1-855-SAN RATE (726-7283)

Mortgage Jargon

“A” Mortgage Lender

The traditional lending source for mortgages such as a bank, credit union and other institutions with similar purposes that cater to customers with good credit scores and a reliable income, considered as “A” clientele. With an A lender, a borrower qualifies for a mortgage based on the borrower’s income and credit.


A legal term for the willing renunciation of rights to an asset or relationship. In real estate. abandonment relates to a property that the owner voluntarily relinquished his/her rights to. Once property has been “abandoned” it is no longer the property of the owner or debtor and creditors can seek to recover their money.

Abstract of Title

The written history of a piece of land to document all transactions associated with that land from the time the property was first sold to the present and includes all items of record that might impair the title, such as liens, charges or encumbrances.

Absolute Title

A clear title that is free of any liens or judgments. A clear title is normally required before a mortgage is granted.

Accelerated Amortization

The restructuring of an existing mortgage loan by increasing the monthly payments in order to pay off the loan in a shorter time than the original maturity.

Acceleration Clause

A provision that states that after one loan payment is late, the loan is considered to be in default, thereby making all outstanding payments due and payable at once or on the request by the lender. Acceleration clauses protect lenders when borrowers miss payments or break any covenants defined in the mortgage contract.

Accelerated Bi-Weekly Mortgage Payment

A mortgage loan that requires payments every two weeks. In total, 26 payments per year. Each bi-weekly payment is equal to one-half of the standard monthly payment.

Accelerated Weekly Mortgage Payment

A mortgage loan that requires payments every two weeks. In total, 52 payments per year. Each weekly payment is equal to one-quarter of the standard monthly payment.

Accredited Mortgage Professional (AMP) 

A designation for those in the mortgage industry that have passed a single national proficiency standard for mortgage professionals in Canada.

Accrued Interest

An interest that has been incurred on a loan but is yet to be charged and in turn paid by the borrower. The interest on the mortgage is calculated daily, but mortgage payments are paid either weekly, bi-weekly, semi-monthly or monthly. Interest accrues from the time of the last payment paid to the time of the next mortgage payment.

Acquisition Fee

Any fee incurred in the process of the acquisition or purchase of a real estate property. Examples of acquisition fees include closing costs, commission to the real estate broker, and any costs associated with development and construction.
Acquisition fees may also refer to a charge from a lessor or lender to cover the expenses incurred for arranging a lease or loan.

Additional Security

A security over a loan that guarantees the lender a portion of the value of the loan until the loan is repaid in full. Usually, the property the borrower has taken out the loan to buy acts as the security over the loan.

Additional Repayment 

An extra payment that goes towards the principal portion of a loan. Any amount the borrower pays above the minimum repayment amount is an additional repayment. Additional repayments allow the borrower to pay off the borrower’s loan sooner. The more paid in addition to the borrower.

Add-On Interest

A method of calculating the interest to be paid on a loan by combining the total principal amount borrowed and the total interest due into one amount owed, to be paid off in equal installments.

Adjusted Basis

The original cost of a property plus the value of any capital expenditures for improvements to the property, minus any depreciation taken.

Adjusted Cost Basis (ACB)

A tax accounting term that refers to the change in an asset’s book value resulting from improvements, new purchases, sales, payouts, or other factors. An adjusted cost base can be calculated as Original cost – Depreciation + Capital Expenditures.

Adjustable-Rate Mortgage (ARM) Margin

A fixed percentage rate added to a variable rate to determine the fully indexed interest rate of an adjustable-rate mortgage (ARM).

Adjustable-Rate Mortgage (ARM) 

A type of mortgage in which the interest rate applied to the outstanding balance varies throughout the life of the loan. With an adjustable-rate mortgage, the initial interest rate is fixed for a period of time. After the initial period, the interest rate resets periodically, at yearly or even monthly intervals. ARMs are also called variable-rate or floating mortgages.

The interest rate for ARMs is reset based on a benchmark or index rate (which can be prime rate), plus an additional spread called an ARM margin. While the index is variable, the margin is fixed for the life of the mortgage. When index rates are rising, the adjustable rate on an ARM increases which benefits the lender and generates a greater level of interest income. Adjustable-rate mortgage loans are beneficial for borrowers when index rates are falling.
The ARM product automatically adjusts mortgage payments depending on the index rate, so the borrower maintains the original amortization schedule. If the prime interest rate increases, payments will increase. Conversely, if the prime rate decreases, payments will decrease as well.

Adjustment Interval

The amount of time between interest rate changes on an Adjustable-Rate Mortgages. The rate adjustment interval is often displayed in x/y format, where “x” is the period until the first adjustment, and “y” is the adjustment period thereafter. For example, a 5/1 ARM is one on which the initial rate holds for 5 years, after which it is adjusted every year. The rate adjustment interval and the payment adjustment interval are the same on a fully amortizing ARM, but may not be on a negative amortization ARM.
After an initial fixed-rate period, the ARM interest rate adjusts up or down once per interval for the remainder of the loan.

Advertised Rate

The nominal interest rate used when calculating the interest expense on a loan.


A person or company authorized to act on behalf of the customer who is selling or to arrange financing of the customer’s property.

Agreement of Purchase and Sale

A written agreement between the seller and the buyer in which the buyer agrees to buy a certain real property and the seller agrees to sell upon terms and conditions as outlined in that agreement.


A note on a person’s credit report that indicates other names used for their financial accounts. Sometimes marked as “Also Known As” or “AKA”, this can include maiden names or variations on the spelling and format of the person’s full name.

Alienation Clause

Also called a due-on-sale clause, is a provision in the mortgage contract signed with the lender that states that the borrower must pay the mortgage in full before the borrower can transfer the property to another person. An alienation clause voids certain contractual obligations to an asset if that asset is sold or if ownership is transferred to another entity. Alienation clauses also exist in insurance policies on any property that’s been sold.

All-In-One Loan

A type of loan that allows homeowners to pay down more interest in the short-term while giving them access to the equity built up in the property. All-in-one mortgages allow for the combining of a mortgage and savings. It combines the elements of a checking and saving account with a mortgage and home equity line of credit (HELOC) into one product, giving the customer access to all of the funds above the value of the minimum home loan repayment amount. An all-in-one loan is also known as a home equity loan or a transactional loan.


An amount of money set aside for future investment in mortgages.

Alternative Mortgage 

A type of non-conventional mortgage. Funds of alternate mortgages originate from private individuals, mortgage investment companies (MICs) or mortgage finance companies (MFCc) which lend out for investment purposes.

Alternative lending is aimed at borrowers who do not meet traditional lending criteria and when traditional loans cannot be approved. The alternative mortgages usually come with higher interest rates. Alternative mortgage lenders base their rates on the area, type of property, degree of risk perceived and estimated costs of administration. Each private mortgage interest is quoted on individual circumstances.


An additional feature of the home or property considered to benefit a property and thereby increase its value. It may be a natural feature such as a park or coastal location, or a man-made addition such as a swimming pool or an outdoor entertaining area.


The process of repaying a debt or mortgage loan over time in regular installments of principal and interest repayments. The principal balance on a mortgage declines over time as the borrower makes periodic payments. A higher percentage of the flat monthly payment goes toward interest early in the loan. With each subsequent payment, a greater percentage of the payment goes toward the loan’s principal.

Amortization Schedule

A table showing the amounts of principal and interest comprising each level payment due at regular intervals and the outstanding principal balance of the loan after each level payment is made.

Amortization Term

The period, usually a number of years, over which a loan will be completely paid by regular installments of principal and interest repayments.

Amortizing Loan

A type of loan that requires regular monthly payments. With each payment, a portion of the payment goes toward the loan’s principal and a portion of it goes toward interest. A fully amortized loan has equal monthly payments, while partially amortized loans also have payment installments, but either at the beginning or the end of the loan, a balloon payment is made. Also known as an installment loan.

Amount Financed

The loan principal a borrower receives from a lender plus loan costs and fees that have been rolled into the loan.

Annual Percentage Rate (APR)

The simple annual rate charged for borrowing or earned through an investment. The APR includes the interest expense on the loan and all fees and other costs involved in procuring the loan. The fees can include broker fees, closing costs, rebates, and discount points. APR is a more accurate picture of total borrowing cost as it takes into consideration all costs associated with procuring a loan, particularly a mortgage.
The APR is either greater than or equal to the nominal interest rate, except in the case of a specialized deal where a lender is offering a rebate on a portion of the borrower’s interest expense.

Annual Percentage Yield (APY)

The actual rate of return earned on a savings deposit or investment in a year taking into account the effect of compounding interest. APY is calculated using the formula: (1 + r/n )n – 1, where “r” is the stated annual interest rate and “n” is the number of compounding periods each year. APY is also called the effective annual rate, or EAR.

Application Scoring

A specific kind of statistical scoring that lenders use to evaluate an applicant for acceptance or denial. Similar to credit scoring, application scoring often factors in other relevant details such as employment status and income to determine risk.


An estimate of the market value of a piece of real estate based upon a variety of factors. There are 3 main methods of appraising: Comparative sales approach, Cost replacement approach and Income approach. Which method is used depends on the circumstances in which the real estate is to be used.

There are several times a property owner may choose to get a property appraisal, including: when buying or selling a home/investment property, refinancing, taking out equity, and even when appealing a property tax assessment.

Appraisal Fee

The fee used to cover the cost of appraisal.  The appraisal fee is usually paid by the borrower as part of the loan application costs.

Appraisal Report

A detailed estimation of the value of a property by a person licensed to do so.

Appraised Value

A professional judgment of a property’s worth, which may not correspond to its actual market value or selling price. Depending on the appraisal approach, an appraiser may consider the price of similar homes in the area, the condition of the home and the features of the property to estimate the value.


The increase in a real estate property’s value over time. How much a property appreciates each year depends on the local real estate market, inflation, and any improvements to the property. A property’s appreciation is calculated based on the fair market value of comparable homes/properties for sale in the neighborhood.

Arm’s Length

A transaction freely arrived at in the open market unaffected by abnormal pressures or by the presence of normal competitive negotiation as might be true in the case of a transaction between related parties.

Articles of Incorporation 

A set of formal documents filed with a government body to legally document the creation of a corporation. Articles of incorporation set forth certain information as mandated by statute, like the ownership structure of a corporation, the corporation’s name, street address, agent for service of process, and the amount and type of stock to be issued.
Articles of incorporation are also called the “corporate charter,” “articles of association,” or “certificate of incorporation.”

Asking Price

The amount of money a property seller wants a buyer to pay to purchase his property. The asking price is generally part of the property listing and may not be the final price paid by the buyer.

Assessed Value 

The dollar value placed on a real estate property by local governments used to calculate property taxes.


A resource with financial value, which can be owned in the hope of providing future benefits or income.

Assumable Mortgage

A mortgage contract that allows, or does not prohibit, a creditworthy buyer from assuming the mortgage contract of the seller. Assuming a loan can save the buyer money if the interest rate on the existing mortgage is below the current market rate. A loan with a “due-on-sale” clause stipulating that the mortgage must be repaid upon sale of the property, is not assumable.

Assumable Clause

A provision in a mortgage contract that allows a buyer to take responsibility for the mortgage from the seller.


An arrangement in where an outstanding mortgage and its terms are transferred from the current property owner to a buyer.

Assumption Fee

A lender’s charge for updating records when a buyer takes responsibility for a mortgage from the seller.

Average Annual Yield

The average yearly income on an investment, expressed as a percentage. Such investments can be deposit accounts with the bank, shares of stock, or assets like commodities or real estate. The average annual yield is calculated by adding all the income from investment and dividing that amount by the number of years the money was invested.

“B” Mortgage Lender

A non-banking institution that deals almost exclusively in mortgages. Unlike the “A” lenders, these lenders offer a lower barrier of entry to qualifying for their products but can offset that with higher interest rates. This means that borrowers with bad credit or no credit, or with lower income can still get approved for a mortgage. “B” lenders rely more heavily on the equity in the property. “B” mortgage lenders do not deal with customer deposits. Also called Alternative Lenders.

Back-End Ratio/Back Ratio

Also known as the debt-to-income ratio, is a ratio that indicates what portion of a borrower’s monthly income goes toward paying debts. Total monthly debt includes expenses, such as mortgage payments (principal, interest, taxes, and insurance), credit card payments, child support, and other loan payments. It is calculated by the formula: (Total monthly debt expense / Gross monthly income) x 100.

Backup Offer 

Another offer or bid for a property to be considered by the property seller if the current offer falls through. When a home has a status of “Backup Offer”, it means the seller has accepted an offer from a buyer but is still accepting offers from other buyers.

Bad Credit

A term used to describe poor credit rating. Common practices that can damage a credit rating include making late loan/credit card payments, skipping payments, exceeding card limits or declaring bankruptcy. “Bad Credit” can result in being denied future credit.

Bad Credit Mortgage

A home loan option for individuals with poor credit ratings who cannot get a mortgage from the major banks. The two most popular bad credit mortgage providers are alternative (or “B” lenders) and private lenders.

Bad Debt

Debt that cannot be collected.  Bad debt is considered as an expense and in some cases can be written-off on both business and individual tax returns.


The amount available in an asset account, or the amount owed on outstanding debt.

Balance Sheet

A statement of the assets and liabilities of a company or a person at some given time.


See the Credit Utilization Ratio.

Balloon Loan

A loan that does not fully amortize over its term. At the end of the loan term, a balloon payment,  one that is larger than the periodic payments, is required to pay off the remaining principal.

Balloon Mortgage

A type of mortgage that does not fully amortize over its term to maturity. The balloon mortgage usually has an initial period of low or no monthly payments, but at the maturity of the mortgage term, the borrower is required to pay off the full balance in a lump sum. The monthly payments, if any, may be interest-only.

Balloon Payment

A lump-sum payment due to pay off a loan at maturity. Balloon payment is usually much larger than the earlier payments on the same loan.

