all current or past imperfections related to a property. A seller’s failure to disclose defects will not affect consent, but will be looked upon as a misrepresentation.

Disclosure:
Open, forthright discussion: between a real estate agent and client regarding relevant matters such as legal responsibilities and ethical duties, or as a vendor statement outlining property defects, such as the existence of lead paint or ground contamination.

Disclosure Statement:
Required under various consumer protection acts, this written statement is included with consumer credit transactions and discloses information regarding a specific loan including such things as credit terms, interest ratesand potential conflicts of interest.

Discount:
Reducing product price or cost of a service by the difference between nominal face value of a loan and actual cash received by the borrower; interest is paid at the beginning of a loan based on the sum to be repaid at maturity.

Discounted Cash Flow Analysis:
A method of analysis that calculates true value of an investment in terms of the present value spread over a number of years. To compensate for future earnings a discount factor is used in calculations so that a real comparison can be made between an investment with quick return and one that is spaced over a number of years.

Discounted Loan:
A loan’s face value minus the interest or discount charged by the lender equals a discounted amount actually advanced to a borrower.

Distressed Property:
Property in very poor physical condition, often sells at below fair market value.

Doctrine of Estates:
In common law countries, this is the concept that specifies the various rights to land ownership.

Doctrine of Privity:
Also referred to as “third party rule”, this principle states that only the parties to a contract are entitled to enforce the contract, thus eliminating third party beneficiaries from having any right to take action.

Dollar Adjustments:
During the appraisal process, comparable properties are compared to a subject property, estimated dollar amounts are allocated to each differing factor so that dollar adjustments can be implemented to reflect how much extra or less a buyer would pay for the subject property in relation to the comparable properties that have recently sold.

Domicile:
A house or apartment that serves as a person’s legally recognized, permanent place of residence.

Dominant Tenement:
This property or estate derives benefit from an easement over a subservient tenement,property or estate, such as a Right-of-Way.

Double Up Option:
This clause may be included as part of a mortgage contractto enable a borrower to double the scheduled principal and interest paymentson a mortgage at anytime and without penalty. This feature can be used either to accelerate the pay-off of a mortgage, as an enhanced prepayment privilege or to manage a volatile cash flow if it is associated with the ability to “skip” an equivalent number of payments. For example, a commission-based individual working in sales could “double-up” with each commission cheque, and “skip” during low cash flow periods.

Dower: Rights of wife or widow in freehold property owned by her husband.

Dower Interest:
A widow’s inherited interest in the property or lands owned by her late husband and accruing to her by virtue of the marriage.

Down Payment:
The amount of money (in the form of cash) put forward by the purchaseras a partial payment and made at the time of purchase towards the purchase price of a home and is not financed with a mortgage. This is also known as the purchaser’s initial “equity” in the property and is judged by a lender to represent the buyer’s personal commitment to the property. For example, a lender considers that, if a buyer saved a large down payment, that they will be far more committed to making mortgage payments and maintaining property value than if they had acquired it for “no money down” or a very low percentage of purchase price. The down payment represents the difference between the purchase price and the amount of the mortgage loan.

Downside Leverage:
When debt service on a mortgage exceeds the yield on an investor’s property, thereby reducing cash flow.

Draft Mortgage Document:
This forms the foundation of a mortgage contract which specifies all terms and conditions of the agreement, but before it is signed a lawyer must review the contents to ensure that loan amounts, interest rates, proper legal descriptions, repayment schedule and all other factors that affect the loan agreement are included and accurately stipulated.

Draw Mortgage:
This construction mortgage provides periodic payments to contractors or subcontractors as work progresses.

Drawee:
A person or organization from whose account money is taken when a check or other order for payment is drawn and from whom the payee or his assignee expects payment.

Drawer:
This person or organization writes a cheque or note for payment to a third party. In the case of a bill of exchange, the drawer is the creditor and is usually the payee.

Draws:
Financing if the form of a builder’s loan involves the borrower receiving partial loan disbursements in stages.

Dual Agency:
When a real-estate brokerage represents both vendor and buyer in a real-estate transaction.

Due-On-Sale Clause:
This mortgage condition requiring full payment when the property is sold is commonly used in reverse mortgage lending.

Duplex:
A building divided into two residences having separate entrances.

Duress:
When an individual feels threatened in some way and thus makes a decision that results in an action or lack of action contrary to the individual’s wishes or interests. If an individual is under duress when entering a contract, the courts may find the agreement null and void.

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Early Occupancy:
When a buyer is granted permission from a seller to move into the property prior to closing.

Earned Income:
An individual’s salary or wages from employment plus taxable benefits and or business income derived from self-employed earnings. Earned income forms the basis for calculating maximum RRSP contribution limits.

Easement:
A right acquired by one landowner for the limited use or enjoyment over the land of anotherparty; an easement isbestowed upon one to utilize the lands of anotherand is a legally registered interest in land. This right or a benefit enjoyed by one landowner over the land of another is, generally for access to some other adjoining property or access to or over another person’s property for a specified and limitedpurpose, such as a driveway, mutual access areas, or right-of-wayfor public utilities, to enable sewer or other municipal services, power lines, roads,referred to as “servitude” in Quebec.

Economic Depreciation:
When external influences not controlled by a property owner cause a decrease in property value.

Economic Life:
The anticipated period of time over which an asset or property may be profitably used.

Economic Obsolescence:
This loss of value over time results from external determinants such as heavy traffic, crime and unfavourable non-residential land uses in a residential area.

Effective Age:
An appraiser’s estimation of a building’s physical condition as it appears to be, actual age may be more or less than the estimated effective age. Property that is rundown or neglected may appear to be older than it actually is. Conversely, an older property, which has been renovated, may be perceived to be much newer than its true age.

Effective Date:
An appraisal is undertaken to establish value as of a specified date and must be reappraised for any other date since market value of property can be extremely volatile.

Effective Gross Income:
The estimated gross annual income from an investment property less allowances for vacancies and rent losses.

Effective Interest Rate:
The true rate of returns or interest on an investment includes a consideration for the impact of compounding or the effects of purchasing a loan at a discount or at a premium. It differs from the nominal interest rate and after considering the effects of compounding it is the actual rate that a borrower must pay on a loan.

Egress:
An exit from a place or the access to exit intended for leaving a place.

Electronic Funds Transfer (EFT):
The automatic transfer of funds from one account to another can be made via computer directly to the lender for the repayment of a loan or for bill payments.

Emili:
This name refers to the automated mortgage insurance evaluation system operated by the Canada Mortgage and Housing Corporation (CMHC).

Empirica Score:
This name refers to the credit score published by Trans Union as opposed to the Beacon Score published by Equifax.

Empty Nesters:
Parents, of adult children no longer living in the family residence, tend to downsize and purchase smaller homes once their children move out.

Encroachment:
Any structure or object that illegally extends onto or over another person’s property, such encroachments might impede property use by the legal owner.
This undue or unlawful trespass on another’s property is usually caused by a building, part of a building, or an obstructionsuch as a wall or fence, intruding illegallyupon public or another’s private property and diminishes the size and value of the invaded property.

Encumbrance:
Any legalinterest, right, outstanding claim or lien registered against real property that may diminish property value, but does not prevent conveyance of title. Examples of encumbrances against property can include mortgages, liens, leases, easements, right-of-ways, judgments, other restrictive covenantsor any legal right to the use of the property by another person who is not the owner. The claim does not necessarily prevent the property from being transferred but may affect the property’s value.

End Loan:
A mortgage loan sold to the final customer, such as a purchaser of a residential property.

Environmental Impact Statement/Assessment:
A government mandated evaluation; this required assessment details environmental ramifications of development and must be conducted prior to any construction.

Equifax:
This Canadian company serves as a credit bureau and publishes Beacon Scores or borrower credit reports that allow lenders to assess credit worthiness of clients.

Equitable Mortgage:
Any mortgage registered after the first mortgage and transfers equity in property as security for a debt.

Equity:
The remaining financial interest or value that a property owner holdsin amortgaged property in excess of or after deduction of all encumbrances or creditors’ claims registered against the property. Equity can be expressed as the difference between the market value for which the vendor could sell the property minus total value of outstandingdebts registered against the property. If the value of debt is greater than the value of the property, then the owner holds no equity in the property. If a home is worth $100,000 and $65,000 remains owing then the owner holds a35% equity in the home.If a buyer purchases a home with a minimal down payment, “equity” can be built through market appreciation in property value over the duration of ownership from the original purchase date.

Equity Of Redemption:
The right of a borrower (mortgagor) over the mortgaged propertyto reclaim or redeem clear title to real property upon full repayment of a loan including principal, interest, and coststhat were in default and thus retain possession of the property.

Equity Participation:
Lenders may hold a profit share in addition to receiving a fixed interest rate to compensate for risks of the investment or the effect of inflation. There are various forms of equity participation; profit in a joint venture as percentage of net or gross income or rental under a sale-leaseback transaction,

Errors and Omissions Insurance:
This malpractice insurance protects professionals such as architects, home inspectors or contractors with respect to claims by clients regarding professional errors, absencesor faults resulting from defective judgment, lack of knowledge or carelessness when acting on behalf of a consumer.

Escheat:
The conveyance of property ownership to the Crown (Government) in event the owner thereof dies and dying intestate (without a will) and having no legally qualified heir to whom the property may pass by lawful descent.

Escrow:
In a real estate transaction, a deed or contract is delivered to a neutral third party to be held in trust or as a security in an escrow accountandtakes effect only when specified conditions contained in the agreement between the contracting partieshave been fulfilled. A vendor’s solicitor will hold funds in trust on behalf of their client until the fulfilment of certain conditions have been met such as delivery of title deeds to property, property registration and delivery of keys to the purchaser. In general, when two or more people deposit securities, instruments, money or other property with a neutral third party, to be delivered on performance of a certain event.

Escrow Account:
An account managed by an agent on behalf of their principal to hold funds designated for payments due to third parties on the event of specified conditions. A mortgagee will add funds as a portion of each mortgage payment for the payment of property taxes or insurance and hold the funds in an escrow account until invoices are paid.

Escrow Agent:
This neutral third party holds documents and money in trust until all conditions of a real-estate transaction are met.

Estate:
The degree, quantity, nature and extent of one’s interest and rights of ownershipin lands and any other subject of property; the total sum of an individual’s ownership interest in real property, personal possessions, and capital; the total assets and liabilities of somebody who is either dead or bankrupt.

Estimate:
Ideally, a written statement outlining costs, terms and conditions associated with performing a service. An estimate is less detailed and therefore less reliable than a quote or bid.

Estoppel Certificate:
This document provides a statement of facts which upon delivery to a third party, the recipient may rely upon and prevents the provider from claiming a different set of facts at a later dateor denying a fact because of previous words or actions to the contrary.  A lender’s estoppel statement as to a purchaser or property, bars the lender from later denying the truth of these statements and protects a third party who has relied and acted upon this statement. This legal written statement, issued by a condominium corporation,details a condominium unit’s current financial and legal status, also referred to as “certificate of estoppel” and is provided to the lender, purchaser or tenant.

Eviction:
This legal process forces a tenant to vacate the rental unit when lease terms are violated.

Examination Of Title:
This review of public records and title abstracts determines the chain of ownership of a property and also referred to as a Title Search.

Excel:
This name refers to the automated mortgage insurance evaluation system operated by Genworth Financial Canada.

Exculpatory Clause:
In the event of some default, this clause in a contract excuses one party from personal liability and holds this one party harmless.

Exclusive Listing:
A legal agreement granting one real-estate agent the exclusive right to sell a property for a specified period, but owners retain the right to sell their property themselves without paying the agent commission.

Executor:
A person legally appointed by testator to carry out the terms of their will.

Existing Mortgage:
This mortgage agreement is already in-place when a property is being sold and depending on whether or not the mortgage is assumable, the buyer may have the option of taking over or assuming this mortgage or arranging a new one.

Expandability:
This mortgage feature enables the borrower to increase or expand the principal loan amount on a first mortgage at the lender’s agreed upon interest rate.

Expenses:
For tax or accounting purposes, these are the expenses incurred in the daily process of producing income and include such items as labour costs, rent, cost of merchandise, supplies, services and any other expenses involved in the operation of the specific business in consideration. Operating expenses are deducted from the gross income produced to arrive at the gross operating profit. Allowance is made for the depredation of the physical assets used in the process of doing business and is subtracted from the gross operating profit to arrive at a net operating profit (or loss) for the period stated in the financial statement. Depreciation is allowed for physical assets such as automobiles, machinery, office furniture and equipment, as well as company owned buildings.

Expert Software:
This name refers to the software, offered by Filogix, which dominates the electronic mortgage delivery system market in Canada.

Express Authority:
The authority delegated by a principal party clearly setting forth in exact, plain, direct and well-defined limits those acts and duties which an agent is empowered to perform on behalf of the principal.

Expropriation:
The government act of legally taking possession of private property for public use through the exercise of the right of eminent domain usually provides fair compensation to the property owner.

Extended Coverage Endorsement:
This endorsement may be attached to fire insurance policies and generally includes coverage against the perils of windstorm, hail, explosion, riot, civil commotion, damage by aircraft or vehicles and smoke.

Extension Agreement:
This agreement lengthens a term on a contract by postponing the original maturity date in order to permit additional time necessary to fulfil an obligation; an extension of a lien’s coverage to include more property.

Extent of Title:
Ownership of land is determined and affected by quantitative factors including boundaries, improvements, area of land, etc.

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Face Rate:
Also known as the nominal rate, this is the contractual interest rate as specified in a mortgage document or other financial instrument.

Face Value:
In a loan agreement this is the amount of money a borrower promises to repay at the contract rate of interest.

Fair Market Value:
The highest price reasonably expected for a buyer to pay for an interest inrealproperty and the lowest price a seller is willing to accept when sold after adequate time and exposure to the market. The price or value established on property at which the property is transferred between a willing and informed buyer and a willing and informed seller, each of whom has a reasonable knowledge of all pertinent facts and neither being under any compulsion to buy or sell.

Feasibility Analysis:
A requirement of lenders in order to provide funds; details of construction costs, projected income plus location and economic factors affecting a project undergo analysis in the decision making process on whether to proceed with a project.

Fee:
In real estate, this is an inheritable right of ownership of real property.

Fee Simple:
The highest estate or absolute right of ownershipof real property, free of any claim against title i.e. “freehold”. Implies the full benefit of the bundle of rights and is the nearest concept to complete ownership as recognized under law.

Fee Tail:
Property ownership, limited to some particular heirs.

Fellow of the Real Estate Institute:
An appraisal specialist isawarded this designation by the Real Estate Institute, the FRI(A) signifies experience in appraisal and valuation of properties up to triplexes.

Fiduciary Duty:
A requirement in a relationship between a trustee (fiduciary)who acts on behalf of a beneficiary, that the trustee must act solely for the benefit of that beneficiary when pertaining to matters coming within the scope of their relationship because of the trust placed in the trustee. Examples of fiduciary relationship include client dealings with real-estate agents or bankers who must act in good faith and trust on behalf of their clients.

Final Order Of Closure:
This judgment taken against a mortgagor, extinguishes the borrower’s (defendant’s) equity in the right of redemption of the property and thus beneficial title is transferred from the borrower to the lender.

Financial Statements:
These documents impart the financial status of the condominium corporation at a specific point in time and generally include an income and expense statement and balance sheet.

Financing Statement:
Filed by a creditor in a public records office, the submission identifies the parties involved, their addresses, and descriptions of the collateral.

Finder’s Fee:
A mortgagee (lender) pays a fee or commission that is usually scaled according to the interest rate and the terms of the loan,to a mortgage professional or broker for referring a mortgage loan.

Fire and Property Insurance:
Prior to closing date and before a mortgage can be advanced, a purchaser must have arranged for fire and property insurance to be in effect. The mortgage lender prior to advancing mortgage funds may require a certificate or binder from an insurance company.

Firm Offer:
An offer to purchase a property with no conditions attached.

First Mortgage:
A mortgage that is registered first against a property before all others on titlegivingthe lender a prior claim over any subsequent mortgagees; this primary lien/charge against the borrower’s property has precedence over all other mortgages or charges and usually conveying the legal estate to the mortgagee. Mortgage seniority and priority is established by date and time of registrationand is determined by the date and time registered, so a first mortgage was literally and legally registered “first”. Upon sale, default or foreclosure of the mortgage, the first mortgagee must be fully satisfied and be paid out of the proceeds before any subsequent claims on the asset. A new first mortgage can therefore only be registered as a “first” mortgage upon the discharge of any existing encumbrances or if the holder of a second mortgage agrees to a postponement to a time or priority immediately following the registration of the new first mortgage.

Fiscal Year:
This bookkeeping term refers to the 12 month cycle of a business’ operating year which does not use the calendar year for their bookkeeping but begins and ends at another specified point in the year.

Five Cs of Credit:
The phrase refers to five criteria used to determine the ability and willingness of a borrower to repay a loan: Capacity – a borrower ability to repay a loan; Capital – the amount of money a borrower has invested in a property; Character – an overall impression regarding a borrower’s credibility to repay a loan using the borrower’s length of employment as a key measurement; Collateral – guaranteed security to a lender in support of a loan, generally consisting of funds, real estate or guarantees provided by third parties, i.e. guarantors; Credit – the repayment history of the borrower.

Five-Percent Down Program:
This allows buyers to obtain up to 95% financing on properties up to a certain value. The loan must be insured against default by the borrower through CMHC (Canada Mortgage and Housing Corporation) or GenworthMortgage Insurance Corporation. This maximum home value will vary according to location (local Realtors should know the applicable limit) and eligibility can vary with personal circumstances.

Fixed Assets:
Assets, typically long term in nature,such as real estate, cars, trucks, machinery, tools, office furniture and manufacturing equipment belonging to an individual or company and used in day to day activities. On the balance sheet these assets are shown at original cost, but since fixed assets wear out over time or otherwise lose their usefulness, with the exception of land, they are depredated each year and the total depredation is deducted each year from original cost to show the net book value as of the specific date of the balance sheet. When a fixed asset is sold the difference between the sale price and the net book value of the subject asset results in a profit or a loss to the operating income of the company and the asset is then removed from the balance sheet. The value of fixed assets to a company lies in their use and application to produce goods and services, rather than in their sale value.

Fixed-Rate Mortgage:
As the most common form of mortgage, the rate of interest and payment amount is determined and remains the same or fixed during the entire pre-determined lifeof the loan. Referred to as the mortgage term, the life of the loan isusually set for between 6 months and 5 years, but can extend up to 40 years. Interest rate and payment amounts remain the same and are set at the time of loan origination withinterest calculated semi-annually, not in advance.This mortgagecannot be renegotiated, if the borrower pays off the mortgage in part or full earlier than the term, there is usually a payment penalty of additional interest. This type of mortgage is usually offered at a lower interest rate than an open mortgage and is most desirable when current interest rates are low.

Fixed Time:
Specified dates when timeshare owners are scheduled to occupy the shared property.

Fixer-Upper:
A house listed for sale at less than market value or at a discounted price because it requires significant repairs or renovation.

Fixtures:
Permanent improvements to real property remain with it at the time of sale. Personal property such as light fixtures, built-in shelving or cabinets even drapery rods once installed can become permanent improvements to real property that may not be removed at the expiration of the term of lease or tenure.

Flat Fee:
A specified dollar amount requested by a brokerage versus being paid commission, based on a percentage of sale proceeds.

Flat Payment:
This system of all-inclusive monthly payments is calculated to include principal interest and taxes with no specific breakdown as to the proportions of the principal, interest and taxes.

Floating Rate Mortgage:
The alternate name for a variable rate mortgage pegged against Prime rate.

Floating Rate Of Interest:
The rate of interest fluctuates according to prime lending rates; short-term loans such as construction loans are usually chargeable at 2% above prime rate.

Flood Insurance:
This policy provides coverage for damage caused by floodwaters, but does not cover damage from falling water, such as rain that may cause a roof to leak.

Flood Plain:
This land is susceptible to floodwaters.

Floor-To-Ceiling Loan:
A permanent loan or cash advance made in two stages; on completion of construction according to terms and conditions of the agreement, and the balance paid out upon occupancy or upon cash flow requirements.

For Sale By Owner:
Homeowners put their property up for sale without help from a realtor in attempt to avoid paying commission.

Forbearance:
The act of not exercising a legal right, as in the waiving of a covenant in a mortgage document, a mortgagee’s act of not insisting on payment of a debt at the due date and giving the debtor more time to pay.Property foreclosure is delayed when the borrower arranges to pay the lender outstanding amounts in arrears.

Foreclosure:
When there is default under any of the covenants in the mortgage,this court action is taken by a lender, to take possession of a home; this legally enforced transfer of real property ordered by a court to satisfy unpaid debts deprives the borrowers of their equitable right to redeem. The process by which a mortgaged property may be sold when a mortgage is in default, a mortgagee takes this remedial court action when a borrower defaults on payments of a mortgage. This action can start when a borrower has failed to make a single payment, however, most lenders will grant a period of time for the borrower to catch up on the payments owing before taking action, providing there was no purposely avoided commitment. Once foreclosure is completed, it is the lender’s right to resell the home.The mortgagee (lender) causes forfeiture of the equity of redemption of the mortgagor and obtains ownership of the mortgaged property. Terminating all of the borrower’s rights in that property, the mortgagee forces sale of the property at public auction. From the proceeds of the sale, the lender can recover the outstanding balance of the mortgage and other costs associated with the foreclosure and resale. Any equity that an owner may have had in the property could be lost.

Forward Commitment:
This is a lender’s promise to a borrower to make or assume a future loan.

Freehold Estate:
The most common, as well as the oldest form of real estate ownership; permanent and absolute tenure of land or property with freedom to dispose of it at will; this interest inland or real property entitles the owner to use the land for an uncertain duration, orinfinite period of time and to deal with the land in any way desired, subject to legislation, contractual obligations, and any changes that affect the title of the property. Another term for freehold is “fee simple” or untrammelled tenure;for a defined period of time as in “life estate”; “fee tail” is for the term of the life of the tenant.

Frontage:
This property boundary line abuts onto the street.

Frustration:
When unforeseen events occur that render a contract impossible or impractical to perform, the frustrated party may rescind the contract without penalty.

Full Income Verification:
A potential borrower can provide complete and accurate proof of income when applying for a loan in order to secure a lower interest rate than rates offered for “no-doc” loans having no verification of income.

Full Market Value:
Assessment at 100 percent of the property’s value is used to set a property tax rates.

Full Review:
This type of appraisal includes a review of the internal and external features of the subject property as well as an assessment of neighbourhood factors.

Fully Amortized Loan:
This mortgage agreement stipulates a constant and regular repayment schedule, including both principal and interest components, that repays the loan amount in full by the loan’s maturity date.

Fully Open Mortgage:
This mortgage allows principal payments to be made in any amount, at any time and in addition to regular mortgage payments, without penalty.

Functional Obsolescence:
With real estate, this loss of value over time is due to characteristics of a building becoming lessvaluable with the changing of tastes and styles. A building lacking central air conditioning will suffer from functional obsolescence, as air conditioning becomes the expected norm for new buildings.

Further Charge:
This second or subsequent loan of money to a mortgagor by a mortgagee is either secured on the same or on additional collateral.

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Gale Date:
The specific date upon which, interest is charged or compounded on a mortgage loan.

Gap Financing:
A gap loan is required by a builder to obtain funds during the period between a permanent take out commitment and a construction loan. A construction lender will usually require a permanent mortgage commitment to the full amount of the construction loan including a holdback provision that only the “floor” amount will be funded at the completion of construction.

General Contractor:
This business or person contracts for and takes responsibility for completing construction projects, hiring, supervising, and paying all subcontractors and suppliers.

Genuine Consent:
This legal requirement stipulates that both parties must have a clear understanding of the details of the contract in question and that a lack of genuine consent can void an agreement.

Genworth Financial:
Canada’s only private mortgage insurer, this company (formerly G.E. Mortgage Insurance Company of Canada) provides banks and lenders with mortgage defaultinsurance, which is required on high ratio mortgages with less than 20% equity or down payment. The insurance premium is paid by the property owner and is usually added to the initial mortgage amount. In the event of foreclosure or default, Genworthwill assume responsibility of the property and reimburse the mortgage holder (lender) with the outstanding mortgage amount.

Gift From A Family Member:
Monetary gifts given to mortgage applicants by relatives occasionally require a written proof to the lender that the funds are not a loan, but a gift that does not have to be re-paid.

Going Concern:
Balance sheets are prepared under the assumption that the subject business is a going concern and its assets are not for sale and cannot be sold without disrupting the business.

Good Title:
When proof of ownership is free of any legal holds or claims.

Graduated Amortization Mortgage:
A special method of repayment on a mortgage devised to enable lower income families to become homeowners. Repayments in the initial period are low, but gradually step up at a higher rate.

Grant:
This technical term found in a deed of transfer or conveyance of land indicates a transfer of any interest or estate in land from one to another.

Grantee:
The party to whom an interest in real property is conveyed is usually the purchaser; one who receives legal transfer of property from another; the buyer.

Grantor:
This party conveys an interest in real estate by deed; one who transfers ownership of property to another; thevendor.

Gross Area:
The total floor area of a building, measured from the outside of the exterior walls.

Gross Debt Service (GDS.) Ratio:
The measure by which lender defines the ability of the borrower to pay the monthly payments required for repayingtheir mortgage debt. This mathematical calculation used by lendersderives a ratio, expressed, as a percentage of a borrower’s gross monthly income that must comply with an upper limit set by lenders when approving mortgage applications. This is the total mortgage debt service expressed as a percentage of the borrower’s income. This percentage is arrived at by totalling a borrower’s monthly shelter costs mortgage payments(principal and interest), property taxes, approximate heating costs, and 50% of any maintenance fees and or condominium fees. This sum is then divided by the gross income of the applicant. Most lenders require that the GDS ratio be no more than 32% of gross (before tax) monthly income. The maximum qualifying GDS in most applications for default insurance is also 32%.
Formula: PIT / GI

Gross Income:
Scheduled income from the operation of a business or of the management of investment property is customarily stated on an annual basis. Gross annualpersonal income may be from one source or multiple sourcesand is the total of salary, wages, commissions and other assured income, before deduction used in the calculation of an applicant’s debt service ratios. Other income may qualify a potential borrower for a loan if it is significant and stable, as well, income earnedby other household members who are co-applicants for a mortgage may also qualify.

Gross Leasable Area:
The total floor area designated for tenant occupancy and exclusive use, the area on which tenants pay rent, excluding common areas.

Gross Profit:
The total revenue of a business after deducting the cost of goods it sold, as detailed in an income statement.

Gross Rent Multiplier:
A method of appraising fair market property value by multiplying gross rents by a factor that varies according to the type and location of the property.

Ground Lease:
This contract is for the rental of land only and is usually for a long term.

Ground Rent:
Rent paid by a lessee for land use only.

Group Insurance:
Found in all mortgage creditor insurance plans, thistype of insurance plan involves premium rates set for a large group as a whole, as opposed to individual premiums set on personal characteristics.

Guaranteed Income Mortgage:
A guarantee included in a purchase money mortgage by a seller-mortgagee that there would be a minimum cash flow or net operating income to the purchaser mortgagee. The guarantee is limited to a short period and may be combined with a management contract whereby the seller as manager will operate the property.

Guarantor:
A third party without interest in the property with an established credit rating and sufficient earnings who agrees to assume responsibility for a debt and guarantees to repay the loan or perform a contracted obligation for the borrower in the eventthe original borrower defaults on the mortgage.

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Half-Bath:
These bathrooms provide a toilet and a sink, but do not contain a shower or bathtub facilities.

Hazard Insurance:
This insurance policy provides coverage against physical damage to property caused by natural disasters such as fire. Depending on property location, lenders may require coverage for floods, hurricanes, and or earthquakes.

Hedge:
A money market instrument used to insure a mortgage lender or borrower against interest rate movements. In the lender’s case the price of this insurance will vary depending upon many political and economic factors, but will generally be lower when interest rates and the economy are less volatile. The buyer on the other hand can hedge at no cost, or at a reasonable rate premium by using specifically designed products, such as a protected or split-term mortgage.

Hectare:
This measurement of area equals 100 meters by 100 meters.

Hereditament:
The term for a property that may be inherited.

High-Ratio Mortgage:
A mortgage loan that exceeds the normal limit of 80% Loan To Value ratio of a conventional first mortgage; the ratio of the borrowed loan amount to the property’s lending value (the lesser of thepurchase price or appraised value of the property). In other words, the down payment amount would be less than 20% of the purchase price/appraised value.If a borrower does not hold 20% of the purchase price or appraised value of a property, the higher loan amount is made possible by a mortgage insurance plan; the borrower must insure the mortgage against payment default to protect the lender. Borrowers must pay an application fee and the insurance premium, the lender will add the premium or cost to the face value of the mortgage. A mortgage insurance company, such as CMHC will issue the policy. This mortgage finances between 80% to 95% of the purchase price or appraised value of the home, whichever is lower. In the event of default and that there is not sufficient value in the property to payoff the mortgage, the lender is insured and therefore is paid for the shortfall. To avoid this cost of insurance, a first mortgage up to 80% can be arranged in conjunction with a second mortgage for the balance (commonly up to 90% of the purchase price).

Highest And Best Use:
This fundamental principle to the concept of appraised valueis based upon the most probable, legally allowable, financially feasible use for the land in question that would most likely produce the greatest net return over a given period of time while taking existing zoning regulations into consideration.

Historic Preservation:
This process protects buildings of historic value or significance from extensive renovation or destruction, limiting an owner’s ability to alter their property.

Historic Structure:
A structure recognized and registered by the Canadian Government as historical.

Holdback:
The withholding of or non-advancement of a portion of each payment of a mortgage loan by a construction lender or owner during construction to ensure construction is satisfactory at every stage. The holdback isretained to maintain adequate security, pending achievement of a performance requirement, or as protection against liens and will remainin effect until satisfactory completion of the work performed by a contractor or such time that any liens placed against the property by the contractor’s debtors are discharged and or the lien rights period has expired.

Home Equity:
The homeowner’s portion of property value owned outright, the difference between the price for which a home could be sold (fair market value) and the total debts registered against it.

Home Equity Debt:
All debt secured against a home’s value.

Home Equity Line Of Credit:
An open-ended personal loan, a line of credit secured against the equity in a borrower’s property. Generally, up to 75% of appraised property value can be borrowed and is then repaid as revolving debt.

Home Equity Loan:
This type of mortgage refinancing replaces or is added to the first mortgage and is generally negotiated when a homeowner wants to increase the mortgage amount to take advantage of the increased equity in a home, usually for a renovation or improving the property.

Home Inspection Report:
A report commissioned by a property owner or purchaser to verify a property’s condition. Many offers to purchase property are conditional on the outcome of a home inspection and satisfactory reportbeing delivered prior to the closing of a real estate transaction. The scope and detail may vary, but most reports comment on visible structure and internal systems such as heating, water or electricaland indicate specific problems and related repair costs. Unfortunately, home inspection is not regulated or a licensed occupation, so to safeguard against inadequate service, request the inspector’s resume and check references from previous customers.

Home Office:
An area within a home used for business purposes that qualifies for a tax deduction.

Home Warranty:
A guarantee on home construction and workmanship, this warranty pays for specified repairs within a specified time period and occasionally includes appliances.

Homeowner’s Association:
This elected committee governs a subdivision or planned community and collects fees from homeowners to maintain common areas and enforce conditions or restrictions set out in developer covenants or by the association.

Homeowner’s Insurance:
An insurance policy that provides homeowner protection; coverage includes loss or damage to property, theft, specified hazards and personal liability.

Homeowner’s Insurance Binder:
Prior to issuing a formal policy an insurance company will issue a document that verifies the agreement to purchase a homeowner’s insurance policy.

Household Formation:
One household can be made up of an individual, a couple and in either case with or without children and or elderly parents. This demographic study investigates how individuals assemble together to create a household and generally mirrors patterns of growth, aging and divorce/separation found in the general population.

Household Income:
The total combined income of all household members.

Housing Discrimination:
The illegal practice of discriminating against buyers or renters of property on the basis of race, religion, background, sex, family status, or disability.

Hypotheque:
In civil law this term reflects a right acquired by a creditor over immovable property that has been assigned by the debtor as security for a debt; corresponds to the common law concept of a lien on real estate, ie. a mortgage inQuebec.

Hypothecary Creditor:
Mortgagee (Quebec).

Hypothecary Debtor:
Mortgagor (Quebec).

Hypothecation:
To pledge assets without surrendering or loosing possession of the assets to the pledgee as security for debt

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ICI Property:
This type if property is marketed for investment, commercial, and or industrial use.

Illegal Contract:
Any contract that requires or involves criminal activity is thus void and as such the parties involved have no legal standing in court.

Illiterate:
In law, an illiterate refers to an individual who cannot read or speak the language, however such an individual is bound to an agreement if they understand its nature, but the contract would be void, if fraudulently interpreted by another party.

Immediate Participation Loan:
A type of loan in which all partners immediately contributes their share.

Immigration:
Entering a country as a foreigner in order to settle or reside permanently therein.

Immovable Property:
This civil law term is used for real property that cannot be moved, such as land or buildings and improvements as opposed to chattels or personal property.

Incapacity:
Refers to a legal disability or official disqualification due to the inability or ineffectiveness of the party to make or engage in certain binding dispositions of their rights, such as entering into a contract.

Income Approach (To Value):
A valuation process for income property, reached by estimating annual income minus allowances for vacancies and bad debt and then subtracting annual operating expenses, real estate taxes, and insurance premiums to obtain net operating income (NOI). The NOI is then converted by capitalization into a capital value.

Income Bond:
These bonds may originate from reorganization due to a default on mortgage bonds and pay a fixed rate of interest contingent upon earnings.

Income/Expense Ratio:
This ratio of operation expenses to gross income is expressed as a percentage and is also known as operating ratio.

Income Property:
Realproperty capable of being used developed or improved for the purpose of generating annual income through leasing the propertyas multi-residential, office or retail space. Also referred to as “non-owner occupied property” or “rental property.”

Income Property Loan:
A loan secured on property, which already has a source of income such as rents to cover the debt service payments on the loan.

Income Statement:
This document summarizes a company’s revenues and expenses and includes calculations to demonstrate whether or not the business earned a profit. Reported annually, quarterly or monthly and generally broken down as follows:
Revenue from day-to-day operations of the business
Costs of production and manufacturing
Gross Profit derived from total revenue minus the costs
Operating Expenses as the total cost of day-to-day operations
Net Income from Operations, the amount remaining when subtracting all costs and taxes from total revenue.

Incorporated Company:
This form of business ownership is established as a separate legal entity under the laws of the jurisdiction in which it operates (provincial and/or federal). When entering into an agreement with an incorporated company, determine that the company exists legally, and that it has the capacity to become a party to the contract.

Indefeasible:
That which cannot be defeated, forfeited, done away with or is impossible to annul, or make void.

Indenture:
An agreement between two or more parties, this document or deed details specific objects to be executed by the parties to the agreement. Originally, indentures were duplicates placed together and cut in a wavy line, so that the two papers could be identified as being authentic by corresponding to each other.

Industrial Property:
This type of property contains units designed for manufacturing, production and warehousing.

Infant:
This person is a minor, younger than the age of majority which varies among provinces and territories; under the legal age of competence and thus incapable of the independent judgment necessary to undertake a legal obligation.

Inflation:
A situation in which there is a general increase in prices for goods and services.

Infrastructure:
A community’s public facilities and services such as schools and hospitals, transportation and communication systems, hydro and electric providers, all are necessary for a community to function.

Ingress:
This term refers to the act of entering into a place, the right of entrance or an entranceway into a place, meaning the opposite of egress.

Initial Interest Rate:
An adjustable-rate mortgage typically uses an introductory interest rate, which changes at a predetermined time.

Injunction:
An order of the court commanding somebody involved in a legal action to do or refrain from doing some particular act or thing.

Inspection:
Examining a house for structural and other defects, prior to the closing of a real estate transaction. Thepurchaser usually selects a building inspector or expert, such as a contractor.

Instrument:
This formal written legal document confirms or creates a legal right and thus instructs in regard to a fact that has been agreed upon, recorded and executed in technical form.

Insurable Interest:
Any interest recognized by the courts and of such a nature that an occurrence of event such as insured against would prejudicially affect the insured. Such interest includes that of an owner, a lender, a lessee or a trustee.

Insurable Title:
A title that satisfies criteria set by a title insurance company, which would then be insurable.