Bank of Canada 

Canada’s central bank – was founded in 1934 and became a Crown Corporation in 1938. It serves to promote the economic and financial well-being of Canada and is responsible for setting the overnight lending rate and determining monetary policy.

Bank Rate

The rate at which a nation’s central bank charges on loans to the charted banks.  This is also the rate at which the chartered banks lend money to their prime customers.

Bank Spread

The difference between the interest rate a bank charges a borrower and the interest rate a bank pays a depositor. A bank earns money from the interest it receives on loans and other assets, and it pays out money to customers who make deposits into interest-bearing accounts. The ratio of money it receives to money it pays out is called the bank spread. Also called the net interest spread, the bank spread is a percentage that tells someone how much money the bank earns versus how much it gives out.

Bank Statement

A document that summarizes all transactions during the statement period and given to account holders by a bank or credit union to keep them informed of all transactions they made during that period. The statement includes deposits, charges, withdrawals, as well as the beginning and ending balance for the period.


A legal process through which a debtor who cannot repay debts to creditors may seek relief from some or all of their debts.

Basis Point

A unit of measure used in finance to describe the amount of change in yield in money debt instruments, including mortgages. It is one-hundredth of 1%. In other words, 1% equates to 100 basis points.

Beacon Score

A credit scoring method developed by Equifax. It is another name for the FICO score from Equifax. Beacon Score (or FICO score) gives the lender insight into a borrower’s credit history and potential ability to be able to repay the debt for which they are applying.


An improvement made to an asset that enhances its value. In real estate terms, betterments are improvements to a property or to surrounding infrastructure, such as roads, sewers or a swimming pool, that boost the value of a property.

Bill of Sale 

A formal document that transfers the ownership of goods or property from one party to another. A bill of sale provides legal evidence that a seller has transferred all rights to an asset to a buyer.

Bi-Monthly Mortgage

A mortgage on which the borrower pays half the monthly payment on the first day of the month, and the other half on the 16th. 

Bi-Weekly Mortgage

A mortgage on which the borrower pays half the monthly payment every two weeks. Because this results in 26 payments per year, the bi-weekly mortgage amortizes before term.

Blanket Mortgage

A single mortgage used to provide financing for multiple properties owned by the same borrower. It is a common option used to finance commercial purchases. A blanket mortgage usually comes with a release clause that permits the borrower to sell a piece of property, without having to use the proceeds to pay down the loan.

Blended Mortgage

A type of mortgage product that combines the mortgage rate from an existing mortgage with the mortgage rate from a new mortgage and blends them into a new rate somewhere in-between the two. Usually used by borrowers to avoid breaking their mortgage early with penalty, to access equity and/or obtain a lower mortgage rate.
There are two options of blended mortgage: Blend and Extend and Blend to Term. Under a Blend and Extend option, the lender gives a borrower a brand new term at the current rate but ‘blends’ the penalty for breaking the existing mortgage to the new rate so the borrower is not required to pay it out of the pocket, or add it to the mortgage.
With the Blend to Term option, the mortgage term remains as is, only a different interest rate is applied to the mortgage till the end of the term.

Blended Payment

The method of repayment where periodical payments of principal and interest are made in such a way that the payments remain constant in amount over an agreed-upon amortization period.

Blended Rate

An interest rate charged on a loan that represents the combination of a previous rate and a new rate. Blended rates are usually offered through the refinancing of existing loans that are charged a rate of interest that is higher than the old loan’s rate, but lower than the rate on a brand-new loan.

Block Funding

The allotment by a lender of funds for a number of loans for one builder.

Blue-Ribbon Condition

A term used to describe a home that has been maintained immaculately and appears to be in its original condition. Another term for blue-ribbon homes is “in mint condition”.


A person or a company who is requesting the loan and who will be responsible for paying it back.

Bottom-Line Price

The highest price a buyer would be willing to pay for a property.

Break-Even Point

The point at which expenses are equal to income or savings. It is a simple financial tool that can be used to determine at what stage a business or an investment will be profitable.
In mortgages, the break-even point often refers to the time it takes to recoup the costs of refinancing a loan. It refers to the length of time it takes for a mortgage refinancing to pay for itself.

Bridge Financing

Short-term financing taken out against one property to finance the purchase of a new property.
Typically used if a homeowner is selling one property and buying another at the same time. Bridging finance offers homebuyers a short-term loan to cover the money they need to buy a new home while they are waiting for the proceeds of the sale from their old home.

Bridge Mortgage

A short-term loan used to allow a homebuyer to purchase a replacement property while still trying to sell their existing home. The borrower’s current home is used as collateral and the money is used to close on the new home before the current home is sold. Some loans are structured so they completely pay off the old home’s first mortgage at the bridge loan’s closing, while others pile the new debt on top of the old.

Broker Premium

The amount a mortgage broker is paid for serving as the middleman between a lender and a borrower. This premium comes from the surcharge a broker applies to a discounted loan before offering it to a borrower.


An economic cycle that is characterized by the rapid escalation of market value, particularly in the price of assets. A bubble occurs when the price of a traded asset grows beyond its true value. The price of the asset grows rapidly and masks the relative insecurity of the price, which eventually results in a sudden, unanticipated drop in the value of the asset. Because of this, bubbles are often only identified after they’ve “burst,” causing financial distress for the asset’s owners. The crash of the USA housing market in the late 2000s was caused by the bursting of one such bubble.

Builder’s Loan

A short-term mortgage loan used to finance the building of a home or another real estate project. The builder or home buyer takes out a construction loan to cover the costs of the project before obtaining long-term funding. Also known as a construction loan.

Building Code

A set of minimum regulations respecting the safety of the buildings concerning public health, fire protection and structural sufficiency.

Building Inspection

An inspection process conducted by a building inspector to ensure the building or home is structurally sound and safe for use. The building inspection can be conducted during new construction, renovation or for the purpose of the property purchase. The inspector makes a professional judgment about whether a building meets building code requirements.
In the case of prospective real estate purchase, having issues uncovered in a building inspection can offer the buyer leverage in negotiating a better price and some contracts of sale can be signed subject to an acceptable building inspection report.

Building Permit

An official document issued by a local government permitting an individual or company to demolish, construct, enlarge, or alter a building.

Buy Down

A lump-sum payment as consideration for the reduction in the interest charged on a loan from that which would normally be charged.

Buy Down Mortgage

A home loan in which the lender charges below-market interest in exchange for discount points.

Buyer’s Agent 

A party that acts on the behalf of a buyer to seek out suitable properties and negotiate with seller’s agents or vendors for a suitable price or contract. Also known as a Selling’s Agent.

Buyer’s Market

A market in which the supply of homes significantly exceeds demand. Since supply is greater than demand, the price of homes is pushed lower, making them more attractive to buyers. In contrast, a seller’s market is one in which there are more buyers and relatively fewer homes for sale, which leads to multiple-offer situations that drive up prices.

A market’s absorption rate is the best way to figure out whether a certain area is behaving as a buyer’s market or a seller’s market. The absorption rate is calculated by looking at how many homes sold in a certain month and dividing that number by the total number of homes for sale at the end of the month. An absorption rate of 20% or below is generally deemed a buyer’s market, since homes are selling relatively slowly and the number of months of supply (20/100, or 5 months) is high. 

Call Option

A financial contract that gives the holder or buyer the right to purchase a stock, bond, commodity or other security within a specified period at a predetermined price. If the price of that security goes up, the holder would be able to make a profit by exercising the call option and buying the security at a lower price than the market value. The holder is not obligated to buy the stock, but the holder does not recover the fee paid to the writer (or seller) of the option.

In mortgages, it is a clause that gives the lender the right to request the balance at any time.

Call Protection

A feature of mortgage loans or mortgage-backed securities designed to reduce the risk of an early call, or early prepayment, of a loan or security. Call protection may be accomplished by including prepayment penalties and lock-in periods in mortgages. Call protection also may be achieved by structuring a mortgage-backed security in such a way that if underlying loans are paid earlier than scheduled, the payments are not immediately passed through to the investor holding the mortgage-backed security.

Canada Guaranty

The third-largest mortgage insurance provider in Canada.

Canada Mortgage and Housing Corporation (CMHC)

A federal Crown corporation that administers the National Housing Act (NHA). Among other services, CMHC also insures mortgages for lenders that are greater than 80% of the purchase price or value of the home. The cost of that insurance is paid for by the borrower and is generally added to the mortgage amount. These mortgages are often referred to as ‘Hi-Ratio’ mortgages.

Canada Mortgage Bonds (CMB)

A fully guaranteed fixed interest rate income investment backed by CMHC (Canada Mortgage and Housing Corporation).


Also known as an interest rate cap, is a limit on how high an interest rate can rise on variable-rate debt. Caps can give borrowers protection against striking rate increases and also provide a ceiling for maximum interest rate costs. Interest rate caps are commonly used in variable-rate mortgages and specifically adjustable-rate mortgage (ARM) loans.


A measurement of a borrower’s ability to repay a loan. Capacity is a major factor in determining creditworthiness. Lenders determine borrower’s capacity by assessing whether a borrower is likely to continue to earn their current income or improve upon it during the period of the loan. They will generally look at the amount of time an applicant has held their current position and how stable that job appears to be.


The value of a long-term asset if it was to be liquidated at their current value.

Capital Asset

A valuable item that a person or company owns for investment or personal purposes, such as stocks, bonds, real estate and even collectibles or art. When a capital asset is sold, the owner earns either a capital gain or a capital loss, depending on the purchase and sale price.

Capital Cost Allowance (CCA)

An annual deduction in the Canadian income tax code that can be claimed on depreciable assets for income tax purposes under the umbrella of the Income Tax Act.

Capital Gain

The profit that results from a sale of a capital asset, such as stock, bond or real estate, where the sale price exceeds the purchase price. The gain is the difference between a higher selling price and a lower purchase price. Conversely, a capital loss arises if the proceeds from the sale of a capital asset are less than the purchase price.

Capital Gain Tax

A federal tax charged on the monetary gain an owner makes from the sale of an asset. The primary residence is excluded from capital gains tax, or CGT, when the homeowners sell it.
On investment properties in Canada, the capital gains inclusion rate is 50%, which means that the owner has to include 50% of the capital gains as income on the owner’s tax return.

In the USA, the gain obtained in the sale of primary residences is taxable under certain conditions.

Capital Expenditure (CapEx)

Money spent by a company to add or expand property, plant, and equipment assets, with the expectation that they will benefit the company over a period longer than one year. Also called capital outlay.

Capital Improvement 

Any permanent structure or other asset added to a property that adds to its value.

Capital Investment

Money used to purchase permanent fixed assets for a business, such as machinery, land or buildings as opposed to day-to-day operating expenses.

Capital Loss

The loss incurred when a capital asset, such as an investment or real estate, decreases in value and is sold for a price lower than the purchase price.


The conversion of whole or portion of the interest amount on the loan or outstanding debt on the loan into a principal sum and the subsequent amortization of that sum with the new payment amount. This is a common practice for lenders that modify loans for borrowers that are in debt and cannot make their current mortgage payments or when lenders allow the borrower to make minimum payments on the loan for some time.

Capitalization Rate (Cap Rate)

A ratio used to estimate the return on investment of a real estate property, such as an apartment or a commercial building. It is calculated by dividing the net operating income of a property in a given year by the purchase price or current value of the property. Net operating income is the income derived from the property after subtracting operating expenses. For example, an apartment building that recently sold for $1,000,000 and generates $100,000 in income after expenses has a capitalization rate of 10%.
Lenders use the cap rate to make decisions concerning the interest rate when making commercial mortgages.

Capitalized Interest

The cost of borrowing to acquire or construct a long-term asset. It is also the interest that a borrower owes on a loan but has delayed payment of the interests and the loan balance has increased by the amount of unpaid interest accrued the borrower owes. Capitalization of interest typically occurs with student loans, as well as construction or real estate loans. The capitalization of interest will not occur until the borrower starts repayment on the loan. Interest will accrue on the loan even if it is not yet in repayment, but the borrower is often free to make an interest-only payment to prevent capitalization of interest from occurring.

Capped Loan

A loan that has an interest rate that will not exceed a set level for a fixed period. That interest rate could fall when the official cash rate drops, but it won’t rise exponentially as standard variable rate can.

Cash-Back Mortgage 

A type of mortgage where the borrower receives a cash rebate in addition to the amount financed to purchase a real estate property. With this type of mortgage, the lender will advance to the borrower a lump sum of cash when at the mortgage closing. The amount of cash rebate the borrower receives is calculated on the size and term of the borrower’s mortgage using a set percentage (usually between 1% and 7%). Mortgages with a cash-back option always come with a fixed interest rate.

Cash-In Refinance

A refinance transaction where borrowers make a larger payment toward the principal before refinancing to lower the loan to value ratio.

Cash Flow

The actual inflow and outflow of cash during a given period. It represents the money coming in and going out of a company or organization during a specific accounting period.
For a rental property owned by an investor, this refers to the amount of money a property generates after expenses are accounted for.

Cash Flow Forecast

An estimate of when and how much money will be received and paid out of a business over a particular period. A cash flow forecast shows the business’s projected cash based on income and expenses and is an important tool when it comes to making decisions about activities such as funding, capital expenditure and investments.

Cash Flow Statement

A financial statement that provides aggregate data regarding all cash inflows a company receives from its ongoing operations and external investment sources. It also includes all cash outflows that pay for business activities and investments during a given period.

Cash-Out Refinance

A new mortgage for an existing property in which the amount borrowed is greater than the amount of the previous mortgage. The difference is given to the borrower in cash when the loan is closed. Also known as Cash-Out Mortgage.

Caveat Emptor

A Latin word for ‘let the buyer beware’. It means that the property buyer is responsible for doing due diligence in examining the property for any issues before it is purchased.


A notice, warning, or word of caution registered on property title by a person or entity who is not the registered owner, claiming to have a proprietary interest (i.e. a right to call for or receive a transfer charge) in a land or a charge. The registered owner of the land or charge cannot deal with the land of charge without the consent of the cautioner.

Central Bank

A body established by a national government to regulate currency and monetary policy on a national-international level. In Canada, it is the Bank of Canada. In the United States, it is the Federal Reserve Board.

Certificate of Charge 

A legal document of a mortgage registered against a property in the Land Titles System. Every mortgage is recorded with a certificate of charge.

Certificate of Currency 

A written document provided by an insurance company to confirm that there is a current and valid insurance policy on a property. 

Certificate of Title

The document that details the property description and identifies ownership of the property. The certificate of title also shows whether there are any mortgages or encumbrances on the property. Certificates of title can apply to any type of property that has a title.

Certificate of Occupancy

A certificate provided by the City Building Inspector that a building has been constructed under the authority of the issued building permit and may be occupied.

Cessation of Charge

A discharge of a mortgage registered under the Land Titles Act.

Chain of Title

A real estate records search that lists the successive owners of a home or property. The purpose of a chain of the title search is to ensure the home or property is free to transfer to a new owner.

The search includes tracing the title of ownership back to the original owner and ensuring the title doesn’t contain any liens, judgments, foreclosures or any other encumbrances that would hinder the transfer of title to a new owner.

Change Frequency

A rate of how often payment and/or interest rate changes in an adjustable-rate mortgage, or ARM. Also known as the adjustment frequency. The interest rate changes on the reset date for that specific ARM product. The adjustment frequency can significantly add to interest costs over the life of a loan.


A borrower’s reputation for paying bills and debts based on past behavior.


An interest in land less than the fee simple estate that is registered on the title, such as a mortgage, easement, statutory right of way, claim of lien or judgment. Charges are shown in the Charges, Liens and Interests section on the title. A charge arises by a contract. With a charge, however, there is no transfer of the title or possession, but the land is charged with the payment of a debt or the discharge of an obligation.
Registering a charge on the title provides a means of securing a mortgage or other loan against the property.

Chartered Bank

A financial institution whose primary role is to accept and safeguard monetary deposits from individuals and organizations, as well as to lend money out.


Another term for a movable personal property. There are two types of chattels: real chattels which are buildings and fixtures of the property, and personal chattels like clothing, carpets and furniture. The Real Estate Purchase and Sale contract shall detail whether real or personal chattels are included in the sale and contract price.

Chattel Mortgage 

A mortgage given on personal movable chattels. Usually given as collateral security to a mortgage on real estate. As an example, a chattel mortgage on refrigerators and stoves in an apartment building, or a car or boat. The lender does not hold a lien against the movable chattel, but in the case of default, the ownership of the chattel is conditionally transferred to the lender until the loan has been satisfied.

Clear Title

A title without any type of lien or levy from creditors or other parties that would pose a question as to legal ownership. This is when there is no restriction on the certificate of title that prevents the sale of a property, such as existing mortgages. A clear title is one in which the owner owns the property outright and without any restriction. With a clear title, there is no question as to who owns the property, and there is no chance that anyone can challenge the property owner’s ownership or make any kind of legal claim to the property.

Closed-End Fund

The investment in real estate equities or mortgages on a one-time-only basis. At the “end” of the investment cycle, the asset is sold and the proceeds distributed based on the original investment.

Closed-End Loan

Any loan in which the amount borrowed and any associated finance charges are expected to be repaid in full by a specified date. Such loans are often amortized to ensure the borrower can make the total amount of the payment. Common closed-end loans include consumer loans and mortgages.

Closed Mortgage 

A mortgage that cannot be prepaid (by more than the limit set in the terms and conditions), renegotiated or refinanced throughout the mortgage term, without paying breakage costs or prepayment penalty to the lender. Closed mortgage rates can be fixed or variable, and are lower than open mortgage rates.


The conclusion or consummation of a transaction. Closing is one of the final components of the real estate buying process in which the sale of the property takes place. A buyer signs a lender agreement for the mortgage while the funds transfer to the seller to complete the transaction.

Closing Adjustment

Any item that has been prepaid by the seller which is applied beyond the closing date and will benefit the buyer after the closing date. The amount that has been overpaid by the seller is pro-rated, and a credit is given to the seller as an adjustment on closing.
Examples of such adjustments on the sale of a home are prepaid realty taxes, prepaid condominium fees (if the property purchased is a condominium), or utilities.

Closing Cost

The miscellaneous costs associated with loan closing. It can include a Loan Origination Fee and Discount Points, Appraisal Fee, Legal Fee, other Lender Fees, Escrow and Title Fees, and the first year’s Insurance Premium. 

Closing Date

The date upon which all paperwork associated with a mortgage/property sales exchange is finalized and on which the new owner takes possession of the property and the sale becomes final.

Closing Disclosure

A final statement of loan terms and closing costs that the lender must provide to the borrower at least three business days before closing in most transactions that involve a loan. The statement lists the loan terms, projected monthly payments, cash necessary to close the sale, and a detailed accounting of the closing costs. The three-day review period allows the borrower time to review the Closing Disclosure and compare it with the Loan Estimate, which the borrower should have received when the borrower applied for the loan.

Cloud on Title

Any encumbrance or claim that affects title to real property that may prevent the transfer of ownership from one party to another. Cloud on title notes that there is doubt related to the condition of the title deed that has to be resolved or cleared before the transfer can take place.

Cluster Housing

A group of houses sharing a common space (parking, swimming pool and landscaping) such as an apartment block or a series of units.


A party applying with another party for a loan where both are equally responsible for repaying the loan.


Any party that co-signs a promissory note and assumes responsibility for the loan if any of the original loan obligators renege.


A party or individual who co-signs for a mortgage loan.


A form of multiple ownership of the real estate in which a corporation or business trust entity holds title to a property and grants the occupancy rights to shareholders through proprietary lease or similar arrangements.


A person who signs an agreement to pay off a loan for someone else if that someone else defaults. Co-signing is a technique often used among family and friends to allow a person with good credit to vouch for a person with new credit or bad credit to get a loan. The presence of a co-signer makes lenders more willing to approve loans for high-risk borrowers.


The personal property or other assets that a borrower offers to a lender to secure a loan. As part of the loan agreement, the borrower forfeits the asset to the lender if the borrower stops making payments on the loan. The lender’s claim to the collateral used for a loan is called a lien. Collateral minimizes the risk for lenders.

Collateral Mortgage

A type of mortgage product that is re-advanceable which allows a lender to lend a borrower more money as the borrower’s property value increases, without having to refinance their mortgage. The collateral mortgage can reach an amount that is higher than the actual loan, up to the total value of the property or even surpass it. Collateral mortgages cannot be transferred to another lender, not even at the end of the mortgage term.

Collateral Security

An asset pledged as security for a loan. If the borrower defaults on the loan payments, the lender may seize the collateral and sell it to recoup some or all of their losses. Loans secured by collateral are typically available at substantially lower interest rates than unsecured loans.

Collateralized Mortgage Obligation (CMO)

A type of mortgage-backed security that contains a pool of mortgages bundled together and sold as an investment. Organized by maturity and level of risk, CMOs receive cash flows as borrowers repay the mortgages that act as collateral on these securities.

Collection Agency

A company used by lenders, or creditors, to recover funds that are past due, or from accounts that are in default. Often, a creditor will hire a collection agency after it has made multiple failed attempts to collect its receivables. A creditor may outsource the debt-collection activity to a third party (the collection agency), or it may have an internal department or a debt-collection subsidiary.


The process to recover funds that are past due, or from accounts that are in default. Credit card debts, loans, medical bills, mobile phone bills, utility charges and library fees are often sold to collection agencies. Collection agencies attempt to recover past-due debts by contacting the borrower via phone and mail. Collection records can remain on the debtor’s credit report for 6 or 7 years from the last 180 day late payment on the original debt.


A secret, deceitful agreement by two or more parties to defraud others.

Combined Loan-to-Value Ratio

A ratio of all secured loans on a property to the fair market value of a property. For example, a first mortgage of $50,000 and a $20,000 equity line secured against a $100,000 house would have a combined LTV ratio of 70%.

Combo Loan 

Two separate mortgage loans from the same lender used concurrently to finance a property. One type of combo loan provides funding for the construction of a new home, followed by a conventional mortgage after construction is complete. Another example is the first and second mortgage on the same property.

Commercial Credit Score

A number indicating a company’s credit risk, similar to what a consumer credit score does for consumers. Also, known as a business credit score, the number predicts the likelihood of a company’s late payment.

Commercial Mortgage

A mortgage loan secured by a commercial property.

Commercial Property

Any property zoned or used solely for business purposes. This may include shopping centers, strip malls, hotels, retail stores, warehouses, restaurants, industrial spaces, farms, office buildings and even vacant lots that have been designated as commercial property by a local government.

Commercial Real Estate

A property used for business purposes. As opposed to residential real estate, which can only be used for residential housing, commercial real estate is designated by law as property intended to generate income.


A fee paid to someone as part of the sale of a particular product. One of the best-known commissions involves the fee paid to a mortgage broker or a real estate agent.
In most cases, this would be a percentage of the amount borrowed in mortgages or of the selling price in real estate.


A contract issued by a lender reciting the basic terms of a loan and accepted by the borrower

Commitment Fee

A fee paid by a borrower to a lender in exchange for a promise to lend money on certain terms for a specified period. Usually charged to extend a loan approval offer for longer than the 30-60 day standard period. “A” lenders do not usually charge these fees.

Commitment Letter

A document from a lender to a borrower that officially lays out the terms of a loan.

Common Areas

Elements of a property available for use for all tenants or owners such as gardens, lobbies, hallways, libraries, shared laundries, and driveways.

Common-Area Assessment

Cost that members of condominium associations and homeowners associations must pay to maintain common areas, such as swimming pools, tennis courts, laundry areas and parking lots. These costs are also referred to as condo fees or homeowners association fees (HOA).


Properties that are similarly sized and have similar features to a subject property. In real estate to find the fair value of a home, comparables are a list of recent asset sales that reflect the characteristics of the asset an owner is looking to sell.

Comparative Market Analyses

An estimate of a home’s value based on recently sold, similar properties in the immediate area. It is usually conducted by a real estate agent, with the purpose to determine a reasonable offering price.

Compound Interest

Also called compounding interest, is the interest calculated on the initial principal, which also includes all of the accumulated interest of previous periods of a deposit or loan. The rate at which compound interest accrues depends on the frequency of compounding, such that the higher the number of compounding periods, the greater the compound interest. Interest can be compounded on any given frequency schedule, from continuous to daily to annually.

Compound Period

The period between the points when interest is paid or when it is added to the principal. In a mortgage loan, the compounding period is the number of times that unpaid mortgage interest is added to the principal amount of the loan.
Except for variable-rate mortgages, all mortgages in Canada are compounded twice per year, or semi-annually, by law. If the mortgage is to be compounded semi-annually, this means that the mortgage holder can only add interest to the principal balance twice per year.  The higher the number of compounding periods, the greater the amount of compound interest, so when calculating compound interest, the number of compounding periods makes a significant difference.

Compounding Method

A method used by lenders to calculate compounding interest. These include:
• S-Simple interest
• A-Compounded annually
• H-Compounded semi-annually
• Q-Compounded quarterly
• M-Compounded monthly
• D-Compounded daily

Conditional Approval

A statement from a mortgage lender indicating a mortgage will get approved provided specific conditions are met at the time of closing. Conditional loan approval does not guarantee a mortgage will be approved. Rather, it means the lender willing to loan a specific amount of money, provided the applicant meets certain criteria.

Conditional Commitment

A promise by a lender to make a loan if the borrower meets certain requirements. This means the lender is willing to finance the mortgage if certain conditions are met.

Conditional Sales Agreement

An agreement by which it is provided that the title to the goods (other than building materials) remains in the seller until payment in full of the purchase price, possession being given forthwith and-the price usually being payable in installments.

Conditional sales agreements allow the seller to repossess the property if the buyer defaults on payment. Conditional sales agreements are typical in real estate because of the stages involved in mortgage financing from pre-approval, appraisal, to the final loan. In these contracts, the buyer can generally take possession of and use the property after both parties have signed and agreed on a closing date. The seller, however, generally keeps the deed in their name until financing has come through and the full purchase price is paid.

Condo Act

An act of legislation in Canada that regulates most aspects of condo formation, purchasing, living in, and governance. Each condo document has to be based on the Act. Each province has its own act because housing is a provincial jurisdiction. In Ontario, The Condominium Act 1998 came into effect in May 2001.

Condo Association

A governing body that consists of individual condominium unit owners and that makes decisions regarding the maintenance of a condominium building and its grounds.


The free ownership of a separate amount of space in a multiple occupancy building with proportioned tenancy in common ownership of common elements used jointly with other owners. In general, a higher density type of development in which a resident owns one of many units along with a share of the ground and other common amenities, like a swimming pool. 

Condominium Fee

A fee paid by all property owners of a condominium complex to cover ongoing maintenance costs. The fee is often based on the size of the condo unit and anticipated annual expenses.

Construction Loan

A type of short-term loan used for a new building construction or improvement. After the construction of the building is complete, the borrower can either refinance the construction loan into a permanent mortgage or obtain a new loan to pay off the construction loan.

Construction to Permanent Loan

An arrangement to finance the construction of a home, when a construction loan is converted into a permanent loan after the building of a home is completed. Another common term for a construction to permanent loan is a single-close loan.


A person who decides on the purchase of a good or a service for personal use, based on personal preferences, beliefs, and needs or the influence of advertising.

Consumer Credit

Also known as consumer debt, is a credit extended to consumers for the purchase of goods or services. Most commonly associated with credit cards, consumer credit also includes other lines of credit, including some loans.