Insurable Value:
This term designates the amount of insurance that can be carried on destructible portions of a propertyto indemnify an owner in the event of damage or loss.

Insurance Fee:
Paid to insurer such as CMHC for mortgage insurance.

Intangible Assets:
These non-physical goods have value to a business, including goodwill or legal rights to market a product.

Inter Alia Mortgage:
Also referred to as a Blanket Mortgage, typically covering two or more properties. The words “Inter Alia” are Latin for “Among other things”.

Interest:
Interest is the cost of borrowing fundsand is the amount that a borrower agrees to pay to a lender as rent or compensation for the use ofborrowed money. Interest is expressed as an annual percentage rate,compounded semi-annually and applicable to a loan or mortgage, paid at a certain frequency as per an agreement with the lenderand represents the annual profit on a loan of money. A customer is paid interest for deposits made into a savings account, and pays interest for money borrowed.Can also mean a right, share or title in property, for example all joint tenants must have the same interest (extent, nature, duration) in the land to satisfy the legal requirement involving the three unities.

Interest Accruing Loan:
A type of loan in which no payments on either interest or principal are remitted until the end of the term, once the mortgage contract has expired the payments are due.

Interest Adjustment:
This process involves the calculation of compound interest payable on the amount borrowed for the period between the day a loan is disbursed and the day the amortization period starts.

Interest Adjustment Date (IAD):
When starting a new mortgage, IAD is the date immediately prior to commencement of the regular monthly payments when mortgage amortization begins and from which interest is calculated at the agreed upon rate and compounded at the frequency set out in the mortgage contract. Accrued interest computed on the various mortgage advances becomes due on the date a mortgage term begins, usually the first day of the month following closingof the mortgage transaction. Interest accumulates in arrears with the first regular monthly payment of blended principal and interest due one month after the IAD. Mortgage funds advanced prior to the IAD are due on the IAD date, accrued interest cost for those days between closing date and the first of the month are usually paid at closing as an interest-only payment. It can be advantageous to close a deal towards the end of the month to lessen up front cash requirements on closing.

Interest Averaging:
A method of determining the overall average interest rate being paid where more than one mortgage is involved in financing a property.

Interest Escalation:
The rate of interest on a loan is raised periodically during the term of a loan as encouragement for early repayment.

Interest Factor:
A decimal equivalent for interest rate on a specified unit amount for a specific time period, computed by dividing the interest rate by the number of days in a basic year and multiplying by the number of days accrued.

Interest-Only Mortgage:
A mortgage on which only the monthly interest cost is paid each month and the principal remains the same during the life of the loan. The principal is repaid in full at the end of the loan’s term. The scheduled payments are lower than on an amortized mortgage since one is not paying any principal. Withno amortization until a later date or until the end of the term, this may be utilised when a purchaser intends to resell property after a short period or if he wishes to accumulate enough income from the property before amortization.

Interest Plus Specified Principal Loan:
This type of loan involves the repayment of principal in equal amounts at every interest-compounding period in addition to the interest that must be paid for that period. Also referred to as a straight-line principal reduction loan.

Interest Rate:
The rate of return a lender receives for permitting a borrower to use mortgage money for a specified term. Usually expressed as the annual percentage rate charged on outstanding loan balances, the interest rate is calculated semi-annually, not in advance.

Interest Rate Cap:
A limit upon interest rate increases and decreases for adjustable rate loans, imposed from one adjustment period to the next or over the entire life of the loan.

Interest Rate Differential (IRD):
With early prepayment of all or part of a mortgage beyond the prepayment privilege amount agreed to in the mortgage contract, a penalty due to the lenderis usually calculated as “thedifference between the existing market rate and the contractual rate for the term remaining, multiplied by the principal outstanding and the balance ofthe term”.You want to pay out your mortgage, but the Lender may ask you to pay the difference in interest. This can add up to thousands of dollars if rates decline considerably. Payout penalties are usually quoted as the “greater” of IRD or 3 months interest penalty. The IRD amount is determined in three steps:
(1) Calculate the difference between the current market interest rate and the contractual interest rate for the remaining term of the mortgage.
(2) Multiply this rate difference by the amount being prepaid.
(3) Multiply the total by the balance of the term.
Example: With a $100,000 outstanding principal balance on a mortgage, a contractual rate of 7.5% and a remaining term of 2 years, if the current market rate has fallen to 6%,the differential is 1.5% per annum.
Therefore the IRD penalty is $100,000 * 2 years * 1.5% per annum = $3,000.

Interim Financing:
This temporary or short-term financing helps a buyer bridge the gap between the closing date on the purchase of a new home and the closing date on the sale of the current home.Interim loans are offered by lenders during the construction of real property for resale and are used to bridge the gap between a construction loan and a permanent loan. Lasting from one to three years, these loansassist developers with financing for construction projects; funds are made available on a daily basis between construction loan advances made by the lender.

Intermediate Term Loan:
This short-term loan of 3 to 5 years is without or only partial amortization and structured with a final balloon payment.

Internal Rate of Return:
A rate determined by balancing the present value of present and future investment costs with the present value of present and future investment benefits.

Intestate:
A person who dies without havinga will, or leaves one which is defective in form, in such a case their estate descends by operation of law to heirs or next of kin.

Investment Property:
This type of property is rented to individuals who do not own the property, and pay rent to the property owner.

Invitation to treat:
This informal request for expressions of interest is an action by one party inviting others to make an offer and is not a legal contract.

Irrevocable:
An offer that is unalterable and incapable of being recalled, revoked,taken back or retracted.

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Joint And Several Note:
This promissory note is underwritten by two or more guarantors who are each jointly and individually liable.

Joint Tenancy:
Land ownership by two or more persons whereby each owner holds an undivided interest, the same size, possession and the same title to the land. This type of tenancy includes the right of survivorship which means that when one owner or one joint tenant passes away, his/her share automatically passes to the other joint tenant or survivor(s); the survivor(s) receive title to the entire property. A joint tenant cannot pass on his or her interest by means of a will. The creation of joint tenancy requires that ‘four unities’ Possession, Interest, Title, Time be satisfied, as in undivided Possession; identical Interest in nature, extent, duration; Title must be derived from the same legal instrument such as a deed or will; Interest of each must begin at the same time. If any of the four unities are missing, the owners automatically become Tenants in Common.

Joint Venture:
This type of business arrangement involves two or more people, businesses or organizations entering into a single venture as partners.

Jointly Owned Property:
This property is legally held in more than one person’s name.

Judgment:
This official, legally binding decision of a court upon the respective rights to an action or suit being litigated and submitted for its determination affects the claims of all parties involved in the court action.

Judicial Sale:
This legal remedy is available to lenders when a mortgage goes into default with any excess monies from the property sale, over and above the mortgage debt, being distributed to the borrower.

Junior Financing:
A subordinate mortgage or loan often given by a property vendor, lower in priority to any existing loan(s).

Junior Mortgage:
A mortgage that falls subsequent to theclaims of the holder of a prior or senior mortgage.

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Key Lot:
This property is essential to the assembly of land for future development, either because of its strategic location or the timing of the acquisition. It must be acquired to achieve the highest and best use.

Kicker:
A bonus or additional payment over and above the fixed interest already paid to an investor such as a percentage of gross profits or cash flow.

Known Defects:
These problems associated with title are known prior to a policy being taken out.

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Land:
Earth’s surfaces not covered by water; the physical property and tenements including not only the ground or soil, but also everything under it and over it, subsoil, minerals, trees, herbage, houses and other structures. Condominium Acts divide land horizontally and vertically thereby delineating the ownership of buildings.

Land Acquisition Loan:
This type of loan is advanced for the acquisition of land rather than for improvements to land or buildings.

Land Contract:
A legal contract for the sale of real estate on an installment basis where a buyer takes possession while making payments, but the seller holds title until full payment has been received. Upon final payment the deed is delivered to the buyer.

Land Development Loan:
This type of loan is advanced for purposes of development of raw land for residential and related uses.

Land Title:
This legal document conveys title to a property.

Land Titles System:
A system used for the registration of land in which the Government guarantees accuracy, validity and legal effect of a title as shown on records held by the Land Registrar, or master of titles,of a Regional Municipality.

Land Transfer Tax(LTT):
Tax payable to the Provincial Government by the purchaser upon the transfer of title from a seller. The rate usually increases on a sliding scale related to purchase price. See Property Purchase Tax.

Land-use Regulations:
These municipal level regulations restrict and regulate the types of buildings and designated uses allowed on a property.

Landed Property:
Having an interest in and pertaining to the land.

Landlord:
This lessor allows another party to occupy his land or building in exchange for consideration such as rent in the form of financial remuneration.

Late Charge:
A borrower is required to pay this additional charge is a penalty for failure to pay a regular installment as scheduled or when due.

Latent Defect:
A present or potential property deficiency, imperfection, fault or blemish that is not visibly detectable or readily evidentupon a reasonably careful inspection, such as termite damage or traces of radon above safe levels.

Lawyer’s Report on Title:
A lawyer’s “opinion”outlines the results of a title search and includes details regarding tax, insurance coverage, mortgage issues, and any other relevant facts such as easements, restrictions or liens that affect title to a property.

Lead Lender:
This financial institution assumes a principal role as head of a financial consortium or syndicate of two or more lenders to provide funds for a mortgage.

Lease:
A binding, written agreement or contractbetween a property owner landlord(lessor) and tenant (lessee) which allows the tenant to occupy and or make use of the landlord’s interest in aproperty for a specified period of timein exchange for a specified consideration i.e.payment of rent by the tenant. This agreement gives rise to the relationship of landlord and tenant.

Lease Extension:
An option that allows a lessee to continue an existing lease, typically from month to month and with the original monthly conditions such as payment amount.

Lease Guarantee Insurance:
This type of insurance protects the owner of leased commercial or industrial property from loss of rental income due to a tenant’s failure to make rent payments.

Lease Option:
A written agreement between a property owner and a tenant that allows the tenant to use a property in exchange for rent, but it also gives the tenant the option to buy the property for a certain price within a specified time period.

Leasehold:
Considered personal property, this estate or interest in real property is held by a lessee, tenant, by virtue of a lease that specifies a fixed duration usually lasting for a number of years.

Leasehold Appraisal:
Methods used to estimate the value of leasehold property.

Leasehold Mortgage:
A mortgageloanfor the purchase of a home or improvements to a homewhere the building is on leased (rented) land, given by a lessee on the security of his leasehold interests in the land. The lender takes an interest in the lease.

Leaseholder:
Tenant under a lease.

Legal Description:
This written legal document, such as a deed or survey, identifies the precise geographical location the property and which is deemed acceptable for registration in a land registry system and as such identifies that property from all others.

Legal Intent:
For an individual to be bound by a contract, that person must have intended to create the commitment, essentially through an act of premeditation.

Legal Mortgage:
Transfer of a legal estate or interest in property for the purpose of securing debt repayment.

Legal Non-Conforming Use:
When a property no longer conforms to current zoning by-laws. Non-Conforming issues could be related to lot set back requirements, or the type of use permitted with regard to current standards. The pre-existing use may be continued legally, but any alterations, additions, or renovations would be required to comply with the present existing by-law standards and could also cause the whole property to become subject to current zoning by-laws.

Lender:
Also known as the mortgagee, in the case of a mortgage loan, the individual or financial institution from which money is borrowed.

Lending Value:
For mortgage purposes, a lender willinterpret an independent appraiser’s value to be the worth of a propertyin a current market and allowing a reasonable time period to sell the property. Usually, aproperty valueis considered to be the lesser of the appraised value and the actual sale price.

Lessee:
The tenant, one who pays rent is granted rights under a lease agreement.

Lessee’s Interest:
This sum of property market value less the value of a lessor’s interest is the present worth of the annual advantage, if any, accruing to the lessee by reason of the contract rent being less than the economic rent.

Lessor:
This person grants use of property to another under a lease agreement with the tenant.

Letter Of Commitment:
Written by a lender, this document specifies the amount of the loan, interest rate, term of loan, and any other pertinent conditions.

Letter Of Credit:
A document issuedby a lending institution on behalf of a customer authorizing the named person or company to withdraw funds up to the stated amount. It also states that the bank will honour the credit, thus serving as a promise of payment to a third party in accordance with the terms of the agreement. Letters of credit may be used in situations where a surety is required such as when a builder signs a contract and needs to provide security that the job will be finished; or a security deposit under a long-term lease. If the party to whom the document is addressed acts on the faith of the letter, then a contract comes into existence between the party and the lending institution that issued the letter.

Letter of Instruction:
This document directs a lawyer to act on behalf of the lender and administer the distribution of funds as per the mortgage loan agreement.

Leverage:
The use borrowed funds in conjunction with a sum of owned money to increase the rate of return from an investment. In real estate upside leverage occurs when the yield or net return on property exceeds debt service for a loan as opposed to downside or reverse leverage occurring when the debt service is greater than the net return on investment.

Liabilities:
All debts and financial obligations that appear on a balance sheet; what a business or a borrower owes including taxes, mortgages payable, accounts payable, prepaid rent, car loans and credit card balances, etc.  Represents all claims or rights to be paid by creditors.

Liability Insurance:
This insurance protects owners against claims of negligence, personal injury, or property damage by other parties.

Lien:
A legal claim affecting real or personalpropertymade by a creditor and registered against title to the property for the repayment of some un-dischargeddebt orobligation that originates with and relates to that property or its owners.This right given to a creditor, once registered, creates an interest in the real property owned by another partyuntil the debt is discharged or the debt must be paid when the property is sold.In Ontario any one who works on a house whether a contractor, sub-contractor or supplier has the right to register a lien against the property within 45 days of completion of the service provided. During the 45-day lien rights period it is customary to hold back 10% of the total price of the contract in order to settle any lien claims. Once a lien is registered on a property the claimant has a further 45 days to ‘perfect’ the lien by filling a Placement of Claim. If there is no filing to perfect the lien, a lawyer can remove the lien from title, but if the claimant has been through the process to perfect the lien, then the owner of the property is precluded from transferring title and could even placing a mortgage on the property until the claim has been paid or settled. Legal facts should be verified in the jurisdiction where the work is being done and allowed for in the payment schedule any contract.

Lien Holdback:
When mortgagees withhold a percentage of the contract price or estimated cost of work to be done from the mortgage funds advanced on new construction, in order to prepare and protect against any registration of lien claims. A homeowner will hold back a percentage of the contract amount until all work has been completed satisfactorily and will release the builder’s lien holdback once satisfied and once the lien rights period has expired.

Lien Laws:
Provincial builder’s lien legislation (normally 10%) permits a contractor’s unpaid suppliers and workers to make claims against a property for payments that are outstanding to them with respect to work or materials related to that property. A lienwaiver must be signed to waive these rights in order for its removal from title to be legal.

Life Estate:
This interestin real property grants exclusive possession of the property for the lifetime of the grantee. A life tenant has an obligation to maintain the property in good repair and is liable to impeachment for any act that is injurious to the inheritance by diminishing its value or by impairing evidence of title.

Limited-Restricted Appraisal:
Also known as a drive-by appraisal, this type of appraisal entails an exterior inspection of the subject property of a questionable transaction such as one involving new or unknown markets, or mixed-use neighbourhoods but not of high risk.

Line Of Credit:
This prearranged credit agreement provides immediate client access to funds up to a maximum pre-established limit for a specified period of time. This revolving source of creditallowed by a bank to a borrower,provides flexibility and enables a client to meet short-term cash requirements. A client can access funds as necessary, and any amount paid back becomes accessible again. Unlike a personal loan, a line of credit permits a client write cheques or make bank withdrawals, and requires interest payments only on funds actually borrowed. The borrower must maintain an acceptable balance on account or have a good credit rating. A credit line will vary according to the changing circumstances of the borrower or the bank.An unsecured line of credit carries a higher interest rate than one secured with personal assets such as bonds or home equity.

Liquidity:
Cash availability, the readiness or ease with which assets can be converted to cash, for example, money in a savings account or money market fund can be retrieved immediately, with little or no advance notice as opposed to money invested in home equity is relatively illiquid since funds can only be taken out by refinancing or committing to an additional mortgage.

Lis Pendens:
This legal document gives notice of Litigation Pending or that a forthcoming lawsuit, an action or proceeding is pending in the courts that could affect the title to the designated piece of property. Notice of commencement of court action, recorded against title of property. A property cannot be transferred to another owner while the lis pendens is on title.

Listing Agreement:
This is a contract between an owner of realty and a real estate broker, whereby the owner binds himself to sell the property to a purchaser procured by the broker, it sets out the terms and conditions of the listing and generally specifies the duration of the listing period, the desired sales price and the payable commission rate.

Listings, Exclusive Agency:
An agreement signed by a seller in which he or she agrees to cooperate with one broker, thus all other brokers must go through the listing broker.

Listings, Multiple:
This is a system of agency and sub-agency relationships. If broker “A” lists a property for sale, “A” is the vendor’s agent. If broker “B” sees the MLS listing and offers it for sale, “B” is the vendor’s sub-agent.

Listings, Open:
This type of listing permits any real estate broker to try and sell the property.

Live-Work Space:
This type of dwelling is where an occupant lives and works.

Loan:
Anything lent or given to another on the condition that it be returned or repaid, either with or without interest being payable. The act of allowing somebody use or to borrow something temporarily on the condition that it is returned to the original owner.

Loan Correspondent:
This mortgage broker or banker performs a service on behalf of an institutional lender over the long term; negotiating mortgage loans and servicing loans by collecting debt services, paying insurance premiums and taxes and remitting the balance to the mortgagee, a mortgage broker may also warehouse loans, holding individual mortgages until a minimum package amount is achieved in which case a profit or a loss may be realized.

Loan Coverage:
General loan coverage for a loan to value ratio of 75% with a ratio of 1.3 for net operating income to debt service is considered adequate.

Loan Fee:
The lender’s administration charge for making a loan in addition to the interest charged to the borrower.

Loan Loss Reserve:
An entry on a real estate company balance sheet, this reserve is entered as provision for any future losses in assets.

Loan Origination:
Prior to a lender issuing a commitment letter, an analysis of the loan application from prospective purchaser is performed to determine if they meet with loan requirements.

Loan Portfolio Turnover:
The average length of time required for a portfolio of mortgages to reach maturity or for a turnover of mortgage loans.

Loan Processing:
Upon application and approval of a loan, a lender must administer standard procedures including the creation of files, ordering credit reports, verification of employment and bank accounts in order to finalize and disburse funds.

Loan Qualification:
Also referred to as qualifying the borrower, this process involves an analysis of the buyer’s ability to satisfy financial obligations and thus their eligibility for financing.

Loan Ratio:
This ratio of the principal amount of the loan to the lending value of the property is expressed as a percentage.

Loan Servicing:
Administration of a mortgage by loan correspondents includes the collection of debt service; keeping an escrow account for payment of insurance and taxes; and making claims or exercising remedies against a mortgagee in default.

Loan-To-Value Ratio(LTV):
The ratio ofthe principal amount of a mortgage loan compared to the appraised value or purchase price of the property, whichever is less, expressed as a percentage. This ratio is calculated by a lender prior to providing a loanand determines whether or not the applicant will qualify for a loan and whether the application, if approved, will be for a conventional loan or a high ratio loan requiring default insurance, and if so, what the cost of that insurance premium will be, the higher the ratio, the higher the insurance premium will be.

For example, if theproperty value is $200,000, the down payment available is $40,000 andthe required mortgage is $160,000. The LTV is $160,000/$200,000 or
80% which will not require default insurance as it meets the 80% conventional mortgage requirement.

Local Improvement Charge:
Over a specific period, municipalities will charge fixed annual fees in addition to property tax to amortize capital costs of local improvements such as sewers or paved roads. These are apportioned and assessed against lands that benefit from the improvements, the lien for payment remains against the land.

Local Taxes:
Municipal tax levied to pay for services.

Lock-In:
A lender’s guarantee that a quoted mortgage rate will not change for a specific period, usually until closing.

Lock-In Clause:
This clause restricts prepayment of a loan during a specified period of the whole term of the mortgage and ensures that the lender receives a stipulated return on his investment and discourages shopping around for another loan before maturity of the existing loan.

Lodger:
Somebody who as a tenant rents a room or part of another person’s house, sharing the accommodation with the owner while holding exclusive possession of the part that is being rented.

Long Term Debt:
A liability which does not have to be paid off in a short period, but is structured for repayment either in monthly or annual payments over a long period of time or by a lump sum payment at the end of a specified period of time. Examples include mortgages, real estate and or chattel, bonds, debentures and promissory notes.

Long Term Investments:
Similar to fixed assets, these investments do not typically depreciate in value.

Long Term Liabilities:
These debts and obligations are repaid over a long period of time, e.g. mortgages.

Low-Documentation Loan:
This mortgage requires a substantial down payment and excellent credit history, thus less income or asset verification is necessary than for conventional loans. Designed for entrepreneurs, the self-employed, or for borrowers who cannot provide financial information, this type of mortgage will cost the borrower a higher interest rate.

Lowball Offer:
A potential buyer makes an offer that is well below market value.

Lump Sum Payment Option:
This clause, included in a fully or partially open mortgage enables a borrower to prepay a portion of the outstanding principal in accordance with the specified terms of the contract.

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Maintenance Fee:
A periodic assessment charged to residents that pays their homeowner’s or condo association for the maintenance and repairs of common areas.

Manufactured Housing:
Pre-constructed homes from a factory are transported and assembled on a lot where they are placed temporarily or permanently.

Margin Of Safety:
The extent to which a loan is protected by property values or operating income, for a mortgage the margin of safety is the excess of equity at fair market value above the outstanding amount of the loan.

Market Conditions:
Factors such as interest rates, the unemployment rate, home appreciation, weather and time of year that can affect sales of homes in a certain area.

Market Value:
The estimated property value an owner can expect to receive if the property sells under normal conditions. The courts have defined this as being the highest price estimated in terms of money which a property will bring, if exposed for sale in the open market, allowing a reasonable time to find a purchaser who buys willingly with knowledge of all the uses to which it may be put, and for which it is capable of being used.  The lowest price a seller, willing, but not compelled to sell, would accept.

Marketable Title:
Such title may not be completely clear but has only minor objections that a prudent purchaser, or mortgagee would accept with expectation that the legal and beneficial estate in the property will become vested in the purchaser. A court of equity considers this title to be so free from defect, encumbrances, present or probable litigation and that it would enforce acceptance by a purchaser.

Matrimonial Home:
Any property in which a person has an interest and that is or has been occupied by the person and their spouse as their family residence. Condominiums, co-operatives, and leasehold interests can be matrimonial homes. Common law stipulates that a deserted partner has a right of possession or the right to stay in the house, but caution is advised since procedures vary in different jurisdictions.

Maturity:
When a financial arrangement falls due for payment or repaymentsuch as at end of the term as stipulated in a mortgage agreement.

Maturity Date:
For a mortgage agreement it is final day in the term at which point, the principal outstanding balance is due and payable to the lender.On the date that the term of the mortgage expires; the mortgage must be renegotiated and renewed for another termor the mortgage balance must bepaid in full. When applying for another term, the borrower is generally required to pay a renewal fee.

Maximum Loan Amount:
Lenders use the loan to value ratio to determine the maximum dollar amount that they are willing to fund as a percentage of value of the property to be purchased.

Maximum Rate:
An alternative term for protected rate.

Mechanics’ Lien:
A claim filed and registered against property by a person or corporate body, for labour and/or materials supplied for the improvement of the property.

Median Price:
The amount paid for a property where half of the properties in the area sell for less and half sell for more.

Meeting Of The Minds:
Whenever all parties mutually agree upon specified terms and overall substance of the contract and thus enter into a contract.

Metes And Bounds:
A system of land description and measurement whereby boundary lines are set forth by utilizing terminal points and angles, mete referring to a limit or limiting mark, and bounds referring to boundary lines.

Migration:
Thisprocess involves a group of people moving together, to or from one region or country to another.

Mill Rate:
Municipalities set a taxation ratio in reference to property values; this rate is multiplied by the nearest thousand dollars of propertyassessment to establish the annual real estate tax amount for each property.

Mixed-Income Housing:
A community where wages and salariesearned by residents varies from household to household.

Minor:
Any person under the age of legal competence and therefore incapable of the independent judgment required to undertake a legal obligation.

Miscellaneous Assets:
Assets that cannot be placed under “current” or “fixed” such as loans due from officers or employees of a company, loans to subsidiary or affiliated companies and cash surrender value of life insurance policies of which the company is beneficiary.

Misrepresentation:
This statement of false facts, typically occurs during negotiations prior to the creation of a contract in order to induce the other party to enter the agreement.

Mistake:
An error in the terms of a contract or agreement may be one of law as in an erroneous opinion as to point of law or one of fact caused not by neglect of legal duty, but due to an ignorance of a fact material to the transaction.  Three types of mistakes exist.  When both parties make the same mistake i.e., Common Mistake, in a contract. A Unilateral Mistake is when each party is proceeding under misapprehension of the facts, rectification of the contract will be ordered if it would be obvious to the other party had the opposite party called attention to the error and where not to do so would be taking advantage in a fraudulent way. A Mutual Mistake is when each party has contracted under the mistaken belief that some fact that is material to the agreement is true, in such case the court will usually grant a rectification of the contract to reflect true intent of the parties involved.

Mixed Use Development:
A large-scale real estate project developed for multiple uses such as a shopping centre complex consisting of a number of buildings housing office retail and or residential spaces.

Mobile Home:
This type of dwelling is mounted on a chassis with a set of axles and is capable of being readily moved from place to place.

Money Order:
Similar to a certified cheque,this guaranteed form of payment for a specific sum of money can be purchased at a bank or post office and is usually for amounts of up to $5,000. Uses might include payment of tuition fees or payment for a magazine subscription.

Moratorium:
This court authorized postponement period is enacted to assist debtors, during which all legal remedies are suspended, thus granting the borrower the right to defer their contractual obligations including payments of mortgage principal.

More Or Less:
A phrase often found in property descriptions intended to cover slight, unimportant or insubstantial inaccuracies to which both parties are willing to assume the risk.

Mortgage:
This written contract details an agreement by which a loan uses a borrower’s pledge of property to a lender as security to ensure the debt is repaid. A borrower is referred to as a debtor ormortgagor, a lender as a creditor ormortgagee. The legal pledge or the charging of real property by a debtor to a creditor as security for a debt gives the mortgagee the right to take possession of property if the loan is not repaid. Usually incurred by the purchase of the property, on the condition that it shall be returned on payment of the debt within a certain period; mortgages are loans used to purchase or refinance property that convey the property to the creditoras security and guarantee for therepayment of the debt. This security is redeemable or recoverable once the loan is paid-off, the lender should provide a discharge of the mortgage to be registered with the municipality. Referred to, as a charge in the Polaris registry system, a mortgage is an encumbrance registered on the title of the land.  The actual loan amount is referred to as the principal, and the mortgagor is expected to repay that principal, along with interest, over the repayment period (amortization) of the mortgage. Since a mortgage is a fully secured form of financing, the interest paid is usually less than with other types of financing. Many people use the equity in their homes to finance the purchase of investments.  Using a Secured Line of Credit, or a fixed-rate mortgage, the interest costs are lower, and borrowers can write off those interest costs against their taxable incomes. A mortgage can be used for financing different things, including: purchasing or constructing a new home; purchasing an existing home; refinancing to consolidate debts; financing a renovation; financing the purchase of other investments; financing the purchase of investment property. As a registered charge on property, it should be removed once the loan has been completely repaid. In Quebec, this is referred to as a hypothec.

Mortgage Acceleration Clause:
A clause in a loan agreement, that allows a lender to demand full payment of the loan balance under certain circumstances such as the sale of the property, loan default, or mortgage refinancing.

Mortgage Application:
A document filled out by a potential borrower. Applicants must provide detailed financial information for the lender to consider before loans are approved and then granted.

Mortgage Averaging:
This method of determining a weighted mortgage rate is used when calculating an average rate for a first and second mortgage, each having different mortgage rates.

Mortgage Backed Securities:
These financial instruments are created by amassing an undivided interest in a pool of insured residential first mortgages and are secured by the value of the underlying real estate.

Mortgage Banker:
More prominent in the U.S.A. as principals of mortgage funds,these individuals originate mortgages, offering financing to the general public through an institution’s product lines, with the intent of selling the contracts to permanent investors under the understanding that the institution will service the loans for the investor.

Mortgage Bond:
When a very large loan is required, a corporation will issue a bond that is secured by a mortgage on their property. This device divides up the loanwhen the number of potential lenders is limited and can be issued and sold to various pension funds through investment dealers on a public issue, or more commonly it can be sold as a private placement issue.

Mortgage Bonds:
Bond holders are represented by a trustee, who is the mortgagee. Bonds can be traded, making them more flexible than individual mortgages.

Mortgage Broker:
A licensed person, group, partnership or company, authorized to deal in mortgages and lend money while using real estate as a security. For a commission they will negotiate with various lenders on behalf of a borrower to originate or obtain the best overall mortgage that meets the satisfaction of all concerned. Mortgage Brokers who allocate mortgage funds are useful in financing “non standard” situations which cannot be funded by major lenders. Because of their special relationships with multiple lenders they can underwrite loan agreements thatoffer clients the best rates and service.Mortgage Brokers will advertise as a mortgage buyer, seller or arranger of real estate loans and will therefore have access to private lenders who do not advertise or operate retail locations.

Mortgage Brokers Act:
This legislation regulates the activities of mortgage brokers across Canada.

Mortgage Commitment:
A lending institution’s formal indication that it will grant a mortgage loan on a property, pursuant to a specified amount and on certain specified terms.

Mortgage Consultant:
This individual is authorized to deal in mortgages on behalf of a mortgage broker, also referred to as a mortgage agent or mortgage specialist.

Mortgage Creditor Insurance:
This type of insurance coverage protects a borrower, should unforeseen circumstances such as illness or death make it impossible for them to remit mortgage payments, it relieves the borrower of mortgage obligations.

Mortgage Critical Illness Insurance:
This insurance product enhances mortgage life insurance.

Mortgage Debenture:
Issued by a corporation, this debenture is secured by a mortgage on their property, synonymous with mortgage bond.

Mortgage (Default) Insurance:
This type of insurance protects the mortgage lender in case the borrower defaults on mortgage payments and is mandatory for high-ratio mortgages in which a borrower’s down payment is less than 20% of the purchase price of the property. The fee, or insurance premium, is calculated as a percentage of the mortgage amount, is payable by the borrower and is incorporated into the principal amount of the mortgage. Mortgage insurance is available through Genworth MortgageInsurance Corporation or Canada Housing and Mortgage Corporation(CMHC).

Mortgage Disability Insurance:
An insurance policy that pays a borrowers mortgage payments should the borrower become ill or disabled and unable to work.The disability must be one that is covered under the policy and payments are only made for a specified amount of time.

Mortgage Fraud:
Any deliberate misrepresentation, omission or material misstatement on the part of a borrower that is relied upon by a lender or insurer to underwrite, approve, fund or insure a mortgage loan.

Mortgage Impairment Insurance:
Mortgage lenders carry this type of master insurance policy as protection in the event of an otherwise uninsured loss of a property securing their debt and or losses resulting from the borrower’s failure to pay real estate taxes.

Mortgage Lien:
A legal claim against mortgaged property, which must be paid when the property is sold.

Mortgage Life Insurance:
Insurance under which the benefits are used to pay off any balance owing on a mortgage upon the death of the insured borrower. The intent is to protect survivors from the loss of their homes. A form of reducing term insurance recommended for all mortgagors.

Mortgage Loan:
An agreement by which sum of money is borrowed and a promise to repay is pledged, wherein as a further security the borrower gives to the lender a conveyance, charge or legal pledge of property, which he owns as security for the loan.

Mortgage Note:
This promissory note is executed in favour of the lender granting an encumbrance or lien on a borrower’s property, generally a mortgagor is personally liable on the note.

Mortgage Originator:
This mortgage professional undertakes in the acceptance, completion and/or submission of mortgage loan applications to underwriting lenders.

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

Mortgage Portfolio:
An investor, mortgagee, lender or broker holds this aggregate of multiple mortgage loans.

Mortgage Postponement:
A process whereby a mortgagee (lender) may permit a borrower to renew or replace an existing mortgage that falls due prior to the maturity date of the subject mortgage.

Mortgage Rate:
The cost to rent money; interest rate payable on a mortgage loan.

Mortgage Refinancing:
Replacing current mortgage financing with new financing to take advantage of a more favorable interest rate, financial condition or existing equity in a property.

Mortgage Renewal:
Renewal refers to ending an existing mortgage term and signing a new term for the continuation of the mortgage.

Mortgage Representative:
These employees of financial institutions originate mortgages, but unlike provincially regulated private originators operating outside of lending institutions, institutional originators working for federally incorporated lenders, are governed under the Office of the Superintendent of Financial Institutions.

Mortgage Term:
The specified period of months or years that a mortgage interest rate is guaranteed or locked in for, during which time, scheduled payments are made in accordance with the specified rate of interest. Terms normally range from six months to five years or more, after which time the borrower can either repay the balance of the principal owing or re-negotiate the mortgage at current rates.

Mortgage Underwriting:
The procedure followed by a lender to determine whether to extend a loan. For a residential mortgage, a factor such as a mortgagor’s income is of prime importance. For a mortgage on income property, a lender will regard the property as the prime security including the income derived from it. Lenders will also evaluate builder or developer’s reputations and credit worthiness.

Mortgagee:
The lender in a mortgage transactionand holder of the mortgage, a financial institution or person to whom property is conveyedadvances funds to a borrower, the real property is conveyed or pledged as security for repayment of the loan.

Mortgagee In Possession:
A mortgagee acquires possession by entering into actual occupation of, or by obtaining the receipt of the rents of the mortgaged premises.

Mortgaged Out:
Refers to a situation whereby total mortgage debt on the property equals or exceeds the current market value or costof the propertyon which it is secured. This type of mortgage may be obtained on improvable property where the security is based on future value and future earnings which are expected to exceed construction costs.

Mortgagor:
A borrower, in a mortgage transaction who makes the paymentsand as owner of the propertyconveys title to that property to the mortgagee tosecure and guarantee repayment of the mortgage.

Motivated Buyer:
A prospective buyer, who needs to purchase a property quickly due to time restraints or pressing personal reasons,

Motivated Seller:
A property owner who needs to sell quickly due to limited time restraints or financial difficulties.

Move-In Condition:
When construction is complete, all touch ups are done, appliances are in working order, and the property has been thoroughly cleaned making it ready for occupancy.

Move-Up Buyer:
A vendor who sells one property makes the purchase of a more expensive property possible.

Movable Property:
This term in civil law is used for personal property as opposed to real property.

Multi-Family:
A building or dwelling that has more than two residential units.

Multiple Listing Service(MLS):
A computer databasesystem used to compile andrelay information to real-estate agents and general public about properties listed for sale. This service is provided by local Real Estate Boards that publish and exchange details of Board registered properties. While this used to be for the exclusive use of registered Realtors, it is now possible for a private individual to “list” a property without committing to pay a Realtor a “listing commission” if the property sells. The majority of properties sold in Canada are sold through the local MLS, a system licensed to member real estate boards by CREA.

Municipal Levies:
Special levies can be charged by municipalities to recover the cost of special services, if these services cannot, for some reason, be funded out of general revenues, or apply primarily to homebuyers. Examples: Water meter installation; road improvements, sewer improvements.

Municipal Property Assessment Corporation (MPAC):
MPAC utilizes an automated valuation model and is responsible for administering a consistent, Ontario-wide property valuation to property owners, municipalities, and the Province of Ontario.

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NHA:
The federal National Housing Act (1954) supersedes previous housing and mortgage policies and is administered by Canada Mortgage and Housing Corporation (CMHC); it seeks to assist the private market in producing affordable housing, to provide improved housing conditionsto meet the needs of most Canadians and for insuring NHA loans made by approved lenders and for direct mortgage lending.

National Housing Act (NHA) Mortgage Loan:
This high ratio first mortgage loan is originated by an approved lender and backed by (insured by) CMHC to certain maximums andis granted under the terms of, and insured under, the National Housing Act 1954.

Negative Amortization:
This condition may arise in a variable rate mortgage with a payment cap with payment terms under which the borrower’s monthly payments are lower than the amount of interest due, as a result the balance due is added to the loan balance making it increase even as payments are made.

Negative Cash Flow:
When operating costs of a property exceed gross rental income or debts.

Net:
Pure profit, clear of anything extraneous, after all necessary deductions forcharges, expenses, discounts, commissions and taxes from total revenues have been made.