Consumer Credit File

The collection of an individual consumer’s debt repayment records, stored at a credit reporting agency (credit bureau). Credit scores are based on consumer credit files and used by lenders to evaluate the probability if a consumer will repay loans in a timely manner as well as the interest rate of the loan.

Consumer Debt

The debt amount owed by consumers as a result of purchasing goods that are used for individual or household consumption.

Consumer Credit Reporting Act

A piece of legislation designed to give consumers the tools necessary to review their personal credit information and to correct inaccurate information.
The Consumer Reporting Act ensures that credit reporting agencies will collect information on, maintain, and report a consumer’s credit and personal information in a responsible manner. The Act also states that a consumer has the right to know what has been reported about the consumer and to whom, and that the consumer has the right to correct any information on these reports that is inaccurate.


A legally binding agreement between two or more parties for a particular purpose. When real property is involved, a dated, written, signed agreement between two or more competent parties to do or not to do a legal act, for a legal consideration, within a specified time.

Contract for Deed

An agreement for the sale of property in which the buyer takes possession while making payments, but the seller holds title until full payment is made. Also called a land contract.

Contractual Lien

A legal claim against property as a result of a voluntary contract that gives a security interest in property to one of the parties involved, such as a mortgage.

Conventional Mortgage

A mortgage loan that is not required to be insured as it is less than a statutory percentage of value (80%). A mortgage exceeding 80% is referred to as a ‘High-Ratio’ mortgage and the lender will require insurance for that mortgage.

Conversion Clause

A specified period of time during which a consumer can change his/her mind and get out of a contract for no reason, with no penalty. Most types of contracts do not have a cooling-off period. In real estate, a cooling-off period exists when buying a home or an investment property, during which either seller or buyer can back out of the contract. The cooling-off period is vital for those borrowers who do not already have pre-approved financing.

According to Section 73 of the Condominium Act, people in Ontario who buy a pre-construction residence directly from a home builder are granted a cooling-off period, during which they can rescind their sales agreement for any reason and essentially walk away from a deal scot-free.
The cooling-off period of 10 days is automatically granted to all pre-construction condo purchases from a builder in Ontario. After those 10 days, the cooling-off period no longer applies and the decision to walk away from a sale can become a legal and financial pain.

Convertible ARM

An adjustable-rate mortgage that can be converted to a fixed-rate mortgage under specified conditions.

Convertible Mortgage

A short-term closed mortgage is an adjustable-rate that gives the borrower the option to convert the loan to a fixed-rate mortgage at any time without penalty.


The act of transferring an ownership interest in a property from one party to another. Conveyance also refers to the written instrument, such as a deed or lease, that transfers the legal title of a property from the seller to the buyer. 


The legal process that transfers the ownership of the property from the seller to the buyer and ensures that the buyer is informed in advance of any restrictions on the property, such as mortgages and liens, and assures the buyer of clean title to the property.

Cooling Off Period

A specified period during which a consumer can change his/her mind and get out of a contract for no reason, with no penalty. Most types of contracts do not have a cooling-off period. In most cases, the contract will be binding.

According to Section 73 of the Condominium Act, people in Ontario who buy a pre-construction residence directly from a home builder are granted a cooling-off period, during which they can rescind their sales agreement for any reason and essentially walk away from a deal scot-free.
The cooling-off period of 10 days is automatically granted to all pre-construction condo purchases from a builder in Ontario. After those 10 days, the cooling-off period no longer applies and the decision to walk away from a sale can become a legal and financial pain.

Cooperative Mortgage

A type of mortgage suitable for the purchase of co-op housing shares. In this type of mortgage, a single entity or corporation retains ownership of the property, and borrowers use their purchased shares to remain in the property.

Cost Approach (To Value)

One of the methods used for the property appraisal. The estimate of value by this approach is reached by estimating the value of the land and adding to this the improvements, less accrued depreciation.

Cost of Borrowing

A finance charge of the dollar amount that a borrower pays to secure and use a loan. It includes the total of interest, loan origination, and other loan-related expenses.

Cost of Living

The total amount of money it takes for a consumer or a household to live comfortably in a certain place and time period.


The terms and conditions which are in place specifying the accepted use of a block of land or property, for example, whether the owner can use the property for only residential purposes or commercial uses as well.


A party that promises to be responsible for the repayment of a loan.

Cover Note

A temporary document issued by an insurance company that provides proof of insurance coverage until a final insurance policy can be issued. A cover note features the name of the insured, the insurer, the coverage, duration of the coverage, and what is being covered by the insurance.


A “conditional acceptance” of a proposal that implies a rejection of the original offer with requirements for something in the proposal to be changed. In a real estate negotiation, a counter-offer is typically a response by the seller to the buyer’s initial offer. There is no limit on the number of counter-offers that can be submitted back and forth during negotiations.


A contractual agreement in which a borrower receives something of value now and agrees to repay the lender at a later date usually with interest. For example, credit is issued to people or companies who want to obtain something now, but who will pay for it later, based on their ability to pay for it later. Credit can be used to purchase a new property or to take out a loan. Credit also refers to the creditworthiness or credit history of a person or company.

Credit Agreement

A legally binding contract between a party who borrows money and the lender. It is agreed upon by both parties and outlines the terms of repayment, the fees, other costs and all the rules and requirements pertaining to the loan.

Credit Bureaus

Also known as credit reporting agencies, are companies that collect information from creditors and lenders about consumer financial behaviour. That data is used to calculate credit scores and generate consumer credit reports which are used mainly by financial institutions in making lending decisions. The three major credit bureaus are Equifax, TransUnion and Experian (In the USA only).

Credit Charge

A finance charge imposed on a consumer for obtaining and using credit or a loan. In respect to a lending transaction, it is the aggregate of all charges against, and the amount paid or payable directly or indirectly by or on behalf of a borrower.

Credit File

It is a collection of raw, unsorted data about a consumer credit history collected and maintained by a credit bureau. A consumer credit file contains basic identifying information, including the consumer’s name, Social Security number, address, and phone number, along with any other previous names, addresses, and phone numbers, consumer’s current and former employers. The credit file shows what types of debt the consumer has, which may include credit cards, installment loans, mortgages, who have inquired about the consumer’s credit in the past two years and when they inquired, and it contains any negative credit information such as bankruptcies, liens, judgments, and past due accounts that have been sent to collections.

Credit File Freeze

A security measure a consumer can request from the credit bureaus to prevent unauthorized people from accessing the consumer’s credit file. This freeze
stops new credit from being issued in the consumer’s name by blocking creditors, lenders, insurers and other companies from accessing the consumer’s credit data. In some cases, a fee by a credit bureau is required to process the file freeze. The freeze can be temporarily or permanently undone for an additional fee.

Credit Freeze

A service available to consumers through the credit bureaus in which consumers lock down their credit, preventing new accounts from being opened. It is a useful tool in cases where identity theft has been detected or is suspected. The credit bureaus charge fees for establishing credit freezes unless identity theft has occurred. They also charge for “thawing” the credit freeze, should a consumer decide to open a new account.

Credit History

A record of a consumer’s ability to repay debts and demonstrated responsibility in repaying debts. The credit history is a main component of a consumer’s credit report. The credit history includes all credit card applications the consumer has made, any personal loans the consumer has, as well as details of the consumer’s repayment history with regards to the consumer’s bills and other debts. The credit history is assessed by a lender to determine how likely the consumer is to responsibly repay the loan.

Credit Inquiry

A request by an institution for credit report information from a credit reporting agency. A credit inquiry is created when a lender pulls consumer’s credit record. It creates a record in a credit report of each time a lender or a potential lender obtains a copy of the consumer’s credit report. Credit inquiries, especially multiple inquiries, may negatively impact the customer’s credit scores. See hard inquiry and soft inquiry.

Credit Insurance

A type of insurance policy purchased by a borrower that pays off one or more existing debts in the event of the borrower’s death, disability, or unemployment.

Credit Life Insurance

A type of life insurance policy that pays off a borrower’s loan if the borrower dies before repaying the debt in full.

Credit Limit

The maximum credit amount a borrower can use at any one time. Typically it applies to equity or line of credit loans and it is determined by several factors, including the borrower’s income and overall financial condition.

Credit Line

A flexible loan option offered by financial institutions to individuals and corporate entities. A credit line always has a credit limit, which is the highest amount of credit the lender has extended to a particular client. The credit limit is based on the borrower’s income, credit history and other factors.

Credit Market

A market where fixed-income securities are traded and where investors and institutions can buy debt securities. Among these are mortgage-backed securities, pools of mortgages that are sold to investors, such as pension plans and hedge funds.

Credit Mix

The type of accounts that make up a consumer’s credit report. The different types of credit that might be part of a consumer’s credit mix include credit cards, revolving loans, student loans, auto loans, and mortgages. Credit mix is one of the five factors used in determining a credit score. Having a broad credit mix is good for the credit score. For example, FICO credit score considers credit mix to be worth 10 percent of the score.

Credit Muling

Credit fraud in which a customer of a bank uses his or her name and information to obtain high-value loans with no intention of paying them back. Also known as first-party fraud.

Credit Obligation

The financial responsibility of a borrower to meet the terms of a credit agreement.

Credit Rating

A measure of the creditworthiness of a borrower. Credit ratings are calculated by the credit bureaus, based on the borrower’s past payment behaviour, income, employment and other factors that serve as a general predictor of ability and propensity to repay debts.

Credit Repair

An act of restoring or correcting a poor credit score. Repairing credit standing may be as simple as disputing mistakes information with the credit agencies or more complex, as working with an accredited credit counsellor to reduce the customer’s debt and improve credit score. Identity theft and the damage incurred may require extensive credit repair work.

Credit Report

A summary of one’s credit history. Produced by credit reporting agencies, credit report reveals the borrower’s credit history and current status of obligations. Credit reports include records on: consumer name, current and former addresses, employment, credit and loan histories, payment histories, inquiries, collection records, and public records such as bankruptcy filings, judgements and tax liens.
Potential creditors and lenders use credit reports as part of their decision-making process to decide whether to extend borrowers credit and at what terms. Others, such as potential employers or landlords, may also access a person’s credit reports to help them decide whether to offer them a job or a lease. The credit reports may also be reviewed for insurance purposes or when someone applies for utilities or mobile phone services.

Credit Reporting Agency

See Credit Bureaus.

Credit Risk

The possibility of a loss resulting from a borrower’s failure to repay a loan or meet contractual obligations. The credit risk is usually assessed by a combination of the borrower’s income level, the loan amount, and the borrower’s credit rating received from the credit reporting agency.
Borrowers considered to be a low credit risk are charged lower interest rates.

Credit Score 

A numerical evaluation of the consumer’s credit history used by lenders to assess the credit risk a consumer poses and the interest rate they will offer if they agree to lend the consumer money. A credit score is based on a consumer’s credit report. It is calculated using complex mathematical formulas that look at the consumer’s most current payment history, debts, credit history, inquiries and other factors from the consumer’s credit report. Credit scores usually range from 300-900, the higher the score, the better. There are a few slightly different credit scoring formulas used by bankers, lenders, creditors, insurers and retailers. Each score can vary somewhat in how it evaluates the credit data.

Credit Scoring 

A system that assesses a borrower on several items, assigning points that are used to determine the borrower’s creditworthiness.
Credit scoring involves the quantification of a variety of factors in a borrower’s background, including a history of default, the current amount of debt, and the length of time that the borrower has made purchases on credit, payment history and new credits.

Credit Union

A  type of not-for-profit financial institution controlled by its members, the people who deposit money into it. While traditional banks are run by shareholders whose goal is to maximize profits, credit unions return all profits to its members in the form of more favorable interest rates. Because of this, credit unions run considerably smaller operations and may serve more limited needs than traditional banks.

Credit Utilization Ratio

A ratio or the percentage of a borrower’s total available credit that is currently being utilized. The lenders use credit utilization ratio to determine a borrower’s creditworthiness and is a factor that is used to determine the borrower’s credit score.


A person or company of legal nature that extends credit by giving another entity permission to borrow money intended to be repaid in the future.


The ability of a potential borrower to repay a loan or meet contractual obligations. The borrower’s creditworthiness is what creditors look at to determine the probability of default before they approve any new credit to the borrower.


The act of using an asset that is collateral for an initial loan as collateral for a second loan. The loans can be of the same type, like a second mortgage on the property, cross-collateralization also includes using other assets, such as a vehicle, to secure another sort of financing, such as a credit card.

Cross Default Clause

A mutual clause in two or more mortgages which state that a default under one mortgage constitutes a default under the other(s).

Daily Interest

The interest amount accrued daily on the account balance. The rate of the daily interest is derived from the annual interest rate divided by 365. Lenders calculate the interest charges on a borrower’s loan daily regardless of the frequency of the loan repayments. This means that the interest calculations can vary depending on the balance of the account each day.


A charge to a customer’s bank card account. Debit transactions can be made by writing a check, using an automated teller machine (ATM) withdrawal or taking money back from a merchant at the point of sale (POS).


The amount of money owed by one party to another.

Debt Consolation

A process of combining debts into one loan with a repayment plan. The goal of debt consolidation is to lower the monthly payment and/or the interest rate of a borrower’s total debt.
For example, if a borrower has several high-interest credit card debts and other loans outstanding, the borrower may combine these debts into a second mortgage or home equity loan, making one, lower-interest payment to the second mortgage lender.

Debt Counseling 

A type of credit counseling that focuses specifically on helping people with debt issues. Debt counseling can help people with the professional guidance they need to manage debt without having to declare bankruptcy.

Debt To Available Credit Ratio

Also called credit utilization ratio or debt-to-limit ratio, refers to how much of a borrower’s available credit has been used compared against the amount of credit still available. The more available credit is used, the less credit is available. A higher debt to available credit ratio means a lower credit score. Lenders consider credit utilization ratio among the many factors when deciding to offer credit, how much and at that interest rate.