Net Income:
The amount of revenue exceeding expenses forms profit, the amount remaining after subtracting all costs and taxes from total revenues.

Net Operating Income (NOI):
The remaining balance following the deduction of operating expenses from gross receipts and gross rental income, but not including any deductions for debt service on mortgages. Free and dear return on property is calculated by the ratio of NOI to total investment including mortgages and equity. This provides a means of direct comparison of the return on different properties.

Net Rate Of Interest:
The interest rate a mortgagee (lender) receives net of the servicing fee deducted by a loan correspondent.

Net Worth:
This is the residual amount after deducting assets from liabilities.

No Cost Switching of Payment Option:
In an open mortgage, this option grants the borrower the privilege to adjust the payment schedule to either monthly, semi-monthly, bi-weekly/weekly at no charge.

No-Doc:
When confirming past income earnings this term is the short form for no document necessary.

No-Fault:
Since title insurance claims are paid on a no-fault basis, the insurer is not able to deny coverage by arguing negligence.

Nominal Interest Rate:
The posted or quotedinterest rate as stated on a loan document. The nominal rate is used to calculate interest payments and differs from the true rate of interest paid due to compounding within the term of the loan. It is also not the same as the effective interest rate, since the loan amount may be discounted or sold at premium, thus making the effective rate of interest either higher or lower.

Non-Assumption Clause:
This condition prohibits a borrower from transferring their mortgage to another borrower without permission from the lender.

Non-Conforming Use:
When a property being used in contravention of current zoning by-laws is permitted because the present use pre-dates the enactment of these zoning by-laws.

Non-Disturbance Agreement:
This agreement permits a tenant under lease to remain in possession of the premises despite any actions undertaken by a lender.

Non Est Factum:
Latin for “it is not my deed”, this claim means that the signature on a contract was signed without the signatory’s knowledge of its meaning or by mistake.

Non-Operating Income:
Includes income not related to the company’s normal operation of business, including monies derived from rents, bank interest and other dividends from company money invested periodically.

Non-Owner Occupant:
A property purchased for investment or rental purposes and occupied by tenants.

Non-Recourse Loan:
This clause in a loan agreement waives a borrower’s personal liability on the loan.

Notes to Financial Statements:
Whenan auditor or accountant prepares financial statements, notes are included to specify what methods of accounting were used and to offer opinions with regard to statement contents and findings pertaining to the company’s operations.

Notice Of Assessment:
A form issued by a government taxing authority. A Federal tax form is issued when personal taxes are complete that shows a breakdown of the given years income along with the balance owing or the refund amount. This notice is required for review by many lenders when a mortgage application is submitted. A municipal tax form is issued advising property owners of the assessment of taxes payable on their property for a given tax year.

Notice D.O.R.:
An official notice filed in court by mortgagor under foreclosure proceedings requesting an opportunity to redeem.

Notice Of Default:
A step in the foreclosure process in which, a lender informs the court that borrower payments are in arrears.

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Obligatory Advance:
An advance of funds made according to terms of a pre-existing construction loan agreement or mortgage.

Offer And Acceptance:
The basic requisite of any contract is a proposal by one party, the offeror, to another party, the offeree, to accept the specified terms of an agreement. If the offeree indicates acceptance of the proposal, the contract will bind both parties to the agreed upon terms.

Offer To Purchase:
A potential purchaser’s written proposal outlining the terms under which the buyer would agree to purchase a specified real property. This formallegal agreement between buyer and seller sets forth a certain price and terms which may include conditions attached to the offer, such as the offer may be conditional on the buyer arranging mortgage financing or selling a current home. Upon acceptance by the vendor, the offer forms a legally binding contract, which determines the rights and obligations of the buyer and seller concerning the purchase and sale.It includes the legal and/or municipal property description, purchase price, closing date, and lists specific items included or excluded from the sale. The offer may be firm (no conditions attached) or conditional (certain conditions must be fulfilled). Once an offer is accepted it becomes an “agreement of purchase and sale.”

Offeree:
This party receives an offer to enter into a contractual agreement.

Offeror:
This party presents a proposal to another with intentions of creating a legal relationship upon acceptance thereof by the other party.

One-Year Adjustable Mortgage:
The annual rate changes from year to year and is based on movements of a published index plus a specified margin, selected by the lender.

Open House:
A sales approach used by realtors to advertise a property that is listed for sale. Potential buyers drop by and view the property without making an appointment.

Open Mortgage:
This mortgage agreement allows a borrower to repay any amount of principal at any time, thus the debt is repaid more quickly than specified or the loan can be re-negotiated at any time during the termwithout notice and without additional interest, prepayment chargesor penalties. For this convenience, the interest rate is between 0.75-1.00% higher than a closed mortgage. This type of mortgage is good option if you are planning to sell your property or pay-off the mortgage entirely. There are two types of open mortgages:
Fixed rate mortgages; the term is usually fairly short (6 months to a year); and the interest rate will be higher than on a closed mortgage.
Variable Rate Mortgages (VRM’s) are usually open (and are “collateral” type mortgages) but recently, several institutions have introduced closed versions.
Mortgages may be partially open, having clauses that allow partial pre-payment at specified times, or in specified ways. For example, the ‘Double Up’ option enables a borrower to double the scheduled principal and interest payments. The ‘Lump Sum Payment’ option enables a borrower to prepay a portion of the principal. The ‘No Cost Switching of Payment’ option enables a borrower to change the payment schedule to monthly, semi-monthly, bi-weekly or weekly. The ‘Skip A Payment’ enables a borrower to skip a monthly payment without the mortgage going into default.

Open End Commitment:
A construction loan advanced to a builder without any assurance by the builder that permanent financing will be obtainable on completion of construction, thus the builder is in a position to take advantage of more favourable interest rates later when construction is complete as there is less risk to the lender. In tough financial periods, builders prefer open-end commitments because of this opportunity to benefit from lower interest rates in the future.

Open End Mortgage:
A mortgage agreement under which a lender has an option to advance more funds when, for example, the value of the property is anticipated to increase.

Open Or Closed:
Restrictions or denial of repayment rights until the maturity of a mortgage are referred to as “dosed” mortgages. If specified on the document as “open”, a mortgagor is permitted to make extra payments of principal sums at any time or at specified times, with or without repayment penalty.

Open Variable Mortgage:
A variable rate mortgage for which interest rate changes in relation to money market conditions. The borrower may prepay or renegotiate an Open Variable mortgage at anytime without additional interest.

Operating Budget:
An estimate of costs and expenses required to operate a building or condominium complex and corresponding revenues needed to balance them, usually projected for a 12-month period. This is different from a capital budget.

Operating Expenses:
Expenses that occur periodically during the day-to-day operations of a businessand are essential to produce net income before depreciation can be placed in two categories, namely, operating expenses and fixed charges.

Operating Income:
Income derived from a company selling its main products or services.

Operational Costs:
These costs incurred due to mortgage fraud are associated with collections, legal commitments, foreclosure, property repair, management, and resale of property.

Option:
A right granted by a property owner to another party; this agreement contains all of the essential agreed upon terms of a purchase and sale whereby one is granted the exclusive right to purchase another’s property within a limited time period at an agreed price, in exchange for valuable consideration. The holder of the option has the right, but is not compellable by the property owner to undertake the action, this allows the offer to be kept open for a period of time under a separate contract.

Order NISI:
A judge will issue the order nisi at the first court appearance, which grants relevant remedies, and fixes the length of redemption period, normally six months, but it may vary according to circumstance. Redemption period refers to time prior to the final order of foreclosure within which any of the respondents can redeem the mortgage by paying into court the amount found to be due and owing.

Order Of Sale:
This mortgage document term refers to the mortgagee’s (lender’s) right to sell the home, in many cases without court approval, in order to recover the full principal and interest outstanding. Generally exercised in the case of default of payment by the owner. If there any money left after the property is sold, and after the lender has recovered its principal, interest and costs, the borrower would receive the balance.

Original Principal Balance:
The initial amount of money borrowed from a lender.

Origination Fee:
A fee charged by a lender or loan correspondent for evaluation, documentation and for processing a loan. The fee includes the costs for document preparation, credit check, property inspection, and conducting an appraisal if applicable.

Other Liabilities:
Includes deferred income taxes, future loss provisions (i.e. lawsuit involvement), and deferred income involving receipt of payment for goods or services not yet provided.

Outstanding Balance:
The total amount owing to a lender at any specific time, whether it is to be repaid over an amortized period or in a lump sum at the end of the term.

Overall Capitalization Rate:
A rate applied to determine property value based on the net income from real estate.

Owner:
This individual or party is the lawful possessor of title to real property.

Owner Equity:
The interest held in the assets of a business by the owner of a business.

Owner Financing:
A transaction in which a property vendor loans all, or a portion, of the money required for the property purchase to the buyer.

Owner Occupant:
A borrower who occupies property used as security or collateral for the loan.

Owner Occupied:
Opposite of investment properties, the property owner also resides in that property.

Owner’s Equity:
The amount remaining for a firm’s owner(s) if all company assets were disposed of in order to pay off all outstanding debt and liabilities.

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Package Loan:
The combination of two types of loan such as a construction loan and permanent financing benefits a borrower with only having to negotiate with a single lender and only having to pay a single set of closing costs.

Par:
When a mortgage is sold or purchased at par it is for an amount equal to the outstanding balance without premium or discount.

Pari Passu:
When mortgages are syndicated, the lenders participate on an equal basis with no one party having preferential access to gains or the ability to opt out of losses. It also refers to equal ranking of a company’s preferred shares.

Partial Discharge:
A mortgagee (lender) will release a specified portion of an interest, right, or obligation registered against a mortgaged property once the mortgagor (borrower) has prepaid a specified portion of mortgage debt or provided some other consideration to the benefit of the lender’s security. The remaining portion continues to be subject to the registered document, such as when the original agreement was registered against more than one title, a partial discharge may release some of the titles, but not others.

Partially Amortized Mortgage:
This type of mortgage protects both borrowers and lenders from interest rate fluctuations by utilizing a short-term maturity date upon which the full outstanding amount must be either repaid or refinanced at current interest rates.

Participation:
Income Participation: In addition to receiving debt repayments on a mortgage, the lender also receives a share in the annual income produced by the property over the term of the mortgage.
Equity Participation: As part of the consideration for making a loan, the lender also receives partial ownership of income produced or of the investment property itself. This ownership may be an indefinite term and thus would endure beyond the maturity of the loan. This type of agreement does not necessarily involve any equity investment on the part of the lender beyond the amount advanced for the mortgage loan.

ParticipationLoan:
An agreement originated by a “lead” bank to share in the advance of funds for a portion of a loan financed by multiple lenders. The lead lender receives a fee to service the loan, set terms, interest rates and the method of apportionment.

Partnership:
This relationship subsists between two or more people or organizations that operate a business in common and who share the financial risks and profits. This form of ownership is less common than a sole proprietorship, but is similar in that it does not exist as a separate legal entity. Partners are each taxed on their own share of profits.

Payment Cap:
A provision in some adjustable-rate mortgages stating that the borrower will never be required to pay more per month than the stated maximum. However, the interest rate is not subject to cap; thus interest costs could exceed the maximum monthly payment.

Payment Frequency:
Regular mortgage payments such as: every week, every other week, twice a month or monthly.

Percent Paid Off:
The percent of principal paid off or equity build up at a given time under an amortization schedule.

Percentage Adjustments:
The appraisal process involves estimates of differences between each factor being compared to the subject property, expressed as a percentage of the sales price. For example, a home with a finished basement compared to one with an unfinished basement might involve an adjustment of an additional 10% in the selling price.

Percentage Rental Against Minimum:
A rental paid under a percentage lease. Rent paid by a tenant is variable and is based on volume of business as a percentage of gross receipts of sales or revenue and paid to the extent that it exceeds a minimum rental.

Percentage Rental Plus Minimum:
Additional rent paid under a percentage lease where minimum rent is not credited against percentage rent payable.

Perfecting Title:
This process eliminates any claims against title.

Performance:
The accomplishment of actions required by a contract or agreement to fulfill one’s obligations. The contract is considered partially performed when one or both parties to the agreement have or had partly carried out the required obligations.

Performance Bond:
This document, issued by a duly incorporated surety company, protects one party and assures faithful performance of the contract and payment of all obligations arising under the contract.

Permanent Financing:
This long-term mortgage is generally intended to fund both land and improvements after completion of construction. Used to payoff a construction loan, it is intended to remain on that property over the full amortization period with terms and conditions of the loan changing during that period.

Permanent “Take-Out” Commitment:
A common procedure for construction lenders, prior to committing to a construction loan, to require a written commitment by a recognized lender (a “bankable” commitment) that upon completion of the building, a permanent mortgage loan will be made.

Permit:
A municipal document which grants authorizationfor construction or renovations to proceed.

Personal Liability:
An individual, liable for debt to the full extent of their entire assets, as opposed to limited liability where a maximum is set on the amount of assets that can be drawn upon to satisfy a debt. Joint and several liability fixes the liability of each individual borrower for the total debt; joint liability binds all the borrowers together in one action; and several liability fixes the liability of each borrower to the extent of his share of the debt. A borrower’s personal assets are pledged, and subject to claim, in addition to a primary security for a loan.

Personal Property:
All property with the exception of land and the improvements thereon, items not affixed to the land, buildings or structures, are referred to as chattels such as appliances, furniture or other consumer goods which are non-contributory to the value of the real property.

Petition:
In British Columbia this document is filed in the Supreme Court and served on all respondents at the commencement of foreclosure proceedings.

Petitioner:
The lender as petitioner seeks to extinguish the respondent’s interest or claim to the mortgaged property.

PI:
An acronym for principal and interest, both are included as components due on a monthly mortgage payment.

PIT:
This acronym for Principal, Interest and property Tax, delineates the components that make up a regular payment on a mortgage. If the down payment is greater than 25% of the purchase price or appraised value, the lender will allow the borrower to make their property tax payments independently of the mortgage.

PITH:
An acronym for Principal, Interest, Taxes, Heating and half of Condo Fees, (if applicable)which are components of a monthly mortgage payment. Otherwise known as “shelter expenses”, PITH includes the four costs used in the calculation of the gross debt service ratio that lenders employ to determine whether or not a borrower will qualify for a mortgage.

Plans:
Technical drawings or blueprints that provide detailed specifications of a project.

Placement Fee Or Arrangement Fee:
A charge levied for services performed when arranging a mortgage agreement.

Plot Plan:
This drawing is an element in architectural plans and details the layout of site improvements including location, dimension and landscape.

Polaris:
The Province of Ontario Land Registration Improvement System’s new simplified method of registration of land transfer, charge, discharge, etc.

Portable Mortgage:
This type of mortgage enables a borrower to transfer the current agreement for an existing property over to a new property without cost or penalty, but a property appraisal and credit approval are usually required. The borrower can transfer the existing mortgage loanbalance, interest rate and remaining term to the new home, but the mortgage will be registered on title of the new property and removed from the original property title. While most mortgages have a portability feature, in the event that more money might be necessary when transferring the mortgage over to the new property, make sure you either have the right to blend in any new funds required, or can arrange the additional funds separately. A borrower would want to port a mortgage in order to avoid early discharge penalties, or if the existing interest rate is much lower than the current rate, porting allows a borrower to move to another property without losing this existing rate. If additional money is lent, the usual result will be a new mortgage with a blended interest rate.

Possession:
A real estate term that refers to the direct occupancy, use, or control of a property after signing the contract at closing and receiving the keys to the house. In the case of joint tenancy, it refers to unity of possession and as such, each party’s ownership is as an undivided interest in the whole of the property.

Possession Date:
This is the date that a buyer actually gets possession of their real estate purchase.

Postal Acceptance Rule:
This guideline on accepting offers indicates that an acceptance should be delivered in the same manner as the offer itself was delivered; it also defines when an acceptance goes into effect. If an offer is delivered by non-instantaneous means such as mail, then the acceptance this offer is effective when it is put in the mailbox, rather than when the other party receives it.

Postponement Clause:
This mortgage clause grants the right to defer a prior charge on title to anotherand is usually contained in a junior mortgage agreement.An equitable mortgageewill permit a borrower (mortgagor)the right to renew or replace a senior mortgage such asan existing first mortgage that becomes due prior to the maturity date of the junior mortgage,usually a second or subsequent mortgage.

Power Of Attorney:
This formal legal document, duly signed and executed by an individual, delegates legal authority to another person to act as an agent on their behalf, but only to the extent stipulated in the instrument, for the purpose of signing documents or completing transactions.

Power Of Sale:
If a default in loan payments occurs by the borrower, a mortgagee has a legal right and powerto force the sale of the mortgaged property by public auction, private contract or tenderand without judicial proceedings by way of a clause inserted into the mortgage agreement and pursuant to provincial legislation.

Pre-Approval:
A process used by mortgage lenders to determine the loan amount they would give to a potential buyer based on current interest rates and an extensive review of the buyer’s credit history. Lenders issue pre-approval letters to strengthen a buyer’s position when bidding on a home, because it instills confidence in a seller because it verifies that the buyer can obtain the funds needed for the purchase the property.

Pre-Approved Mortgage:
A mortgage for a set maximum amount and interest rate that is arranged prior to the purchaser finding a house. Often arranged prior to shopping for a home, this option can help the purchaser establish an affordable price range. Also known as a pre-arranged mortgage.

Pre-Authorized Payments:
This payment system enables funds to be automatically debited from an account on a specified date by a financial institution on the authorization of the account holder. The electronically debited funds areused for payments such as bills for insurance or utilities, mortgages, or personal loans.

Pre-Qualification:
An informal process in which a lender provides an estimate of how much can be borrowed to purchase a property. The estimate is not legally binding and is based entirely on non-verified information provided by the potential borrower. Pre-qualification is not the same as pre-approval.

Pre-Sold Home:
A house has been sold prior to its construction.

Premium:
When a mortgage is being purchased, this amount is often stated as a percentage, and is paid in addition to the face value of a mortgage.

Prepaid Expenses:
Property related expenses or costs such as taxes, insurance, and interest that are prorated upon sale and paid at the time of closing, these costs cannot be financed as a part of the mortgage.

Prepayment Clause:
If included in an agreement, this mortgage clause grants the mortgagor, borrower the privilege to make payments over and above the regular agreed-upon paymentsthus paying off additional sums from the principal balance or paying off all of the mortgage debt in advance of the maturity date. A common example allows for reducing the principal amount of the mortgage by up to 20% annually.