Debt to Income Ratio

A measure that compares a person’s monthly debt payment to their monthly gross income. Expressed as a percentage, a debt-to-income ratio is calculated by dividing total recurring monthly debt by monthly gross income. Lenders prefer to see a debt-to-income ratio smaller than 36%, with no more than 28% of that debt going towards servicing the loan.
Also called the back-end ratio, the debt-to-income ratio impacts a person’s credit score and the types of lenders willing to lend money.

Debt to Limit Ratio

See Debt to Available-Credit Ratio.

Debt Service Ratio (DSR)

A metric used by lenders to determine if a borrower can make payments on a loan or mortgage. The debt service ratio is calculated by dividing the monthly debt by gross monthly income (before taxes). There are two ratios used by the lenders to qualify borrowers for a mortgage loan, gross debt servicing (GDS) and total debt servicing (TDS). The gross debt service ratio (GDS) considers a borrower’s monthly carrying costs (mortgage payment, property tax, insurance, utilities) and the total debt service ratio (TDS) considers all of the borrower’s current debt commitments (for example, car loan, child support, student loan, credit card balances).
Also called front-end ratio or housing expense ratio.


A person or company that owes money to a creditor.

Declining Life Insurance

A type of life insurance policy with a decreasing death benefit over time, often used to insure mortgage debt. As the amount owed on the mortgage decreases, so does the size of the death benefit, and insurance premiums.


A legal document that shows who has the legal right to possess a property and states whether there are any agreements or obligations on the property.

Deed in Lieu of Foreclosure

A document that transfers the title of a property from the property owner to the lender in exchange for being relieved of the mortgage debt.

Deed in Lieu of Foreclosure Agreement

An agreement between a homeowner behind on mortgage payments with the lender that relinquishes all homeownership rights to the mortgage lender.

Deed of Reconveyance

A document that transfers the title of the real property to the borrower from the lender once the borrower has fully paid the debt. This document also becomes a part of public records. Also known as reconveyance deed and recon.

Deed Restriction

A limitation written into a deed limiting or restricting the use of the real property.

Deed of Trust

An arrangement among three parties: the borrower, the lender, and an impartial trustee to hold the legal title on the property until the borrower pays it off. In exchange for a loan of money from the lender, the borrower places legal title to real property in the hands of the trustee who holds it for the benefit of the lender, named in the deed as the beneficiary.
The trustee is usually an entity such as a title company with “power of sale” if the borrower defaults on the loan payment.


A failure to honour a contract or agreement (usually to pay a debt). If a borrower does not pay the minimum home loan repayment by the due date, then the borrower will be in default. If the borrower does not make loan repayments and remains in default the lender may take legal action to repossess the property. Defaults can also be listed against the borrower’s name for failure to pay bills such as a phone or electricity bill. These then show up on the borrower’s credit history and can impair the borrower’s credit when it comes time to apply for a loan. Defaults can show up on the borrower’s credit history and can impair the borrower’s credit and chances to obtain a new loan.

Defective Title

An impaired title on an asset or a piece of real estate property. The defect or impairment on a title can be in the form of a lien, mortgage, or judgment. Because other parties can lay claim to the property or asset, the title cannot be legally transferred to someone else. Defective titles are also called bad titles.

Deferred Interest

An arrangement that allows interest payments on a loan to be deferred during a specific period. A deferred interest mortgage allows borrowers to defer paying some or all of a loan’s interest for a specified time.
In the retail sector, these are often advertised as charging “no interest until” a certain date. After that date, the interest that has been accruing since the purchase date is charged to the account.


An agreement between a lender and a borrower to temporarily suspend debt payments. Young people with large student loan debts and low or no income are frequently granted loan deferments. Under a student loan deferment, interest is frozen and is not added to the balance. Forbearance is a similar suspension of debt payments, although interest continues to accrue on the principal balance.

Delinquent Account

Any account past due. In the credit card industry, a card issuer usually will not report an account as delinquent until at least 30 days have gone past the due date during which the cardholder has not made at least a minimum payment.

Delinquent Mortgage

A mortgage loan for which the borrower has failed to make payments as required in the mortgage documents. A mortgage becomes delinquent when the borrower does not make the required payments.


A situation when a borrower misses due date for a single scheduled payment for a form of financing. For example, if the borrower does not make the mortgage repayments on time then there is a risk of defaulting on the loan due to delinquency which can eventually lead to a notice of default, and later a Power of Sale or Foreclosure. Any delinquency impacts the borrower’s credit score and chances of getting a new loan.

Demand Loan

A type of loan with no fixed term and where the balance must be repaid upon request.

Demand for Payment

A letter from a creditor or collection agency outlining a debt obligation, including the amount owed, how and when the debt should be repaid and the consequences of non-payment.


The measure of loss in value of a property due to all causes, including physical deterioration, functional and economic obsolescence.

Derogatory Information

Negative marks in someone’s credit history. Derogatory information can damage someone’s credit score and prevent one from taking out a new loan. It can also stay on a credit report for as long as 10 years. Examples of derogatory information are late payment, collection or bankruptcy.

Direct Debit

An authorized financial transaction in which one person or company withdraws funds from the payer’s bank account.


An act of paying out money and includes the actual delivery of funds from a bank account or other funds. In the real estate context, it includes money paid for expenses incurred during the conveyancing process of purchasing a new real estate property. Examples of these expenses are title search fees and costs paid to government authorities.

Discharged Bankrupt

The term used for persons or entities who have previously been declared bankrupt but have had their bankruptcy discharged.

Discharge Fee

The administration and other fees paid to cover the costs of the mortgage discharge. The discharge fees are paid at the end of the loan term when a borrower pays the amount in full.

Discharge of Mortgage

A legal document executed by the mortgagee and given to the mortgagor when a mortgage loan has been repaid in full before, at, or after the maturity date, releasing the mortgagor from all obligations and covenants contained in the mortgage.


The process of revealing evidence held by one party to an action to the other party. In the financial world, disclosure refers to the timely release of all information about a company that may influence an investor’s decision. It reveals both positive and negative news, data, and operational details that impact its business.
In real estate, it refers to the seller’s legal obligation to reveal known defects about the property they are selling. A property disclosure statement is the actual documentation of a seller’s disclosure. It’s a required form in real estate transactions and outlines any known problems such as health and safety hazard or structural defects and other information that would impact the home’s value or safety.

Discretionary Expense

A type of expense that a household or business can be without. Discretionary expenses are often defined as nonessential spending, which means a household or business is still able to run even if all discretionary consumer spending stops. These are the nice-to-have expenses in the budget, and examples are entertainment, travelling or dining out.

Discretionary Income

The amount of a person’s income that is left for spending, investing, or saving after paying taxes and paying for personal necessities, such as food, shelter, and clothing. Discretionary income includes money spent on luxury items, vacations, and nonessential goods and services.

Discount Brokerage

A business that allows clients to buy and sell securities but does not provide advice, research, planning or other investment services. Clients who use discount brokerages usually have little to no interaction with a real broker. Discount brokerages usually charge lower fees.

Discount Mortgage

Also known as a discounted variable rate, is a loan where the interest rate is set a certain amount below the lender’s standard variable rate (SVR) for either a set period or the entire term of the mortgage. The SVR can raise or lower by any amount and at any time. If the interest rate rises, the monthly mortgage payments would rise but a borrower would be paying more interest, rather than repaying more of the principal.

Discount Point

A measure of interest: 1 point is 1% of the total amount of the loan. Discount points help borrowers to reduce their monthly mortgage payments and interest rates. Borrowers may pay points upfront, a type of buy-down payment, to decrease the interest rate of a mortgage and mortgage payment.

Disposable Income

The amount a person has leftover from the wages and other income once all of the person’s bills and expenses have been paid. It does not include any lifestyle or entertainment expenses but is the amount the lender will look at to determine how much someone has remaining from the total income each month to service a loan.


A request to the credit bureaus by a consumer to have an error on the consumer’s credit report corrected.

Distressed Property

Any property that suffers a reduction in its market price due to the risk of foreclosure or repossession. A distressed property is usually a result of a homeowner’s inability to pay mortgage payments and/or tax bills on the property. It is common for a distressed property to be sold below market value.

Down Payment

A payment made as part of a large purchase in the early stages of a financing arrangement. In real estate, it is the deposit plus any other money a real estate property buyer sets aside to pay towards the purchase price of the property. The higher the down payment, the lower the interest payments will be on the remainder of the loan.


Also known as progress payment, is a portion of the loan released to the builder at each stage of building construction. By allowing to draw on the construction loan only how much is needed, the interest payments are lower than if the borrower borrowed the whole amount upfront.

Draw Period

A fixed period of time during which a predetermined amount of loan can be accessed as needed. After the draw period expires, the borrower can renew the loan (usually credit line) or may be required to pay the outstanding balance in full or overtime.
The draw period provides the borrower with the flexibility to access additional funds as needed without the extra expense of taking all the funds at once and thus paying interest on an amount that is more than needed.

Dual Agency

Situation when the same real estate agent represents both the seller and the buyer. In most cases, it is not a good idea for one agent to represent both parties in a real estate transaction. The listing agent’s job is to sell a home at the highest possible price, while the buyer’s agent aims to negotiate the lowest price for the buyer. In this case, the agent and his client’s interests are not aligned.
Buyers and sellers should be sure to understand all potential conflicts of interest before entering into a dual agency relationship.

Due-On-Sale Clause 

A stipulation in a mortgage or deed of trust, requiring a borrower to pay the entire loan balance upon the sale of the property for which a mortgage is being secured. Banks and mortgage lenders use due-on-sale clauses to prevent the buyer of a property from assuming the current mortgage at the original interest rate. Buyers of a property with a due-on-sale clause in the mortgage must negotiate a new interest rate.

Early Mortgage Renewal

Situation when a lender allows a borrower to renew the mortgage and stay with them anytime in the final 120 days of the borrower’s current mortgage term.

Early Termination (or Repayment) Fee

A fee charged when a borrower pays out the loan early within a designated time period specified by the lender. Also known as early exit fees or deferred establishment fees.


After-tax net income or the amount of profit received by a person or a company during a specific period.

Earnest Money

A sum of money put up by the buyer when an offer on a home or property is made. The purpose of earnest money is as a token of good faith, a symbol that the buyer is seriously pursuing the purchase. 


A right for one property owner to enter another’s without permission. An easement grants the use of a part of the property but does not transfer interest. As such, the original property owner is still responsible for the taxes on the part of the property. An easement runs with the land and binds all subsequent owners. For an easement to exist, the properties do not need to be adjoining. An example of easement is a Right of Way, when the owner grants access rights of another to pass over the land of another.

Economic Cost

The lender’s estimate of its loss resulting from a borrower making a change to their loan during it’s fixed rate period such as switching to a variable rate loan prior to the fixed rate period expiring.

Economic Life 

The estimated period over which it is anticipated that a property may profitably by utilized.

Electronic Funds Transfer (EFT)

A system of transferring money electronically over a computerized network from one bank account directly to another. The most widely-used EFT programs are direct deposit and E-Transfer.

Emergency Fund

An easily accessible savings set aside for unexpected expenses.

Empirica Score

A score range from 150 to 934 provided by the credit rating agency TransUnion to rate people’s credit. A score of 150 represents the worst credit possible, whereas a credit score of 934 represents the best credit possible. To qualify for a good interest rate, lenders typically require a score of 680 or higher. A credit score of less than 500 is considered poor.
Empirica is a score that TransUnion only provides to lenders. Empirica is based on FICO.

Employee Benefit

A form of employee compensation not in the form of wages, salaries, commissions, or other cash payments.

Employment Insurance

An unemployment insurance program in Canada that allows individuals who have recently lost a job, or individuals who are unable to work because of illness or who are caring for a young child or a seriously ill family member, to receive temporary financial assistance.


Anything that is a liability or charge on a property. For example, it can include an easement that runs through the property, or a charge stating the property owner may choose to repaint their boundary fence from an approved colour list.

End Loan

The final, long-term mortgage on a property that a person borrows for repaying a short-term construction loan or other interim loans. End loans are offered to borrowers with short-term loans, especially construction-based loans.


One of the three national credit bureaus (also known as credit reporting agencies) that collects and provides consumer financial records.


The fair market value of a home minus the unpaid mortgage principal and liens.  Also called the lendable value or net value.

Equity Capital

Collective term for the various classes of share capital or stock in a company. It also embraces earned and capital surplus items found on a typical balance sheet.

Equity of Redemption

The right of the mortgagor to have title to his property restored to him when he has repaid the mortgage in full.

Equity Take Out Mortgage

A mortgage loan based on the equity in the property and obtained through either refinancing an existing mortgage or getting a second mortgage added on. Because it is tied to property equity, the property owner must have equity in the property, after its fair market value and other mortgages are taken into consideration. An equity take-out mortgage may contain a fixed rate and a fixed sum borrowed, or may be a variable rate and may be arranged as a line of credit, where funds are withdrawn at the discretion of the borrower.

Equitable Mortgage

A mortgage that has a claim solely on the equity of redemption and not to the title of the property itself.


A legal concept describing a financial instrument whereby an asset or escrow money is held by a third party on behalf of two other parties that are in the process of completing a transaction.
When a borrower refinances a mortgage, for example, the loan application, title and paperwork may have to go through an escrow agent until the borrower’s income and details have been verified for approval of the loan.

Escrow Account 

A lender-established account through which a borrower makes payments and a lender takes deductions to cover the costs of the following: mortgage insurance premiums, property tax payments, and/or casualty insurance premiums. Escrow accounts are customary where the LTV of an original loan exceeds 80%. In these situations, the borrower’s equity is not high and if foreclosure became necessary, the lender would not want to recoup the cost of back tax payment. Sometimes called an “impound account”.