Prepayment Penalty:
When a mortgage is not fully open, lenders may charge a fee to borrowers to allow for the prepayment of all or part of the outstanding principal of a mortgage loanbefore the end of afixed term provided for in the mortgage agreement. When a prepayment is made which is over and above the scheduled mortgage payments, the normal prepayment penalty is the greater of three months’ interest or the Interest Rate Differential (IRD) on the prepaid amount. Specifics will always be set out in the mortgage document. CMHC  (for insured mortgages) and a few major lenders set the maximum penalty at 3 months interest once a mortgage has been in effect for three years, regardless of the number of renewals.  A penalty charge can amount to $2000 or $3000 for paying back a mortgage before the term expires.

Prepayment Privilege(s):
A mortgage agreement clause stipulating what portion of the principal balance a borrower can prepay ahead of scheduled payments, without incurring a penalty. Also stipulated would be the penalty payable when a prepayment option is exercised under a closed mortgage. This privilege is used to decrease the amount of interest paid over the life of a mortgage. Some mortgage agreementsrestrict prepayments to specific amounts and times. Limiting prepayments to a single annual payment on the anniversary date of no more than 10% of the original principal is also common practice. Prepayment privileges have become more lenient, allowing mortgages to be paid off on an accelerated basis.

Prime:
The lowest rate a financial institution charges its best customers.

Prime Lending Rate:
The lowest interest rate offered by chartered banks to preferred, creditworthy clients.

Prime Rate:
Based on the rate established by the Bank of Canada, most Canadian financial institutions charge the same prime rate asthe rate charged for lending funds to their best customersor their most credit-worthy borrowers. Also referred to as the rate of interest paid on government bonds, the prime rate affects mortgage-lending rates.

Principal:
The amount of money actually borrowed for a new mortgage or loan and owed to a lender at any specified time, including accrued unpaid interest.This is the total amount outstanding on a loan upon which interest must be paid. On a mortgage repayment plan, principal is the portion of money that goes toward reducing the original amount borrowed. Also refers to the person or corporate body that is competent to perform an act to benefit them on his or her own account, but employs another person or an agent to do it.

Principal And Interest:
Regular loan payments in which the amount paid is a combination of interest owed on the loan and an amount paid towards the principal borrowed.

Principal Balance:
This represents the outstanding dollar amount owing on the mortgage debt.

Principal Risk:
Associated with interest only loans, this risk to the lender is a result of market fluctuations. If a property’s market value falls, it might become less valuable than the principal amount of the loan due at the end of the mortgage term, thus the lender might not be able to recoup the entire principal.

Principle Of Conformity:
A concept that property will draw a fair market price if located among similar properties of the same size, style, and condition.

Principle Of Contribution:
The value of any item in production is measured by how much it adds to the net income or value of the property by reason of its presence or detracts from net income or value by reason of its absence irrespective of the item’s cost.

Principle Of Progression:
When the value of a modest dwelling increases due to its location near more expensive properties.

Principle Of Regression:
When an expensive property loses value due to its location near lower-priced dwellings.

Principle Of Substitution:
Where a product or property is replaceable its value tends to be set by the cost of acquiring an equally desirable and similar substitute property in the marketplace providing there is no undue delay in making the acquisition.

Prior Charge:
An encumbrance ranked in priority, ahead of a newer mortgage or other subsequent charges.

Prior Encumbrance:
This claim on property ranks in priority, ahead of a newer mortgage.

Private Mortgage:
A private corporation or individual would provide this type of mortgage.

Pro Forma Statement:
This financial statement details gross income, operating costs and net operating costs and net operating income for a specified financial period.

Probate Sale:
A court supervised sale following the death of the property owner. Proceeds from the property sale are disbursed among heirs and creditors as determined by the court.

Production Home:
A mass-produced home found in a housing development or subdivision.

Progress Advances:
Loan advances made on a property during the construction period whereby the lender makes advances on the basis of retaining a portion of the loan which in the lender’s opinion will be sufficient to complete the building should the borrower fail to complete construction.

Profit Margin:
How effectively a firm is using its resources is calculated by dividing net income after taxes by total revenues.

Projected Income:
The estimated future income generated from property.

Promisee:
The person to whom a promise has been made can enforce the promise in a contract.

Promisor:
This person makes a promise in a contract.

Promissory Note:
This written promise to pay a sum of money to the payee on demand or at an agreed or determinable future date is not subject to any further conditions.

Property:
Either ‘personal’ movable possessions or ‘real’ such as freehold ownership of land, in both cases property refers to individual rights enjoyed by virtue of ownership.

Property Purchase Tax:
In British Columbia this tax applies to most properties. Generally, the tax is 1% of the first $200,000.00 purchase and 2% of the balance. There are exemptions for First Time Buyers up to a limit. See Land Transfer Tax

Property Report:
A legal document prepared by a licensed surveyor that maps out the location of all visible improvements relative to property boundaries. In the case of a timeshare property the Property Report is a legal disclosure that developers must provide to prospective buyers.

Property Tax:
A tax levied by a municipality and paid by the owner of real property. The amount of tax varies and is based on the property’s value.

Property Value:
The amount of money real property is sold for depending on the price negotiated by a buyer and seller.

Protected Variable Rate Mortgage:
A mortgage in which the interest rate varies to coincide with money market conditions, the variable mortgage rate cannot exceed a pre-set maximum during the term of the mortgage. This maximum is often equivalent to the posted five year fixed rate, referred to as the “Protected Rate.”

Pur Autre Vie:
An estate or interest in land that endures during the life of a person other then the one entitled to such estate this form of life estate is measured by the life of a third party rather than that of the person presently enjoying the property.

Purchase Agreement:
A contract signed by a buyer and a property owner that details the buyer’s intent to pay a specific amount for a property by a specified date.

Purchase-Money Mortgage:
A property vendor will take back a mortgage loan in lieu of cash in order to help finance the purchaser.

Purchase Option:
An agreement between a property owner and tenant that credits a portion of rent is towards the purchase price of the property.

Purchase Price:
A property’s total selling price: including the down payment and mortgage principal.

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Qualifying:
During the process of analyzing the buyer’s eligibility for financing, borrowers will usually qualify for a mortgage of about three times their gross annual income, assuming steady employment, good credit history and relatively little debt. Banks are picky about the type of income they will use to qualify for a mortgage, a self-employed borrower will need to provide the last two or three years of Notice of Assessments from the Canada Revenue Agency, the bank will average the net taxable income over two or three years to qualify the borrower for a mortgage. A majority of borrowers will require 5 or 10 per cent of the purchase price for a down payment to qualify.

Qualifying Ratios:
Lenders calculate the percentage of income that is spent on housing debt and combined household debt. The qualifying Gross Debt Service ratio (GDS) is up to and including a maximum of 32% of the combined gross family income. The qualifying Total Debt Service ratio (TDS) is up to and including 40% of gross income.

Quantum Meruit:
In the case of a breached contract, this process determines an actual value for the services provided under situations when payment is expected. Whether or not an actual contract exists or when doubt is cast as to the amount due for the work performed, the party who breached the agreement should pay to the injured party this amount as merited by services performed.This Latin term means “as much as he deserved”.

Quick Ratio:
A firm’s ability to pay current assets quickly is calculated by dividing current assets less inventories by current liabilities.

Quiet Enjoyment:
This covenant contained in a lease agreement assures a tenant/lessee the right to use the leased property without disturbance or interference from the lessor/owner.

Quiet Possession:
This covenant contained in a mortgage agreement refers to a mortgagor’s right to uninterrupted use of the property without interference by the lender when not in default.

Quit Claim:
A default remedy which releases a party for or from any action, claim, right, or interest which the releasor had or might have against that party.

Quit Claim Deed:
A full release of one’s interest or right to property to another, usually executed between mortgagees and mortgagors in a form of title transfer and ownership from the owner to the lender. This universal release of all encumbrances, claims or rights to a parcel of land is pursuant to the rules and regulations as set out in provincial land registration procedure.

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Rate (Interest):
The annual percentage amount paid by a borrower and charged by the lender in return for lending funds.

Rate Commitment:
The number of days a lender will guarantee a mortgage rate on a mortgage approval. This varies from lender to lender usually between 30 to 120 days.

Real Estate:
A parcel of physical land and any appurtenances including permanent structures located upon it.

Real Estate Agent:
A, licensed, representative who negotiates real estate transactions on behalf of buyers or sellers in exchange for commission and is an active member of a real estate board and the Canadian Real Estate Association.

Real Estate Attorney:
Lawyers, who specialize, work on real estate transactions, property tax issues and on the transfer of land and buildings.

Real Estate Broker:
This licensed individual represents buyers or sellers of real estate, and earns commission for the work. Most brokers employ agents and retain a portion of agent commissions in exchange for providing administration, marketing and office space.

Real Estate Investment Trust:
A REIT is an investment trust specializing in holdings of real estate related investments in varying combinations of mortgages, construction loans and real property.

Real Property:
Often referred to as “property”, “real estate”, “land”, or “realty”. Land, tenements and appurtenances, including anything attached to land andof a permanent nature such as structures, trees, minerals and the interest, benefits and rights inherent in the ownership of physical real estate. This term implies a benefit of ownership of real estate, combining both real estate and the rights associated with ownership of permanent non-movable property: land and improvements, such as buildings and landscaping. In civil law, real property is referred to as immovable property and does not include moveable personal property that is referred to as chattels.

Realtor:
This certification mark is the property of the Canadian Real Estate Association and designates broker member of the Association. Real estate professionals holding a valid license and are members of the Canadian Real Estate Associationand generally hold active membership in a local real estate board.

Realty:
Real Property.

Reassessment:
This process establishes a new base value for property taxation by updating assessments to reflect more current values.

Re-Conveyance:
After a mortgage is completely paid, clear title is transferred of to the borrower.

Receipt:
A written or printed acknowledgment that things such as a certain sum of money or as stated thereon has been received.

Receiver:
When a borrower is in default and upon the request of a lender, a third party is duly appointed by the court to receive and account for the rents and profits from mortgaged premises.

Redeem:
To buy back, repurchase or payoff the entire amount of what is outstanding on a debt. This process discharges property from an encumbrance.

Redemption:
Buying back a mortgage estate through the payment of sum due on the mortgage.
It is the duty of a lender, on being paid the full outstanding principal, interest and costs due by the borrower, to grant the borrower the title deeds together with an executed reconveyance of the mortgage property.

Redemption Period:
The period of time granted by law during which a mortgagor may redeem property by paying off the entire amount of debt that has fallen into arrears.

Refinance:
The process of paying off or discharging an existing mortgage and any other registered encumbranceswith the proceeds from a new mortgage with the same lender or with a different lender that offers more favorable conditions to the borrower. The purpose might be to: take advantage of a lower interest rate,transform equity into cash for vacations or home improvements, consolidate debt, arrange better prepayment terms, switch from a conventional to a collateral mortgage, or to pay out the mortgage in full.

Registered Encumbrances:
Legal claims filed against real property usually for any debts for which the property was pledged as security.

Registered Retirement Savings Plan(RRSP):
A Federal program allowing Canadiantaxpayers to set aside a portion of earned income for use in the future. Approximately 18% of earned income up to a set maximumof $13,500 can be contributed into a retirement savings plan “taxfree”. Encouraging Canadians to save money for retirement, the investment and the interest earned on the RRSP is sheltered and will not be taxed as long as the funds remain in the plan. If a taxpayer has already paid tax on personal income, then an RRSP contribution, which can be made until March 1st of the year following the year in which the income was earned and taxed, can result in significant tax rebates. These cash refunds are popular with to first time buyers who put the funds towards a deposit in order to gain entry into the real estate market. RRSP’s can be drawn upon to purchase a first home, but these withdrawals must be caught up with and re-deposited retroactively.When contributing to an RRSP, there is eligibility to claim a tax deduction, however any withdrawals a later date, other than for the purchase of a first home, will result in a tax liability.

Registration And Discharge Dates:
Dates of registration by number and date are kept on file in the local Registry Office and/or land Titles office, and then given to the mortgagee (lender). Once a loan has been paid in full at or after maturity date, a mortgagee can execute the “discharge” or cessation of charge and register this document to liquidate the mortgage and thus allow the mortgagor (borrower) to redeem the mortgage. Mortgages are labelled according to priority as registered against title; e.g. First charge-First Mortgage (by date and time) is the earliest mortgage registered, subsequent mortgages are labelled as second charge-Second Mortgage (by date and time) and or Third charge-Third Mortgage (by date and time).

Registration Fees:
Fees paid to the provincial government for recording a title transfer, mortgage registration or other instrument such as an Assignment or Lien with the local authorities.

Registry System:
Regulated by provincial statute, this system of land registration provides for the registration of all interests in land and is recorded in chronological order. The registrar assumes no responsibility for the legal effect of the document with this system, but with the newer Land Titles system, the registrar guarantees the accuracy of title as shown on record.

Release Of Covenant:
A lender’s agreement to terminate the personal obligation of the original mortgagor (borrower), usually upon sale of a mortgaged property to a new purchaser who is acceptable to the lender, and who has signed an assumption agreement or other appropriate legal documents releasing the original mortgagor, guarantor whose covenant is no longer required.

Relocation Company:
A company, that provides assistance to relocated employees.

Remaining Balance:
The unpaid principal balance left outstanding on a loan.

Remaining Term:
The duration of time remaining for a borrower to pay off the outstanding balance of an installment loan as scheduled.

Renegotiate:
When the terms and conditions of a mortgage agreement are changed prior to maturity. Renegotiation occurs with the lender who presently holds the mortgage.

Renewal:
When the mortgage term has concluded, the mortgage is up for renewal; the mortgage agreement may “roll over” or be extended with the same lender on newly agreed upon terms and conditions (such as the rate of interest) acceptable to both the lender and the borrower. This is known as renewing a mortgage.The mortgage is open at this time for prepayment in part or in full, the borrower may renew with same lender or transfer to another lender to seek alternative financingat no cost.

Renewal Agreement:
An agreement whereby a lender agrees to extend the term of the loan, possibly on revised terms with regard to the principal repayment schedule and or interest rate.

Rent:
Periodic payments made by the lessee or tenant to the lessor or landlord as compensation for the possession or use of their property during a specified term.

Rent Contract:
Rental payments received by the real estate owner under any lease contract.

Rent Economic:
The income real estate can command in the open market at any given time for its highest and best use.

Rent Loss Insurance:
If a property becomes unfit for habitation due to a hazard or damage, insurance will cover losses in rental value or income.

Rent Roll:
This document lists the tenants in occupancy, the area or unit occupied by each, their lease expiry dates and rent payable as well as any other leasing details as may be necessary.

Rental Holdback Standby Loan:
An amount withheld from a borrower under permanent financing until a certain occupancy rate is achieved, a developer may obtain a standby loan commitment to supplement the holdback.

Rental Requirements:
A condition pertaining to a limit placed on a permanent loan agreement that allows for a portion of the loan to be advanced upon the reaching a minimum rental or occupancy rate.

Rental Value:
The monetary amount of return that can be reasonably expected in exchange for allowing the right to use real estate may be expressed as an amount per month or other period of time, or per room, per front foot, or other unit of property.

Replacement Cost:
Used for insurance purposes, this estimated cost of replacing a subject property might include coststo rebuild and refurnish with materials and items having exactly the same utility and of similar value in the event of theft or fire when replacing lost items.

Replacement Reserve:
This cash reserve is maintained for the future replacement of fixed assets as they deteriorate or become obsolete.

Repossession:
A lender has the legal right to assume ownership of property if a borrower defaults on mortgage payments.

Reproduction Cost:
The estimated cost of construction to reproduce an exact duplicate or replica property with the same or closely similar materials and accounting for current prices of labour and materials.

Resale Value:
The price an owner is able to negotiate when selling an existing property.

Rescission:
This termination or cancellation of a contract, generally by mutual consent, returns the parties to the state in which they would have been if the contract had not been made.

Reserve Fund:
Set up by a condominium corporation, funds set aside or reserved for major repair and replacement of such things as roofs, plumbing, or heating systems as well as for additional improvements to common areas in a condominium. Sometimes referred to as a contingency fund.

Rest:
This accounting procedure involves the periodical balancing of an account for the purpose of converting interest into principal, and charging the liable party thereon with compound interest. This process of adjusting the accounts between parties stipulates the date upon which the adjustment between the parties is altered is not necessarily the date upon which payment is made, unless so agreed.

Restriction:
A limitation placed upon the use of property as stipulated in the deed or other written instrument contained in the chain of title. Notwithstanding full ownership, all land use is subject to certain restrictions such as: police power to enforce legislation such as zoning by-laws and official plans; power of eminent domain involving the right to expropriate; power of taxation of various levels of government having the right to tax; power to escheat which involves a property that reverts back to the crown if taxes not paid or if a property owner dies without a will.

Restrictive Covenant:
This agreement between owners of different property, usually neighbouring landowners, restricts the use of one of the propertiesor places a limitation on the use of property, which runs with the land and is registered within the title documents for the property. The restriction must be negative in natureand reasonable with the use being imposed on the covenantor, Servient Tenement, for the benefit of land belonging to the covenantee, the Dominant Tenement.

Restructured Loan:
To prevent foreclosure on a property, a mortgage may be altered or restructured to offer a more manageable interest rate, term or payment schedule.

Return on Equity:
This measure of how much income is generated by each dollar of equity invested is calculated by dividing net income after taxes by the owners’ equity.

Return On Investment:
Dividing invested equity by cash flow, tells an investor what percentage of gains or profit have been earned from their investment. Free and clear return is calculated as a percentage of net operating income divided by total investment in the property. Cash flow return is calculated as a percentage of cash flow divided by equity investment, also referred to as return on equity and cash-on-cash return. Total return is calculated as a percentage of cash flow including loan amortization divided by the total invested.

Revenue:
The inflow of cash or other properties received in exchange for goods or services rendered or the earnings from day-to-day operations of a business.

Reverse Mortgage:
This type of mortgage enables elderly homeowners to convert their built-up home equity into monthly cash payment(s), generally to cover living expenses. At the end of the loan period or upon the sale of the property the loan balance is due. Upon the death of the borrower the mortgage is terminated and heirs to the estate meet the outstanding obligation usually by selling the property.

Reversion:
The right to repossess and resume full proprietorship of real property previously alienated by lease, easement, mortgage or other encumbrance. A property owner retains the right to future possession at the time of the transfer of his or her interest in real property. According to the terms of the controlling instrument, the reversionary right becomes effective at a specified time or under specific conditions such as the termination of a leasehold, abandonment of a right-of-way, or at the end of the estimated economic life of the improvements.

Right:
The interest one holds in a piece of property, a claim or title enforceable by law.

Right Of First Refusal:
An option offered by property owners giving a potential buyer the opportunity to purchase their property before it is offered to anyone else.

Right Of Survivorship:
This distinguishing feature of joint tenancy comes into effect when land held in undivided portions by co-owners and provides that upon the death of any joint owner, the deceased’s interest in the land passes to the surviving co-owner, rather than to theperson’s estate or heirs.

Right-Of-Way:
A form of easement, usually to allow public passage over private land or to allow municipalities and power companies the right to install and maintain sewers, gas lines, etc. The right to pass over another’s land, more or less frequently in accordance with the nature of an easement and asset out in the instrument. Such a right may be implied by law if it is deemed necessary to do so, for example when land is not accessible except by way of the land retained by the grantor.

Riparian Rights:
The rights of property owners where their land is situated on the banks of watercourses, to take advantageous use of the water on, under, or adjacent to their land, including the right to access the water, to fish there from and right of navigation. These rights are not founded on ownership of the bed of the watercourse, but on right of access to the water.

Risk:
The uncertainty, exposure and vulnerability imposed on an investor with regard to any potential loss that an investment may accrue in value as compared to the expected rate of return. Real estate speculation examines risk with regard to income stream, market fluctuations, financing, leverage and general economic conditions.

Roll In:
When closing costs are included or rolled into a mortgage loan, the borrower lowers initial out-of-pocket closing expenses, but incurs higher payments.

Roll-In Loans:
A refinancing agreement in which closing costs and fees are incorporated into the new loan. Those with a reasonable amount of home equity can reduce interest expenses if they plan to stay in their home.

Roll Over Mortgage:
Interest rates are set for a specific term, at the end of this term, the mortgage is said to “roll-over”. The borrower and lender may agree to extend the loan, but if satisfactory terms cannot be agreed upon, the lender is entitled to be repaid in full and the borrower may seek alternative financing.

Running With The Land:
A covenant is said to run with the land when it extends beyond the original parties to the agreement and binds all subsequent owners to either liability concerning the requirement to perform or the right to take advantage of the covenant.

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Sale Holdback:
A lender mortgagee will retain or holdback a percentage of the principal amount of a mortgage until the subject property has been sold to a party that satisfies the lender’s loan requirements, meets the mortgagee’s approval and until this party has assumed the responsibility of the mortgage by signing the appropriate legal documents.

Sale Leaseback:
This technique for financing areal estate transaction involves a seller transferring title to a buyer and upon purchase the seller simultaneously enters into a long-term lease of the property with the new owner. The vendor is now a lessee and remains in possession for the specified term of the lease and covenants to pay rent and operation expenses to the purchaser who is now the lesser. This enables the vendor to free up the cash investment in real property for another use.

Sales Agreement:
A purchase of property where the purchaser does not obtain a transfer of title deed until a specified further sum of money has been paid to the vendor.

Sales Data Report:
This type of quick appraisal estimates a value for good quality real estate in low risk neighbourhoods, but does not include an inspection. Based on MLS sales and listing data, the value estimate provides important information, but lacks the detail provided by more in-depth appraisals.

Sandwich Lease:
A lease, in which the owner of the lease is neither the fee owner nor the user of the property, but is the lessee of one party and the lessor to another.

Seal:
This official stamp with a raised or engraved symbol of authorityor emblem is a mark of office. Once pressed into a document and signed, the embossed emblem certifies the signature and authenticates the document as being binding and irrevocable once delivery takes place.

Sealed And Delivered:
This legal term indicates that a conveyor has received adequate consideration as evidenced by their voluntary delivery. The word “sealed” refers to being signed under seal, a replacement for consideration making a contract legally binding to all parties. In order for the seal to be legal and effective, it must be the conscious and deliberate act of the person applying the seal.

Seasonal Deficiencies:
Because of seasonal or climatic conditions, work required to finish a property cannot be immediately completed.

Second Mortgage:
A mortgage loan granted, registered and secured against realproperty when there is already a first mortgage registered against the propertytitle. Second mortgage has rights subordinate to the rights of the first mortgage. In case of default, the first mortgage is paid before the second mortgage from the proceeds of the sale of the propertyand as such, these loans are less secure and demand higher interest rates. If the borrower defaults and the property is sold the second mortgage takes top priority only after a first mortgage has been paid. Determination of a first, second or third mortgage is by priority of registration date and time.

Secondary Financing:
The financing real estate with a loan, or loans that are subordinate to a first mortgage.

Secondary Homes:
A secondary home is a property other than the owner’s principal residence. It may be purchased to meet special family circumstances or work demands, or as a cottage or leisure residence, and is intended for occupancy by the owner or a relative (on a rent free basis) at some time during the year. It does not include rental properties, part-time rentals, timeshares or rental pools.

Secondary Mortgage Market:
A market dealing in existing mortgages where multiple mortgage agreements are bundled together and bought orsold as securities to investors, more money is made available for lending to potential homebuyers.

Secured Creditor:
This creditor holds as security for the debt of a mortgage, a pledge, charge, lien, or privilege on or against the property of the debtor.

Secured Debt:
Typically, a mortgage agreement in which, the loan amount is secured with collateral, usually in the form of a lien against the debtor’s property. The creditor may take the property if the debtor defaults on payments.

Secured Line Of Credit:
A lump sum loan, offered as a revolving source of credit with a pre-established limit, for which the borrower provides collateral.

Security:
Property, or assets, offered as backing for a loan. In the case of mortgages, the property being purchased or refinanced with the loan usually forms the collateral or security for the loan.

Seller Broker:
A real estate professional who earns commission in exchange for finding a buyer and assisting in the negotiation for the real estate transaction.

Seller Carry Back Or Transfer Back:
A type of financing where a property seller will accept a down payment and receive scheduled payments until the property is paid for in full.

Seller’s Market:
When the real estate market favors the seller, meaning the seller will expect to sell quickly and for market or above market value.

Semi-Annual Compounding:

A common form of interest calculation for mortgages this compounding method involves the assessment of one half of the stated annual rate against the outstanding balance of a loan.

Semi-Custom Home:
An upgraded house with buyer specified features such as the type of cabinets and floor coverings, but with a floor plan predetermined by the builder.

Service Charge:
Fees charged to customers for specific services rendered or as a penalty charged when the customer fails to meet agreed upon requirements.

Servient Tenement:
The parcel of land over which an easement, right-of way, or some other service exists that favours a dominant tenement.

Set Back:
The distance from an established lot line or curb within which no buildings may be erected.

Severance:
With real estate it involves the subdivision of a parcel of land.

Shared-Appreciation Mortgage:
A mortgage offered by a private lender with a below-market interest rate given in exchange for a share in profits once the property is sold.

Shareholder:
The owners of the company, also referred to as a stockholder, this party legally owns one or more shares of stock in a company.

Shareholders’ Equity:
Composed of the money paid in by shareholders as capital investments plus the profits earned and retained over a period of time and not paid out as dividends. Sometimes referred to as net worth, it is the difference between the assets and liabilities of a corporation,

Sheriff’s Certificate:
This signed statement from the sheriff’s office certifies that there are no judgments against the specific land.

Short Form Mortgage:
This mortgage document follows the exact language of the long form prescribed by law but utilises abbreviated, shortened terminology while at the same time having the identical legal effect.

Simple Interest:
The cost of borrowing money is calculated by applying the interest rate only to the original principal amount, interest is not charged on accrued interest, as opposed to compound interest that is calculated by applying the interest rate to the outstanding principal amount as well as to any accrued interest.

Single Family Dwelling:
This residential property is designed for occupancy by one family and situated on land zoned specifically for that purpose.

Skip Payment Option:
A clause may be added to an open mortgage agreement that enables the borrower to skip a monthly payment without the mortgage going into default.

Socage:
In feudal law, a tenure of land held by the tenant in return for performance of specified services or by payment of rent.

Sole Proprietorship:
This business is owned by a single person having unlimited liability and is not registered as a corporation.

Solicitor Or Legal Fee:
This legal tariff is the responsibility of the mortgagor and charged by the solicitor acting in the mortgage transaction; usually 1 to 1 1/4% plus disbursements paid by the solicitor. Also refers to an additional discharge fee for removing a mortgage from title at a later date.

Specific Performance:
This court remedy compels a defendant to fulfill the specific terms of an agreement such as a real estate or mortgage contract and is only granted when the remedy of damages would be inadequate to compensate the plaintiff for breach of contract.

Specifications:
A detailed description of the scope of work that clearly indicates how the work will be executed and what the final appearance will be. Specifications should form part of the contract and specify the quality and quantity of materials to be used.

Speculative Builder Or Developer:
This type of company builds on spec without any commitment from a buyer or tenant to purchase or lease the property.

Spread:
Bank terminology for a rate gap between interest rates charged to borrowers and interest rates paid to depositors.

Square Footage:
A measurement of floor area is calculated by multiplying a room’s length by its width. Total square footage is calculated by adding the floor area of all rooms and corridors contained in a building.

Squatter:
Somebody who occupies land illegally or who has taken adverse possession of a piece of property and by so taking possession has asserted a right to it.

Standby Commitment:
A lender‘s commitment to grant a loan on specified terms during a specified period of time under the understanding that the borrower will not likely draw upon the funds. This commitment is issued for a fee and enables a borrower to arrange construction financing from other sources. The lender would be willing to advance the committed funds in the event that a permanent loan on more favorable terms cannot be obtained.

Standby Fee:
A sum of money paid by a borrower to the lender to hold a mortgage commitment for a certain period of time. This fee is usually non-refundable.

Standing Mortgage:
This type of mortgage provides for equal, regular lump-sum payments of principal, usually quarterly, plus accrued interest.

Standing Offers:
These proposals are made to the general public and can be accepted by anyone, but once one person has accepted a standing offer, no one else can accept it unless more than one acceptance was contemplated in the offer.

Starter Home:
An inexpensive property bought as a first time home that allows the purchaser to build equity through property appreciation and mortgage payments with the intent to sell in a few years. The started home can be sold or traded up for a more expensive property with the acquired equity being put towards the bigger purchase.

Statement:
A record of bank transactions such as: debits, credits, transfers, payroll deposits, account balance, cheque fees, service charges, and ATM activity.
The statement covers a certain time period and is forwarded by the bank to the account holder, usually on a monthly basis.

Statement Of Adjustments:
A document prepared by a vendor ‘s lawyer setting out the details of a real estate transaction, in balance sheet form including credits to the vendor such as purchase price, prepaid taxes, prepaid insurance, etc. and credits to the purchaser including deposits, arrears in taxes prior to the date of closing and the balance due on closing. Both the purchaser and the vendor will receive a copy as a record at the date of closing of the financial breakdown of the transaction.

Statement Of Changes In Financial Position:
Provides information concerning the changes in working capital of a company from one year to another and links balance sheets from one year to the next. It details changes to investment activities of a company and changes in the issuance of capital stock from year to year, thus imparting how a company obtains and uses its cash.

Statement Of Earnings:
A report on the company detailing how much money the company has earned or lost during the year from the daily operation of the company, also referred to as an income and expenses statement or a profit and loss statement. This statement presents revenues and expenses incurred by the company over the period of time covered and reveals where the income is derived from and how the income is spent. When analyzing a company’s financial stability, it is normal to request three years of financial statements so the consistency and the progress of the earnings can be satisfactorily determined.

Statement Of Retained Earnings:
Indicates the amount of earnings kept in the business in the form of cash equity or invested in new assets for the companyover and above dividends paid out to shareholders. This amount of retained earnings is transferred to the balance sheet thus increasing the equity of the principal shareholders.

Statute:
A law established by an Act of Parliament or an act of provincial legislature.

Statute Of Frauds:
This law provides that certain contracts must be in writing in order to be enforceable at law, includes real estate contracts.

Statute Of Limitations:
The legal span of time; during which legal action must be exercised or forfeited.

Statutory Right of Way:
An easement granted by provincial legislation permitting a landowner, crown corporation or municipality, to use another’s land such as when a water authority is installing water pipe under an individual’s land.

Step Mortgage:
This type of mortgage attaches a mortgage loan to a line of credit in one package.

Step Down Lease:
This lease provides for decreases in the rental payment amount at specified dates.

Step Rate Mortgage:
A fixed-rate mortgage with lower payments at the beginning of the loan, typically for two years, but payments increase after the specified time period.

Step Up Lease:
This lease provides for increases in the rental payment amount at specified dates.

Straight Loan:
A mortgage with interest only payments and no principal payments.

Strata Fees:
Monthly levies by the corporation owning the Condominium for the maintenance of common areas, cleaning, reserves for repairs to major common areas like the roof, etc.

Strata Title:
A form of ownership in which a property owner owns their individual unit, plus a share of the site’s common areas or common property; residential, commercial, industrial and other types of buildings may be subdivided by way of a strata plan.
Managed by its own “strata corporation”, the owner of each strata lot has one vote in the strata corporation, and generally pays monthly maintenance fees to cover shared expenses related to common property and to provide for a contingency fund, used for repairs and maintenance of common property.  Governing legislation regarding strata title property is found in the British Columbia Strata Property Act. See Condominium.

Sub Prime Mortgage:
A mortgage loan granted to a borrower who has a poor credit report due to missed or late payments, a default on debt. Lenders usually charge sub-prime borrowers higher interest rates to compensate for potential losses from defaults on loans.

Subcontractor:
A tradesperson hired to do specialized work such as plumbing or electrical work that the general contractor’s staff is unable to perform. The subcontractor takes direction from, is paid by, and is responsible to the contractor.

Subject Clauses:
This is a term to describe a condition in which the purchase of the home is subject to the condition that you have set being met or fulfilled.

Subject Property:
This property is being evaluated by an appraisal.

Subordinate Loan:
A mortgage having less security or priority than another mortgage, including second or third mortgages, or home-equity loans.

Subordination:
One party’s written acknowledgement that a debt due is inferior in statusto the interest of another in the same property. Subordination may apply to mortgages, leases, real estate rights, or any other type of debt instrument.

Subprime Transactions:
This classification of lending is based on a higher risk to the lender that the money lent will not be repaid, compared to prime deals.

Subrogation:
Replacing one party with another with respect to a legal right, interest, or obligation, such as a mortgage holder selling his rights and interest to another.

Supply And Demand:
The economic force from which market value emanates, a rise in demand and a decrease in supply will drive market values higher; conversely values will fall as supply increases and demand diminishes.

Surety:
Somebody who contracts with a creditor as a guarantee for the performance of someone elseand to assume responsibility for the other party’s obligations in case of default.

Survey:
This legal, written and or mapped, document, executed by a licensed surveyor,illustrates precise details and mathematical measurements of the exact quantity of landand a property’s boundaries, as well as locations and dimensions for all structures and on the lot, such as buildings, additions, pools, sheds, or fences. A survey also details any registered or visible easements, rights-of-way, any building set back requirements or zoning compliances or any encroachmentsmade by either the subject property or by adjoining properties onto the subject property. An up-to-date survey includes all physical features and is often required by a lender as part of the mortgage transaction asconfirmation that any building sits within the described boundaries of the land.

Survey Fee:
Paid to a licensed surveyor such as an Ontario Land Surveyor (O.L.S.).

Surveyor’s Certificate:
This formal statement signed, certified, and dated by a surveyor provides pertinent facts about a particular property and any easements or encroachments affecting it and is no longer available in Ontario.

Survivorship:
The right of a person to secure ownership by reason of outliving someone with whom joint tenancy or undivided interest in the land is shared.

Sweat Equity:
The value of work put into a property by its owner. Renovations, maintenance, and repairs can be applied toward a down payment and thus reduce the cash amount required by the lender.

Switch:
To transfer an existing mortgage from one financial institution to another, often changing lenders at the end of a term, when the mortgage becomes “open”. At present, most lenders will pay the costs incurred with a “switch” as well as offering reduced rates to lure clients away from a competitor.

Syndication:
This group of lenders shares in the principal disbursement of a large loan in order to spread risk or to comply with statutory restrictions on loan size.

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Takeout Mortgage:
This long-term, first mortgage agreement is committed and expected to be advanced to a borrower upon completion of construction of a property or in compliance with other conditions in a loan commitment funds are generally used to payoff an interim orconstruction loan.

Tax Account:
A lender will collect and hold property taxes on behalf of a homeowner in this dedicated account and will remit the taxes to the municipality when due.

Tax Certificate:
At the time of a sale, the buyer’s lawyer must confirm that local taxes have been paid up to date. If so, a Tax Certificate is issued by the appropriate taxing authority that details the status of real estate taxes and or other assessments affecting the property, from this information closing adjustments may be calculated – usually requiring the buyer to compensate the seller for any prepaid taxes. If not up to date, the municipality requires that the seller pay them off any arrears from the proceeds of the sale. If proceeds are insufficient, a buyer may be required to pay the shortfall.

Tax Lien:
A tax authority’s encumbrance imposed on real estate for failure to pay taxes within the time required by law. Property title cannot be transferred until all liens for unpaid taxes are cleared, thus preventing any sale of the property.

Tax Sale:
Property sold by the government to recover unpaid taxes.

Teardown Condition:
A property, located in a desirable location, which can be improved by replacing existing structures with newly, built structures.

Tenancy in Common:
Joint ownership of real property by two or more persons with distinct shares, but there is unity of possession with undivided interest.Each person’s interest can be sold or transferred by means of a will, whereby upon the death of one, his/her share is credited to his/her own estate.

Tenant:
This party pays rent for the right to occupy another person’s property, land or buildings, generally for a specific period of time. The landlord tenant relationship implies a transmission of an estate or interest from the landlord to tenant.

Tenant in Tail:
Keeping property within the direct lineal descendants of an ancestor, the freehold estate is limited to the present tenant and to heirs of his body, the line of heirs is called entail.

Tenants In Common:
Ownership of a property by two or more individuals, each of whom owns an undivided interest with equal an right to use the entire property, although each may hold a different number of shares in the property. Unlike joint tenancy, if one tenant passes away, their interest does not pass to the tenant survivor(s), but becomes an asset of the deceased tenant’s estate.  The deceased tenant’s ownership may be sold, mortgaged, or given to an individual named in a Will, the new owner simply becomes the new tenant in common and thus a tenancy in common does not end just because one party chooses to sell his or her interest.