Escrow Officer

Someone who facilitates the real estate transactions from the time the contract is signed through the close of escrow. These can include inspections, earnest money agreements, disclosures, lender issues, and title and escrow issues.


All of a person’s possessions, property and debts which will be left behind when the person dies.

Estoppel Certificate

A signed statement of facts that cannot later be contradicted by the signer. It is used in mortgage negotiations to establish facts and financial obligations, such as outstanding amounts due that can affect the settlement of a loan. The assessments and payments outlined in the estoppel certificate are incorporated into the amounts due at closing.

For example, an estoppel certificate may be used to assess the existing terms of lease obligations of existing tenants in a tenant-occupied property transaction. The content of an estoppel certificate can vary widely, but it will generally ask the tenants for the following information:

  • A copy of the existing lease
  • Date of and the expiration of the existing lease
  • Names of tenants
  • Current monthly rent
  • Security deposit
  • Parking and storage allotment
  • Confirmation of standard leasing terms

Once all information is gathered on the estoppel certificate, both the tenant and landlord sign the certificate to attest to its accuracy.

Exchange of Contracts

The point at which a property transaction becomes legally binding. This is the final step in a real estate property purchase. Once each party, buyer and vendor, has signed the contracts and they have been exchanged, the contract becomes legally binding.

Exclusive Agency Listing

An agreement between a seller and a real estate firm or agent granting the firm or agent the right to be the only firm or agent to market and sell a property, except the seller retains the right to market and sell the home to a buyer without having to pay a commission to the listing agent, if the seller finds the buyer independently of the agent or firm.

This is different from an “exclusive right of sale” listing, in which the listing broker receives a commission from the seller regardless of who brings the buyer into the purchase.


An amount of money spent for a certain purpose or the act of spending that money.


The costs people incur for goods and services. Expenses are often categorized as fixed, variable, and periodic. Fixed expenses are those that occur each month in a regular amount, such as rent, car payments, and mortgage payments. Variable expenses are those that change from one time period to the next, such as food, clothing, gasoline, and entertainment. Periodic expenses are those that occur several times a year, such as car insurance and property insurance premium payments.


One of the three  the USA national credit bureaus that collects and provides consumer financial records. Experian operates the ConsumerInfo, FreeCreditScore and CreditExpert brands.

Expiration Term

The set number of years that a record will remain on a consumer’s credit report. Most negative records stay on the consumer’s credit report for 6-10 years. The shortest expiration term is two years for inquiry records. The longest expiration term is 15 years for paid tax liens or indefinitely for unpaid tax liens. Positive information can also stay on the consumer credit report indefinitely.

Fair Market Value

The price that a willing buyer will pay to an unrelated but willing seller. The fair market value is the amount a seller may expect to receive from a sale of the seller’s real estate, or the price a buyer may expect to pay when purchasing a certain property.

Fee Simple

The highest form of property ownership in real estate. The owner of the property has full and irrevocable ownership of the land and any buildings on that land. Also known as fee simple absolute.


The name of the data analytics company that pioneered the concept of credit scoring through its signature three-digit FICO score. FICO was founded in 1956 by engineer Bill Fair and mathematician Earl Isaac.

FICO Score

A type of credit score created by the Fair Isaac Corporation. FICO® Scores are used by many lenders as a decision-making tool on how likely a borrower is to repay the loan on time. FICO scores range from 300 to 850. A FICO® Score of 670 or above is considered a good credit score, while a score of 800 or above is considered exceptional.


A legal relationship of confidence that gives one the right to act on behalf of another person or entity (the principal). A fiduciary relationship gives rise to specific duties of loyalty, disclosure, good faith, and due care. In a real estate transaction, real estate agents are in a fiduciary relationship with their clients. When a buyer or seller signs an agency agreement, he or she puts trust in the agent to handle the transaction and keep his or her best interests in mind.  A mortgage broker or agent is in a fiduciary position to act in good faith toward a client and doesn’t put his or her own personal economic benefits over the client.

Finance Charge

A measure of interest: 1 point is 1% of the total amount of the loan. Discount points help borrowers to reduce their monthly mortgage payments and interest rates. Borrowers may pay points upfront, a type of buy-down payment, to decrease the interest rate of a mortgage and mortgage payment.

Finder’s Fee 

A fee or commission paid by a lender or borrower to a broker for respectively, referring to or obtaining a mortgage loan.

Firm Commitment

A lender’s promise to lend money to a specific borrower on specified terms at a certain time.

First Lien

A primary claim by the lender for satisfaction of outstanding debt. A first mortgage creates a first lien oh the property.

First Mortgage 

A primary lien on a property. As a primary loan that pays for the property, the loan has priority over all other liens or claims on a property in the event of default. For example, a borrower defaults on a loan secured by a property worth $100,000 net of sale costs. The property has a first mortgage with a balance of $90,000 and a second mortgage with a balance of $15,000. The first mortgage lender can collect $90,000 plus any unpaid interest and foreclosure costs. The second mortgage lender can collect only what is left of the $100,000.

First-Time Home Buyer

A person who had no ownership in a principal residence during the 4 years before the date of purchase of a property. This includes a spouse or common-law partner, if either meets the above test, and also a single parent who only owned a property with a former spouse while married. A person who only owned a property that was not in compliance with building codes and which cannot be brought into compliance for less than the cost of constructing a permanent structure is also considered a first-time homebuyer.

First-Time Home Buyer Tax Credit  

A rebate for qualifying first-time homebuyers in Canada. To receive a first-time home buyer rebate, the homebuyer must claim it with the homebuyer’s income tax return under the line 369.

Fixed Expense

An expense whose total amount does not change from month to month. Typical household fixed expenses are mortgage or rent payments, car loan payments, real estate taxes and insurance premiums.

Fixed Installment

Periodic payment on a loan whose sum does not vary.

Fixed Interest Rate 

An unchanging rate charged on a liability, such as a loan or mortgage. The interest rate charged on a borrower’s home loan is locked in for a certain period of time. The interest rate will not change during the fixed interest rate term which is often between one year and 10 years.

Fixed-Rate Closed Mortgage

A mortgage with a fixed interest rate that cannot be paid off before the end of the mortgage term. With fixed interest rate mortgages, the amount of regular mortgage payment is constant throughout the mortgage term.

Fixed-Rate Open Mortgage

A mortgage with a fixed interest rate that can be paid off before the end of the mortgage term. With fixed interest rate mortgages, the amount of regular mortgage payment is constant throughout the mortgage term.

Fixed-Rate Option

A home equity line of credit financing option that allows borrowers to specify the payments and interest on a portion of their balance. This can be done a few times during the life of the loan, usually for an additional fee.

Flat Interest Rate

An interest rate that is calculated from the original loan amount throughout the term of the loan.

Flat Payment

An all-inclusive monthly loan payment that is calculated to include principal, interest and taxes. Under this system there is no specific breakdown as to the amounts of the principal, interest and taxes.

Flexible Expense

A discretionary expense in a budget that does not have a set monthly cost. The flexible expense varies from month to month, may be recurring, although the amount spent and the decision to incur the expense are still matters of choice. Examples of the flexible expense includes groceries, utilities and gas.


An increase or decrease of the interest rate with changes in market conditions or with an index. Floating rates are also called variable rates. One of the advantages of floating rates is that interest rates may float down, thus lowering the borrower’s monthly payments. The key disadvantage is that the rate may float upward and increase the borrower’s monthly payments.


A mortgage interest rate lock with an option to reduce the rate if market interest rates decline during the lock period. Also called a cap. Borrowers are protected against a rate increase while the float-down option allows them to take advantage of a rate drop during the lock period.
The borrower pays a fee for the flexibility of the float down option. Float-downs vary widely in terms of how often the borrower can exercise and exactly when the borrower can exercise the float-down option.

Flood Insurance

A type of property insurance that covers a property for losses sustained by water damage specifically due to flooding caused by heavy or prolonged rain, melting snow, coastal storm surges or blocked storm drainage systems. For a financed property, the lender usually requires the borrower to purchase flood insurance for the loan to be approved.

Floor Loan

A portion of a mortgage loan that may be funded upon conditions less stringent than those required for funding the full amount. For example, the floor loan, equal to perhaps 50 percent of the full amount, may be funded upon completion of construction without occupancy requirements, but substantial occupancy of the building may be required for funding the full amount of the loan.


An agreement between a lender and borrower to temporarily suspend debt payments. In the mortgage context, it is a form of mortgage repayment relief granted by the lender or creditor in lieu of forcing a property into power of sale or foreclosure. The borrower must demonstrate the cause for repayment postponement, such as financial difficulties associated with a major illness or the loss of a job. Interest continues to accrue on the principal balance during the forbearance period.


A legal action by a lender to take possession of a mortgaged property as a result of the borrower’s failure to make mortgage payments.


The legal process that allows a lender to recover the amount owed on a defaulted mortgage loan by taking ownership of and selling the mortgaged property. Foreclosure lets the lender sell or take back the mortgaged property after obtaining a court’s permission.

Formal Approval

The official approval of the loan by a lender after the lender made all the necessary checks and reviews of a borrower’s application. Formal approval means that the borrower meets the lender’s qualification requirements.


The intentional act of using false or misleading information by an individual for personal or financial gain.

Fraud Alert

A notice that is placed on someone’s credit report to alert credit card companies and others who may extend the person’s credit that the person may have been a victim of fraud, including identity theft. Fraud alerts are free and usually stay for 90-day on the credit reports. This 90-day alert notifies potential creditors that the person’s identity may have been stolen and suggests that they take extra steps to confirm the person’s identity before opening a new account. If it turns out that the person’s identity has been stolen, the person can request an extended 7-year alert by providing documentation of the crime (such as a police report). There is also a special 1-year fraud alert available for military personnel on activity duty.

Free and Clear

A phrase describing the situation of a real property being completely paid off and no creditor has a claim on it.


A type of the property title. It is the common ownership of real property, or land, and all immovable structures attached to such land. It is in contrast to a leasehold, in which the property reverts to the owner of the land after the lease period has expired. For an estate to be a freehold, it must possess two qualities, immobility (property must be land or some interest issuing out of or annexed to land) and ownership of it must be of an indeterminate duration. If the time of ownership can be fixed and determined, it cannot be a freehold. It is “An estate in land held in fee simple, fee tail or for term of life”.

Freehold gives the property owner complete control and ownership for as long as the owner owns it. While the land or property is mortgaged it is partially owned by the lender, and at the end of the mortgage term, the owner will have freehold over the property with no obligations remaining.


A real estate property that stands independently of others.

Front-End- Ratio or Front Ratio

Also known as the mortgage-to-income ratio, is a ratio that indicates what portion of a borrower’s income is allocated to mortgage payments. It is calculated by dividing the total of a borrower’s anticipated monthly mortgage payment (principal and interest), property taxes, and insurance by the borrower’s monthly gross income. The general rule is that the front ratio should not exceed 28%.


The Financial Services Regulatory Authority of Ontario (FSRA) is a regulatory agency of the Ministry of Finance that assumed regulatory duties of the Financial Services Commission of Ontario (FSCO) and the Deposit Insurance Corporation of Ontario (DICO) effective June 8, 2019.
It regulates insurance, pension plans, loan and trust companies, credit unions, caisses populaires, mortgage brokering, and co-operative corporations in Ontario, and service providers who invoice auto insurers for statutory accident benefits claims.

Full Title Guarantee

An agreement of sale that implies specific covenants or certain promises are based on the side of the sellers. This includes assurance that the seller has the authority to sell an item, such as property or copyright, and that the item is free from any charges or adverse rights other than those that the seller has previously disclosed to the buyer.

Fully Amortizing Payment

The monthly mortgage payment which, if maintained unchanged through the remaining life of the loan at the then-existing interest rate, will pay off the loan over the remaining life. 

Fully Indexed Interest Rate

A variable interest rate calculated by adding a margin to a specified index interest rate. Usually, initial interest rates on ARMs are below the fully indexed rate. If the index does not change from its initial level after the initial rate period ends the interest rate will rise to the fully indexed rate after a period determined by the interest rate increase cap. For example, if the initial rate is 4% for 1 year, the fully indexed rate 7%, and the rate adjusts every year subject to a 1% rate increase cap, the 7% rate will be reached at the end of the third year.
Index interest rates can be based on the prime rate or various treasury bills and note rates. The margin rate is usually determined by the lender and based on the borrower’s credit quality.

Full Doc Loan

The common type of loans used for financing a real estate property purchase. Full Documentation Loan requires the borrower’s income and assets verification.


A legal process in which a creditor receives legal permission to take a portion of a debtor’s assets (bank account, salary, etc) to repay a delinquent debt.

GE Capital

The financial services division of General Electric. It is a CMHC alternative in the Canadian Mortgage Market place. GE Capital like CMHC provides banks/lenders with mortgage insurance. In the event of default or foreclosure GE Capital assumes responsibility for the property and reimburses the bank/lender the entire mortgage amount. This insurance is required generally when the borrower has less than 25% equity or down payment. This insurance is paid by the property owner in advance but usually added to the mortgage amount. 

Genworth MI Canada

A private mortgage insurance service provider in Canada.

Gift Letter 

A letter explicitly stating that money received from a friend or relative is a gift. Usually used by a borrower to obtain a mortgage loan. In the case where the mortgage applicants cannot come up with the full downpayment for a mortgage from their resources, they can receive a gift usually from an immediate family member to assist them. This is called a gifted downpayment. If the downpayment for a mortgage is gifted in full or in part, a gift letter is required to prove the authenticity of the gift.

Government Charge

A term used when referring to all the fees and charges that a property owner will pay to the government when purchasing a property, such as property land transfer tax and other charges.

Grace Period

A set length of time after the due date during which payment may be made without penalty. A grace period is commonly included in mortgage loans and insurance contracts. Grace periods apply only to mortgages on which interest is calculated monthly. Simple interest mortgages do not have a grace period because interest accrues daily. If a loan or other agreement has a grace period, its length of time will be noted in the contract.

Gross Debt Service Ratio (GDS)

The ratio of an amount equal to the acceptable mortgage charges to an amount equal to the effective gross annual income of the borrower. It is one of the mathematical calculations used by lenders to determine a borrower’s capacity to repay a mortgage. It takes into account the monthly mortgage payments, property taxes, approximate heating costs, and 50% of any maintenance fees, and this sum is then divided by the monthly gross income of the applicants. Ratios up to 32 % are acceptable by the lenders in Canada and up to 28% in the USA.

Gross Income

Also known as gross profit, pre-tax income or before-tax income, measures total income and revenue from all sources. Gross income has slightly different meanings for companies and persons. For companies, gross income is total revenue minus the cost of goods sold. For persons, it means total income before tax and tax charges deductions.

Gross Lease 

A type of lease that includes all expenses attributable to the real estate are paid by the landlord. These expenses could include taxes, insurance, utilities, and any other charges that might be added to the final lease cost. The gross leases are most common in multi-tenant commercial buildings.

Gross Leasable Area

The total floor area designed for tenant occupancy and exclusive use and is that area on which tenants pay rent. Gross leasable area is usually measured from the centre line of joint partitions and outside wall faces. The rentable area of a floor is fixed for the life of a building and is not affected by changes in corridor sizes or configuration

Gross Rent

The amount of the flat rent stipulated in a lease. The gross rent is specific for gross rent leases and includes net rent and property expenses like property tax, insurance, utilities, maintenance and any other charges that might be added to the final lease cost. Gross rent leases are common in commercial real estate.

Gross Rental Yield

A measure of the gross rental income generated by a property as a percentage of its acquisition cost or purchase price. The gross rental yield on the investment property is used to compare the investment return. To calculate the gross rental yield: divide the rental income received in a year by the purchase price that was paid for the property. For example, if the yearly rent on the investment property is $18,200 and the median house price for the area is $509,250 then the gross rental yield will be 3.57%.


A good and service sales tax that applies in all Canadian provinces charged at 5%. The GST is paid by consumers, but it is remitted to the government by the businesses selling the goods and services.


A formal and legal promise of fulfilling certain terms and conditions such as being a guarantor on a home loan.


A person or entity that agrees to be responsible for another’s debt or performance under a contract if the other fails to pay or perform.

Guaranteed Mortgage 

A mortgage guaranteed by a third party, often a government agency that will assume the debt obligation for the loan if the borrower defaults. The value of the real estate property secures the mortgage. If the borrower defaults, the lender can file a claim against the guarantor.

Hard Inquiry 

Also called a hard pull, is a type of credit check done to determine an applicant’s creditworthiness. It results when a consumer applies for a credit, such as a car loan, credit card or mortgage. The pull on the applicant’s credit history can lower their credit score. An inquiry would show up as a hard pull only if the consumer-initiated it by applying for credit. Hard inquiries remain on the credit report for 2 years but are only included in the consumer’s credit score for the first 12 months.

Hard Money Loan 

A mortgage of last resort for borrowers who ca not obtain financing in the standard market due to poor credit.

Harmonized Sales Tax (HST) 

A consumption tax in Canada. It is used in provinces where both the federal goods and services tax (GST) and the regional provincial sales tax (PST) have been combined into a single value-added sales tax.
The harmonized sales tax (HST) applies to newly constructed homes or substantially renovated homes but does not apply to resale homes. Depending on which province the homebuyer lives in, it can be GST (which stands for federal goods and service) or HST. Buyers of new homes may receive a rebate of up to the certain limit of the provincial portion of the HST.  The harmonized sales tax applies to commercial properties.


Any object, situation, or behavior that has the potential to cause injury, ill health, or damage to property or the environment.

Hazard Insurance

A type of property insurance that provides coverage for damage to the structure of a property caused by fires, severe storms, hail/sleet, earthquakes or other natural events. As long as the specific hazard is covered within the policy, the property owner will get compensation to cover the cost of any damage incurred. Mortgage lenders often require borrowers to have property insurance to get hazard coverage.


An abbreviation of Home Equity Line of Credit, a loan that leverages the equity in the owner’s home. The HELOC functions like a revolving line of credit where the property owner can choose when and how much money to withdraw, so long as the amount does not exceed more than 65% of the value of the home.
The interest charged on a home equity loan is often higher than a standard variable rate. A HELOC may have a minimum monthly payment requirement (often “interest-only”). However, the debtor may make a repayment of any amount ranging from the minimum payment to the drawn amount plus interest.

High Ratio Mortgage 

A mortgage in which a borrower places a down payment of less than 20% of the purchase price on a home. Another way of phrasing a high ratio mortgage is one with a loan to value ratio of more than 80%. A mortgage with more than a 20% down payment is called a conventional mortgage.

High Yield Mortgage

A mortgage with a higher than the average interest rate. The yield refers to the compound interest charged on the mortgage, also known as the Annual Percentage Rate (APR). The yield is the interest paid to the mortgage holder, as interest, and is income for the mortgage holder.

Hold Back

The withholding of or no advancement of a portion of a mortgage loan to maintain adequate security, pending achievement of a performance requirement, or as protection against liens.

Holding Deposit

An amount of money that a prospective buyer pays to the seller as an “expression of interest” in purchasing a property. The holding deposit is a way for the buyer to show that they are serious about wanting to buy the property. The holding deposit does not secure the property but is given in good faith for the vendor to start process the sale

Holding Period

The duration of time between the acquisition of an asset and its sale. It is the length of time during which a particular asset is “held” by an individual investor or entity. Holding periods determine how to tax an asset’s capital gain or loss.

Home Buyer’s Plan

A program that allows first-time homebuyers to withdraw from their registered retirement savings plans (RRSPs) to buy or build a qualifying home for themselves. The Canadian government’s Home Buyers’ Plan (HBP) allows first-time homebuyers to borrow up to $25,000 from their RRSP, tax-free, to help first-time homebuyers purchase a home. This is considered a loan and it must be repaid within 15 years.

Home Equity

The value of a property owner’s interest in a real estate property. It is the real estate property’s current market value less any liens that are attached to that property, like mortgages and any other outstanding debts over the property. The amount of equity in a property—or its value—fluctuates over time as more mortgage payments are made and market forces impact the current value of the property. As the property appreciates in value the property owner’s equity increases, but if the property depreciates in value, the property owner could be at risk of negative equity, where the property owner owes more than the property is worth.

Home Equity Debt

Debt secured by the equity in the borrower’s home.

Home Equity Loan

A type of consumer debt. Also known as a home equity installment loan, or second mortgage, it allows homeowners to borrow against the equity in their homes. Home equity loan amounts are based on the difference between a home’s current market value and the mortgage balance due.

Home Inspection

An examination of a property to determine if it is structurally and mechanically safe. A home inspection can make a homeowner aware of any repairs which will be required on the home and this can give a home buyer leverage to negotiate a lower purchase price or inform the home buyer of expensive home maintenance ahead.

Home Loan

A sum of money borrowed from a lender to help you purchase a property. It means you’re pledging your home to the lender as security that you will repay the full amount. Until the loan, plus interest, is repaid in full, your lender holds the title of the property.

Home and Content Insurance

A comprehensive property insurance policy that covers the structure of a home or building and the contents located inside from certain specified perils up to specified coverage limits.

Home Price Index

A financial and market tool that provides historical data on residential home prices in various regions.

Home Warranty 

A service contract that for a set period covers the cost of maintaining household systems or appliances. The company offering the home warranty promises to repair or replace specific components of the home under warranty if the need arises.

Homeowners Insurance

A type of property insurance policy that protects the homeowners against damages to their private residences caused by fire and other common hazards. Liability insurance, which protects homeowners in case someone is injured on their property, is also included. Most policies are “full replacement cost,” which guarantees sufficient funds to rebuild the home. Full replacement cost is usually determined based on a home’s last appraised value less the cost of the land. To protect lenders’ interests, they are typically named on casualty insurance plans as additional insured parties.

House Flipping

The purchase of a house or property at a reduced market rate for the purpose of a quick turnaround, a “flip,” and profit. 

Housing Bubble

A marked increase in house prices fueled partly by expectations that prices will continue to rise.

Housing Co-Op

A real estate corporation in which buyers own a share of real estate holdings and may reside in a co-op unit. Shareholders do not have mortgages but pay on a cut of the shares and earn equity over the long term.

Housing Expense Ratio

A ratio comparing housing expenses to pre-tax income. Lenders often use it in qualifying borrowers for loans. The general rule is that this ratio should not exceed 28% in the USA or 32% in Canada. This is also known as the the front-end ratio.

Housing Equity Partnership (HEP)

A partnership in ownership of equity in a house. The ownership is split between the resident(s) and investors (s). The co-owners split the capital gain after the property is sold. The idea behind HEPs is that they are a way for people to own their homes who otherwise would be unable to purchase a house.

Household Income

The total amount of gross income earned by every member over 15 years of age of a single household. Sources of household income include wages, salaries, investment returns, retirement accounts, and welfare payments. Lenders use household income to determine the lending risks and how much to lend to a borrower. It is also a useful economic indicator of an area’s standard of living.

Hybrid Mortgage

A mortgage split into multiple segments each with different term lengths, rates, and rate types. The hybrid mortgage combines the benefits of an adjustable-rate mortgage and a fixed-rate mortgage, such as adjustable rates in the early years and then an automatic conversion to fixed rates after a stated period. For example, the 5/25 means adjustable for 5 years and fixed for 25. This type of mortgage allows borrowers to better manage risks and costs. Also known as a laddered or a combination mortgage.


The promise of collateral in return for a loan. When a lender chooses to issue a loan to a borrower, the lender may require collateral to secure the loan in case of default. When that happens, the borrower’s asset is hypothecated or collateralized.

Impound Account 

Also known as an escrow account, is an account set up by a lender to collect and pay amounts such as property taxes, private mortgage insurance, and other required payments from the borrowers. The borrower funds the account each month as a part of his regular mortgage payment. That money is swept into the impound account until the taxes and insurance are due.
When the bill payments come due, the lender pays the bills on the borrower’s behalf. A typical example of this account would be when a lender collects funds from the borrowers with each mortgage payment and pays property tax for the mortgaged property.


The money that an individual or business receives in exchange for providing labour, producing a good or service, or through investing capital.

Income Approach (To Value)

One of the methods in the valuation process of an income property. The estimate of value is reached by estimating the annual income less an allowance for vacancies and bad debts and subtracting annual operating expenses, real estate taxes and insurance premiums to obtain the net operating income. This is then converted by capitalization into a capital value.

Income Property

A real estate property that is used or is capable of being used in the normal market, primarily for the production of annual income through leasing of the property.

Income Statement

A financial statement showing a person’s or company’s income and expenditure for a specific period, showing a lender the proportions of the income that go to savings, bills and other debt payment, and how much disposable income is left to service a loan. The income statements could be observed monthly, quarterly, semi-annually, or annually.

Income Tax

A charge imposed by the government on the annual gains of a person, business, or other taxable unit derived through work, business pursuits, investments, property dealings, and other income sources. Earnings subject to personal’s income taxes can come from diverse sources, including wages, salaries, dividends, interest, royalties, rents and gambling winnings.
Business income taxes apply to corporations, partnerships, small businesses, and self-employed people. The difference between the business income and the operating and capital expenses is considered the taxable business income.

Income Verification

The process of verifying current and past employment by obtaining dates of employment as well as the amount of income paid. Loan applications may require fully documented proof of an applicant’s income.

Indemnity Insurance

A security against any damage or loss, where if compensation is required, indemnity is the amount paid to compensate for a loss.

Index Rate

Also known as the underlying benchmark interest rate, is a published interest rate against which lenders measure the difference between the current interest rate on an adjustable-rate mortgage and that earned by other investments (such various U.S. Treasury security yields), which is then used to adjust the interest rate on an adjustable mortgage up or down. The index takes into account their financial position, their cost of lending, and inflation, the official cash rate and the government central bank’s decisions.
In Canada, an adjustable interest rate is based on the prime interest rate, as a benchmark.
The indexed rate on an adjustable-rate mortgage is what causes the fully indexed rate to fluctuate for the borrower.

Initial Interest Rate

The introductory interest rate on an adjustable-rate mortgage (ARM), which usually changes at a predetermined time.


A quantitative measure of the rate at which the average price level of a basket of selected goods and services in an economy increases over a period of time. Over time the cost of living increases so that the same amount of money is able to buy you less and less. Increases in inflation are caused when there are high volumes of money in circulation and that amount exceeds the goods and services which are available to buy, unnaturally raising demand and therefore decreasing the value of the dollar because you need more money to buy the same items.


Assets received from the estate of a person who passed away. It can also refer to the total of the property a person leaves to his or her heirs.


A record on a credit report that shows every time a person, one of their creditors, or a potential creditor requests a copy of their credit report data. See Soft Inquiry and Hard Inquiry.

Inspection Report 

A report written by a home inspector after a thorough evaluation of the home’s condition, including the electrical system, plumbing, roof, foundation and other structural features. Prospective property buyers often hire a building inspector for the building inspection before deciding whether to buy a property.


The regular periodic loan re-payment that a borrower agrees to make to the lender.

Installment Loan

A financial product that permits borrowers to borrow a large sum of money that can be repaid in installments over time. The installment loan usually carries a fixed interest rate and requires regular installment payments.


A contract in which an insurer indemnifies another against losses from specific contingencies or perils. There are three components of any type of insurance that are crucial: premium, policy limit, and deductible. The policyholder pays the premium for the coverage by the insurer. Because the cost of coverage is contingent on the risk profile of the insured, insurers may offer policyholders stronger coverage in return for a higher premium.
The policy limit is the maximum amount an insurer will pay under a policy for a covered loss. The deductible is a specific amount the policy-holder must pay out-of-pocket before the insurer pays a claim.