Tenement:
Property held by tenant and subject to tenure.  Aresidential building providing several self-contained rented apartments with only basic amenities.

Tenure:
A system of land holdings for a temporary time period; a tenant’s right to hold property as a tenant.

Term:
A fixed period, a prescribed duration the actual length of time a financial contract such as a mortgage agreementis in effect and the duration for which the money is loaned.Payments made may not fully repay the outstanding principal by the end of the term because the amortization period usually extends longer. The interest rate, payment schedules plus other conditions are predetermined and specified for the duration the term. The interest rate typically stays constant during the term and will be fixed for whatever term the borrower chooses. A mortgage term usually runs anywhere from six months to five years, but may be amortized over a much longer period such as 25 years. When a term expires, the mortgage is due, the borrower can either repay the outstanding balance of principal in full, renew the mortgage for another term, or negotiate and refinancea new mortgage agreement at the then currentmarket rates and conditions. The total life or duration of a mortgage is usually made up of several terms.

Term Mortgage:
Sometimes called a straight loan, this non-amortizing mortgage utilizes interest only payments with the principal being paid in its entirety at the maturity date.

Third Mortgage:
A mortgage placed on real property that is already encumbered with a first and second mortgage, determination of priority is based on the registration time and date.

Time:
As one of the four unities in Joint Tenancy, all of the co-owners must receive their interest in the property at the same time.

Time Is Of The Essence:
This legal term requires punctual performance of a contract on dosing date and is indicated by so stating as in an Agreement of Purchase and Sale.

Timeshare:
A property with multiple ownership, in which owners receive proportional use of the property at scheduled times throughout the year. Timeshare ownership is typically used for vacation or resort properties.

Title:
A legal document establishing the right of ownership, ameans of legal evidence documenting a person’s legal right to possession or ownership of real property.

Title Deed:
Proof of property ownership of as a legal vested right as opposed to a contingent right.

Title Fraud:
A form of fraudulent activity regarding property ownership, such as a fraudster securing a mortgage against a home that he does not own by assuming the homeowner’s identity and credit history and absconding with the loan proceeds.

Title Insurance:
An Insurance policy sold by title insurance companies to protect a property owner, and thus the mortgage lender against any potential legal problems related to “clouds” on a property title such as liens or claims against the property, or of legal priority of the mortgagee. Policies are also purchased for a protection against mortgage fraud as the insurer agrees to pay the insured a specific amount for any loss caused by insured defects to title of a property, for which the insured has an interest as purchaser, lender or otherwise. Title insuranceis usually considerably less expensive than engaging a lawyer to search title in order to provide an opinion of title, a process that can leave a new homeowner vulnerable to issues of liability.

Title Search:
The research of records in the registry or land titles office in order to determine the history and sequence or “chain” of ownership of a subject property. This detailed examination of publicly registered land title documents is to ensure the legal description of the property is accurate and that an owner of real property has the legal right to transfer ownership of title. A title search should also identify any disparities in the chain of title, as well as any liens, claims or other encumbrances, against the property.

Title Search:
The process of examination of the chain of title to real property as filed in public records determines ownership of a subject property and the existence of any encumbrances or defects and determines the state of title.

Torrens System:
A provincial land registration system also known as the “Land Titles System.”
The Torrens system records the state of the title, includingcurrent land title ownership and encumbrances against title and provides assurances that entries are valid, thus removing the necessity of additional searches of prior public records. Originated in Australia by Sir Robert Richard Torrens, the former Premier of South Australia, Collector of Customs, Registrar-General of Deeds and the originator of the Land Titles System that came into effect on July 1^st 1858.

Total Debt Service (TDS) Ratio:
Lenders use this ratio to determine whether or not a borrower is able to carry the debt load for a mortgage. The ratio is calculated as the percentage of a borrower’s gross (before tax)annual income required to cover payments associated with the cost of housing (GDS) and other outstanding loans or debt resulting from credit card, bank loan or car payments or alimony. The percentage is arrived at by totalling a borrower’s monthly shelter costs (mortgage payments(principal and interest), property taxes, approximate heating costs, and half of any maintenance fees orcondominium fees) PLUS all other monthly debt and financing obligations(i.e. personal loans, car payments, lines of credit, credit card debt, other mortgages, support payments, etc.). This sum is then divided by the applicant’s gross monthly income. Most lenders impose a maximum amount associated with this ratio usually no more than 40% for a particular application, with some as low as 37% of gross monthly income, this is to ensure that borrowers can afford to carry the debt.The maximum qualifying TDS in most applications for default insurance purposes is also 40%. Charges for (Principal, Interest and Taxes plus payments on other Outstanding Debts) are divided by the mortgagor’s (Gross Income).
Formula:(PIT + OSD) / GI

Trade Equity:
Property used as trade equity as partial down payment when offering to buy another property.

Trading Down:
Selling a more expensive property in order to purchase a less expensive property. Typically, elderly people or ‘empty nesters’ will sell their existing home and buy a smaller home with the intention of reducing costs associated with home ownership in order to help fund retirement living.

Trading Up:
Selling a less expensive property in order to purchase a more expensive property.

Trailer Fee:
Lenders may pay this fee to a mortgage broker or originator for sourcing or placing the mortgage with that lender. The fee is paid annually and continues for as long as the borrower maintains the mortgage with that lender. This practice is similar to that found in the insurance and mutual fund industries.

Trans Union:
A Canadian company that serves as a credit bureau issuing borrower credit reports which allows lenders to assess credit worthiness of clients.

Transfer:
To pass rights or property from one party to another; a document conveys rights or property between parties.

Transfer Of Charge:
A legal document used for the assignment of a mortgage under the Land Titles System.

Trust Account:
A regulated account used by law firms or real estate brokerages to hold funds in trust until the real estate closing takes place. This account holds funds put forth by the buyer and seller before the closing to be applied toward costs associated with a real estate transaction.This account must be maintained as separate and apart from one’s personal monies, required by law in the case of a broker.

Trust Company:
This commercial bank or other corporation manages, holds, or invests assets for the benefit of others as regulated be the federal Trust Companies Act.

Trust Deed:
This written instrument duly executed, sealed, and delivered, conveys or transfers property to a trustee, usually involving real property.

Trust Fund:
Funds are held in trust, either as a deposit for the purchase of real property or as allocated towards the payment of taxes and or insurance.

Trustee:
A company or individual that is assigned legal authority and responsibilityto administer or manageassets or to hold legal title to property “for the benefit of” oron behalf of another individual, institution or organization referred to as thebeneficiary. A trustee must maintain an accurate account of the trust property or assets and be prepared to render an accounting as requested.

“20/20” Prepayment Privileges:
A borrower may increase principal and interest payments by up to 20% once each calendar year and may prepay the mortgage, in minimal amounts of up to 20% of the original principal each calendar year. There are no additional fees or interest or when a borrower exercises either or both of these privileges.

Type A Vacation Property:
Vacation property with the same construction standards as found in residential property, with year-round road access.

Type B Vacation Property:
This vacation property has not got a standard heating system or year-round road access.

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Umbrella Mortgage:
One mortgage document encompasses one or more already existing mortgages registered on the same property. The mortgagee (lender) is responsible for remission of payment(s), to lender(s), while the mortgagor (borrower) makes one payment to the mortgagee. This product is also referred to as a wraparound.

Unconscionable Transaction:
This can occur when there is a situation involving a disproportion of power between parties, with the stronger party acting in an unreasonable or unfair manner. This often applies in relation to transactions involving a loan where the cost of the loan is excessive and the transaction is harsh and oppressive to the borrower.

Undertaking:
This is a promise by or agreement of a Lawyer to do something or to ensure that certain conditions, usually those of a lender, are met generally after closing due to time constraints. The best example is the undertaking to register a discharge of an obsolete first mortgage after the new one has been registered, because there is simply not enough time to do so at closing. A guarantee of undertaking also governs such closing dynamics as the releasing funds prior to a new mortgage document being officially registered.

Underwriter (Mortgage):
A person employed by a mortgage lender or mortgage broker who approves or turns down loan applications based upon the lender’s guidelines with regard to ratio of mortgage loan to value of property, quality of the real property, and the applicant’s credit-worthiness and ability to pay.

Underwriting:
This procedure is undertaken by lenders and insurers in order to verify information and supporting documentation that has been submitted by prospective clients during an application process. In the case of a mortgage, the analysis makes an assessment of risk involved for a lender to grant or declinea mortgage loan and whether or not the risk is acceptable, based on all the information the borrower has given the lender. Every lender has an underwriting process and lending criteria that differs to some extent from other lenders. Underwriting examines risk on both the applicant(s) and the property andinvolves a property evaluation, appraisal report, plus an evaluation of the borrower’s ability and willingness to repay the loan.

Undue Influence:
This occurs when one party suffers pressure, such as manipulation or persuasion by another party, and acting under that influence, enters into a contract against their best interests or wishes and as such it may be said not to be an act ofexercising their free and independent volition. Evidence of such control may result in invalidation of the agreement by the courts.

Unenforceable Contract:
This type of contract cannot be acted upon and is similar to a void contract. Typically oral contracts are unenforceable in a court of law when a basis of an action cannot be formed. Although aspects may be valid such as an agreement for sale of land, which is required to be in writing by Provincial Statutes of Fraud, if not in writing, it is not enforceable.

Unilateral Mistake:
In relation to contracts, when one party is in error or is of mistaken belief pertaining to an essential element of the agreement if the other party is aware of it and makes no attempt to rectify it, the court may intervene to restore the parties as far as possible to their original position.

Upgrades:
Builder’s a newly built property; offer buyers the option to select higher-quality floor coverings, cabinets, windows, fixtures, etc. at additional cost to the buyer. If the buyer decides not to purchase upgrades, he or she can select the standard options offered by the builder.

Up-Zoning:
The controversial practice of changing an area’s zoning, typically from residential to commercial use, allowing for greater density and congestion in the area. Up zoning affects the current occupants. The term also applies when changing zoning to limit growth and density.

Unit:
One of a number of similar residences within a building or development
One of a number of similar residences within a building or development, and apartment or part of a condominium owned and occupied or rented by the owner/shareholder.

Unities:
In common law, the four essential requirements for creating and maintaining joint tenancy. They are Time, Title, Interest and Possession.

Unity of Interest:
One of the incidents of joint tenancy is that all joint tenants must have the same interest (extent, nature, duration) in the property jointly held.

Unity of Possession:
One of the incidents of joint tenancy is that all joint tenants are equally in possession of the entire property with an undivided interest in the whole of the property and not merely in respect of a particular share.

Unity of Time:
One of the incidents of joint tenancy is that all joint tenants must receive their interests at the same time.

Unity of Title:
One of the incidents of joint tenancy is that all joint tenants must have right of title under the same document unlike Tenants in common who may take property by different titles.

Usury:
The lending of money at an unconscionable and exorbitant rate of interest and above what is allowable by statutes or interest that is excessive.

Usury Rate:
This is the maximum legal rate allowable for interest, discounts, or other fees that may be charged for the use of money.

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Valid:
A document executed with proper formality that has binding force, is legally sufficient, is sustainable and effective in law. If a property title is valid then it has legal force and is legally binding.

Valuable Consideration:
What a party receives in exchange for what they agree to do. The granting of some beneficial right, interest, profit by one party in exchange for the forbearance, detriment, performance, loss or responsibility undertaken by the other party to a contract.

Valuation:
The process of assessing value or price of a property through an appraisal its quality, condition, and desirability, or of the cost of replacement.

Valuation Date:
A municipality will set this date as a benchmark for establishing the assessed value for all properties in its jurisdiction.

Variable-Rate Mortgage (VRM):
A mortgage product for which the rate of interest may varyduring the term of the mortgage withadjustments linked to a specific factor such as prime lending rate changes at chartered banks or guaranteed investment certificate rates for a designated lender, thus reflecting changes in the current market rates.The interest rate is usually compounded monthly and in most, but not all cases, the VRM is fully open. While the regular payment amount usually remains the same for the term’s duration, the amount applied toward the principal fluctuates according to the change in the rate of interest or as money market conditions change, usually not more than once a month.The regular payment stays the same for a specified period, however, if interest rates go down, more of the payment is applied to reduce the principal; if rates go up, more of the payment is applied to payment of interest. Variable rate mortgages may be open or closedand are sometimes referred to as floating rate mortgages oradjustable-rate Mortgages. A capped variable rate mortgage means that the amount of interest that you will pay has a ceiling or cap regardless of how high interest rates go. Also referred to as an adjustable rate mortgage, it is the opposite of a fixed rate mortgage.

Vendor:
One who sells something, in a real estate transaction this party is the seller of real property.

Vendor Take Back (VTB) mortgage:
Where the seller, vendor, of a property uses their own equity to provide some or the entire mortgage financing in order to sell a property. This mortgage held by the vendor of real propertyis taken from the purchaser as a portion of payment on the purchase price for that property. In order lure a prospective buyer or to ensure the sale of a property, a vendor may provide all or some of the financing.Also referred to as “vendor financing.”

Vendor’s Lien:
The vendor of property will register this notice on title for any remaining unpaid balance of the purchase price at the time of closing of the transaction. It is usually collaterally secured by a mortgage and has priority over the claim of an execution creditor of the purchaser.

Vendor’s Warranty:
This guarantee implies that a home will be built in the appropriate way so that it is suitable for human habitation, if not, the purchaser will be entitled to damages for warranty violation.

Verification Of Employment:
Lenders sometimes contact an applicant’s employer in order to verify information provided in a mortgage application, such where he or she works,income structure, length of employment, position, and so on.

Vicarious Performance:
This involves the subcontracting or delegation of contractual obligations or responsibilities to a third party.

Void:
Something that is void has no validity or effect under the law meaning it is null, ineffective or useless. A contract is voidable when it contains a condition that allows one party involved in a contract to retract or cancel the contract at their sole and absolute discretion, thus the contract can be rendered void, having no legal force.

Void Contract:
This contract or agreement has no legal force or validity.

Voidable:
Where one party to a contract is entitled rescind the contract at their option as specified in the agreement.

Voidable Contract:
This contract has the capability of being made void by one of the parties involved, but has full legal validity until rescinded.

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Waiver:
The act of deliberate and voluntary relinquishment, renunciation, abandonmentor surrender of a claim, right, or privilege.It implies intention to proceed with the execution of an agreement while forgoing some condition as set forth therein.

Walk-Through:
A buyer’s final inspection of a property which is being purchased, usually takes place on the day of closing or one day prior to ensure all the conditions of the sale have been met.

Warranty:
A guarantee or assuranceprovided by a company or vendor to a purchaser which states that a product is reliable and free from known defects and that the seller will, without charge, repair or replace defective parts within a given time limit and under certain conditions. This side agreement refers to subject matter of a contract, but is not essential or intrinsic to the main purpose of the contract, asa minor promise that does not go to the heart of the contract, it is not vital to the enforcement of the contract, unlike a condition.If there is a violation of warranty, the purchaser cannot cancel or terminate the contract, but must complete the contract and sue for damages or financial losses that can be demonstrated.

Weekly And Bi-Weekly Payments:
A borrower can usually choose to make mortgage payments once a week or once every two weeks. This pays principal down faster because it makes the equivalent of one extra monthly payment per year.

Witness:
This legally competent individual signs or subscribes to a document to evidence the fact that it was executed in their presence and thereby attesting to its authenticity and proving its execution by testifying, if required. A witness is usually required to sign a deed, will or other legal document to acknowledge the witnessing of the signatures of the principal parties involved in a legal agreement.

Work Orders:
Municipal by-laws (“zoning” by-laws) require among other things that residential property be maintained in a safe and habitable condition, and that a property’s use conform to specific requirements (no illegal basement apartments, satellite antenna, etc.).

Working Capital:
Balance sheets provide information to determine the working capital of a company.It is calculated bysubtracting total current liabilities from total current assets of the company. Once working capital, also referred to as net current assets, is determined it indicates how much money would remain once all current liabilities were paid and as such, this demonstrates a company’s ability to meet daily obligations and whether or not the company is in a favourable position to expand growth. Lack of sufficient working capital can lead to business failure.

Wraparound Mortgage:
A refinanced mortgage arrangementwhereby one document encompasses one or more, already existing mortgages registered on the same property. Balances on all outstanding mortgages are amalgamated into a single loan with the mortgagee being responsible for making multiple payments while the mortgagor makes only one payment to the mortgagee.

Writ:
This document is issued by a court in the name of sovereign, state, etc. as a form of written command to the party to whom it is addressed directing said party to act or abstain from acting in some way.

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X:
A symbol used in contracts or other legal documents to indicate or mark where the signature or signatures of the parties involved must be written.

Xanadu:
This is the name of an idyllic and beautiful place.

Xenodochium:
This is an old term used for denoting an inn.

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Yard:
This Imperial measure of length consists of three feet or thirty-six inches. Also refers to an enclosed area of ground on a property, such as a back yard or courtyard.

Year-End Statement:
A mortgage summary or report that is sent to the borrower at the end of each year. The statement shows the amount of taxes and interest paid on the mortgage during the year, as well as the remaining loan balance.

Yield:
The return on an investment expressed as a percentage per annum of the amount invested is usually derived in the form of interest or dividends. In leases of real property it indicates a specific amount of rent paid to the lessor.

Yield to Maturity:
The annual percent returned to the lender each year on actual funds borrowed, considering that the loan will be repaid in full upon maturity.

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Zero Down Mortgages:
This type of mortgage provides100% mortgage financing and is also referred to as a “No Money Down Mortgage.” This type of mortgage carries a higher interest rate.

Zoning:
Part of a municipal planning process, laws are enforced by municipal authoritiesto regulate the character, mode and intensity of use permitted for real estate in specifically defined areas. Specified limitation on the use of landand construction and use of building in defined areas or regions within a municipality that are usually distinguished from adjacent areas by distinctive features. Districts are established and zoned in order to define and regulate the type of land use permitted for each area. A zoning ordinance might specify the construction and use of buildings;allow houses or apartments to be built, but not factories or warehouses;dictate uniform holding restrictions related to use, height, area, bulk and density of population; zoning by-laws are imposed upon private property. A zoning restriction for example, might state that one cannot build a duplex on an area zoned for single-family dwellings.

Zoning Laws:
Municipal by-laws that prescribe land use for specific purposes, and how buildings on the land may be put to use.