Insured Loan

A loan where all or part of the principal and interest and permitted costs are insured against loss by an insurance company. An insured loan is protected against default because, if default does occur, the insurance company will pay the lender what is owed. Insured loans carry lower interest rates than uninsured loans because there is less risk involved.


The amount of money a lender or financial institution receives for lending out money.

Interest Accrual Period

The period over which the interest due the lender is calculated. If the interest accrual period on a 6 % mortgage for $100,000 is a year, the interest for the year is .06($100,000) = $6,000. If interest accrues monthly, as it does on most mortgages in Canada and the USA, the monthly interest is .06/12($100,000) = $500. If interest accrues biweekly, the biweekly interest is .06/26($100,000) = $230.77. And if interest accrues daily, the daily interest is .06/365($100,000) = $16 .44.

Interest Adjustment

The amount of interest accumulated between the property’s closing date and the day the first mortgage payment is withdrawn by the lender, when the closing date falls before the first scheduled mortgage payment.

Interest Adjustment Date 

The date one month prior to commencement of amortization, when accrued interest computed on the funds advanced becomes due.

Interest Adjustment Period

The frequency of rate adjustments on an ARM after the initial rate period is over. The rate adjustment period is sometimes but not always the same as the initial rate period. As an example, a 3/3 ARM is one in which both periods are 3 years while a 3/1 ARM has an initial rate period of 3 years after which the rate adjusts every year.

Interest in Advance

An interest relating to a particular period of a loan, calculated or paid at the beginning of the period. For example, a borrower pays 12 months of interest in one lump sum before the Interest in Advance period starts. Interest in Advance is only available on interest-only fixed-rate investment loans.

Interest in Arrear

An interest relating to a particular period of a loan, calculated or paid at the end of the period.

Interest Bearing Note

A type of loan that carries interest at a pre-determined rate, and is repaid based on an established time frame and interest rate.

Interest Cost

A time-adjusted measure of cost to a mortgage borrower. It is calculated in the same way as the APR except that the APR assumes that the loan runs to term, and is always measured before taxes. Interest cost is measured over the borrower’s time horizon, and it may be measured after taxes at the borrower’s tax rate. In addition, the cost items included in interest cost may be more or less inclusive than those included in the APR.

Interest Ceiling

The highest interest rate possible under an ARM contract. Also know as the interest rate “cap”. It is expressed as a specified number of percentage points above the initial interest rate.

Interest Due

The dollar amount required to pay the interest cost of a loan for the payment period. Interest due is a component of the total loan payment. Each month, the interest due will decline as the principal balance reduces.

Interest-Only Mortgage 

A mortgage on which for some period the monthly mortgage payment consists of interest only. During that period, the mortgage principal remains unchanged. An interest-only loan requires the borrower to pay only the interest portion of the mortgage repayments.

Interest Rate

The rate, which fluctuates according to various economic forces, that is the measure of the price at which money can be borrowed. The Interest rate is the cost of borrowing the principal.
For example, for a mortgage loan of $200,000 with a 6 percent interest rate, the annual interest expense would amount to $12,000, or a monthly payment of $1,000.

Interest Rate Differential

The difference between the interest rate and a bank’s posted rate on the prepayment date for mortgages. 

Interest Rate Floor

The lowest interest rate possible for adjustable-rate loans.

Interest Rate Increase Cap

The maximum allowable increase in the interest rate on an adjustable-rate loan each time the rate is adjusted. Interest rate caps are usually placed on mortgage rates to insulate borrowers against extreme rate jumps over the life of the loan.

Interest Rate Decrease Cap

The maximum allowable decrease in the interest rate on an adjustable-rate loan each time the rate is adjusted. 

Interest Rate Lock

An assurance from a lender that an interest rate will not rise between the time a borrower locks in the terms of the loan and the time the loan closes.

Interim Financing

The process of obtaining temporary, short-term financing to close a real estate transaction.  Interim financing, also called bridge financing or a bridge loan, is often used by a buyer who is selling a home to buy another, but the sale of the first home cannot be completed before the purchase of the second home must be completed.

Interim financing is used to cover the remaining purchase price of the second home until the proceeds of the first sale are received.

Internal Rate of Return

A metric used in capital budgeting to estimate the profitability of potential investments. This is calculated to determine the return on investment an investor could make. Internal rate of return takes into account the time value of money by showing the rate of interest at which the present value of future cash flow is equal to the cost of the investment loan, so the investor can see the point at which their investment turns a profit.

Introductory Rate

A lower initial interest rate charged to a customer during the initial stages of a loan. It is usually offered on mortgages and credit cards for a period between one month and five years, depending on the lender and type of product. At the end of the introductory period, the loan interest rate will revert to the lender’s standard rate for the borrower’s type of loan.


A collection of unsold products waiting to be sold. Inventory is listed as a current asset on a company’s balance sheet. Inventory is commonly thought of as the finished goods a company accumulates before selling them to end-users.
In real estate, inventory is defined as a list of items that will be included in a property sale. This could include furniture or any fixtures or fittings the vendor is including the sale price.


Any person or other entity who commits capital with the expectation of receiving financial returns.

Investment Income

The money that someone earns from an increase in the value of investments. It includes dividends paid on stocks, capital gains derived from property sales and interest earned on a savings or money market account.

Investment Loan

A loan that is specifically tailored to a borrower looking to purchase an investment property where they will not be living in, but earning income from.

Investment Property

A property that has been purchased with the sole intention of achieving a return. Investors can earn a return on their purchases through rental income, capital gains when their property increases in value, or both. For a property to be deemed an investment and be eligible for the tax deductions and exemptions, the owner cannot live in the property.

Investment Return

The amount of money or profit made on an investment expressed as a percentage of the investment’s cost. This measure can help an investor to determine whether their investment property is increasing in value, how much it is increasing and how it is likely to continue to increase.

Joint Account

An account shared by two or more people. Each person on the account is legally responsible for the debt and the account will be reported to each person’s credit report.

Joint Credit

Any type of debt that is owed by two or more people jointly. The repayment of joint credit is the responsibility of all parties.

Joint Liability

The responsibility of two or more people for paying back a debt. A joint liability allows parties to share the risks associated with taking on debt and to protect themselves in the event of lawsuits. If someone applies for a loan such as a mortgage, with another person, the loan agreement may specify that they are each responsible for the debt. This applies both to co-borrowers, who apply for debt together, and to co-signers.

Joint Ownership

A type of property ownership in which more than one person share ownership in a home and/or property. Joint ownership can be as joint tenants with a right of survivorship or by tenants-in-common.
Joint tenants with a right of survivorship indicate that if there are two or more owners of the property, and one owner dies, then the surviving owner or owners will continue to own the property.
With the tenancy in common, each owner will hold a percentage of interest in the property. The percentages owned do not have to be equal portions. Most often, this percentage of ownership is determined by how much each owner contributes to the purchase of the property.

Joint and Several Liability

A responsibility for loan obligations shared between two or more parties. In the event of default, this means each debtor can be sued individually, as well as jointly until the creditor has obtained their payment. If the creditor receives an unsatisfactory outcome from pursuing one debtor, they are not exempt from being able to pursue the others.

Joint Tenants

A type of property ownership in which more than one person share ownership equally in a home and/or property. This is common for spouses. This agreement also creates a right of survivorship, which means that if one person dies, the other party automatically assumes full ownership of the property.

Joint Venture

An association based on the contract between two or more parties to own and/or develop real estate. It may take a variety of forms including partnership. It is formed for specific purposes and duration. Each party in the joint venture is responsible for profits, losses, and costs associated with it.

Judicial Foreclosure 

The process of taking a mortgaged property when the homeowner fails to keep up his or her mortgage payment. A judicial foreclosure refers to when the foreclosure goes through the court system, and there is a court order for the property to be sold to pay the debt.


A decision of a court regarding the rights and liabilities of parties in a legal action or proceeding.

Junior Mortgage

A mortgage that is subsequent to the claims of the holder of a prior or senior mortgage.


Land Draw

A construction loan backed by the value of the land.

Land Survey

A plan showing the boundaries of a property and where buildings are positioned within those boundaries. Land surveys are used to identify boundaries and features of the land to determine ownership. A land survey is the scientific process of measuring the dimensions of a particular area of the earth’s surface, including its horizontal distances, directions, angles, and elevations. Artificial structures, such as a road or building, may also be noted on a survey.

Land Transfer Tax 

A tax imposed by some provincial governments and paid by the purchaser of a property at closing. A land transfer tax may be imposed by a province and/or municipality. Land transfer tax is payable on the closing date when the Transfer is registered.
Land transfer tax is based on the amount paid for the land, in addition to the amount remaining on any mortgage or debt assumed as part of the arrangement to buy the land.
For example, when a property owner buys land or an interest in land in Ontario, they pay Ontario’s land transfer tax. In addition to provincial land transfer tax, the City of Toronto has a separate land transfer tax (the Municipal Land Transfer Tax) and is the only municipality in Ontario to levy such a tax. The Municipal Land Transfer Tax applies to all purchase transactions in the City of Toronto.

Land Transfer Tax Rebate 

A tax rebate program available to qualifying first-time homebuyers in Canadian provinces, Ontario, British Columbia, and Prince Edward Island. First-time homebuyers of an eligible home may be eligible for a refund of all or part of the land transfer tax.


An owner of a house, apartment, condominium, or land which is rented or leased to an individual or business, who is called the tenant.

Late Charge

An additional charge a borrower is required to pay as a penalty for failure to pay a regular payment installment on the loan when due. Most mortgage notes offer borrowers a 10 or 15-day grace period, with a late charge of about 5% on payments received on the 16th day or later.

Late Payment

A payment received after the grace period stipulated in the note. Most mortgage grace periods are 10 or 15 days. 

Latent Defect 

Also known as an inherent defect, is damage to real estate property or a construction project that is not apparent upon initial inspection and is discovered when the property or project is turned over to new owners.

Lead-Generation Site

A website designed to gather and capture leads to businesses. Lead generation is the initiation of consumer interest or enquiry into the products or services of a business. Mortgage lead generation websites collect information from potential borrowers visiting the sites and sell it to mortgage lenders and brokers.

Lead Lender

A financial institution that heads up a financial consortium or syndicate to provide funds for a mortgage.


A contract between a landlord (lessor) and tenant (lessee) for the occupation or use of the landlord’s interest in a property by the tenant for a specified period and a specified consideration or rent.

Lease-to-Own Purchase

A type of contract that allows a potential homebuyer to lease a home with a purchase option on the home within a specified period.


An asset or property that a lessee (tenant) contracts to rent from a lessor (property owner) for a specific period in exchange for scheduled rent payments.

Leasehold Mortgage

A mortgage given by a lessee on the security of his leasehold interests in the land.

Legal Description 

The geographical description of real estate that identifies its precise location, boundaries and any easements for a legal transaction, such as a transfer of ownership. A legal description is kept with the deed.

Legal Fee 

A fee associated with the property sale or purchase, or loan application processing by a solicitor on behalf of the client. Associated with the sale or purchase of a property, these include costs for searching, drawing and registering the mortgage documents.

Lender Fee

A fee associated with closing costs, sometimes called processing fees. Fees are designed to cover costs incurred by lenders during the loan process.


A tenant of real property under a lease.


The owner of a property that is leased or a person who grants a lease.

Letter of Credit

A document issued by a bank or financial institution that guarantees that a seller will receive a buyer’s payment on time and for the full amount. If the buyer is unable to make a payment on the purchase, the bank will be required to cover the full or remaining amount of the purchase. Banks usually require a pledge of securities or cash as collateral for issuing a letter of credit. Also called Credit Letter.

Letter of Intent (LoI)

A non-binding document that outlines a proposed understanding between two or more parties who wish to finalize the details for a future transaction. A letter of intent provides a formal, but preliminary  agreement between two parties who intend to do business with each other. They are frequently used in business transactions as a pre-agreement. Their terms are nonbinding and still subject to negotiation pending a formal contract.

Level Payment

A method of loan repayment where periodical payments of principal and interest are made in a certain way so the payment amount remains constant.

Leveraged Property

A property financed with mortgage debt.


The legal obligation to pay a debt, or to pay for damages a person or a legal entity has caused someone else. In the finance context, the liabilities include all debts and obligations, like mortgages, personal loans, student loans or credit card debts, and obligations on outgoing expenses and bills.


A legal claim by one person or entity over a property of another to hold it as security against a debt or loan. In real estate, the liens are used to ensure the payment of a debt, with the property acting as collateral against the amount owed. Liens also include obligations not met or satisfied, judgments, unpaid taxes, materials, or labour.

Lien Holdback

The practice of mortgage withholding up to 15% of mortgage funds advanced on new construction.

Life-Cycle Cost Analysis 

A method of calculating a building’s expected operating and maintenance costs over its lifespan.

Limited Title Guarantee

An agreement of sale used where the seller of the property has no personal knowledge of the property. The seller cannot guarantee that the property is not subject to any financial charges, nor can the seller guarantee whether there are any rights over the property or give information on what rights there could be. It is often utilized in the sale cases by the Attorney, the Estate’s executor, where the property that is being sold has to be repossessed by the Trustees or any other Personal Representatives.

Line of Credit

A flexible loan arrangement that gives a borrower the ability to draw down on an agreed amount of equity through their loan account. The borrower can take money out as needed until the limit is reached, and as money is repaid.

Liquid Asset

Any asset a person or business owns that can be converted into cash within a short amount of time and without losing its value. Liquid assets include things like cash, money market instruments, and marketable securities. Tangible assets, such as real estate, fine art, and collectibles, are all relatively illiquid.


The degree to which an asset or security can be quickly bought or sold in the market without affecting the asset’s price. Liquidity is also a measure of the funds available for a down payment, closing costs, debt obligations and reserves.

Listing Agent

A real estate agent who lists the property for sale and represents the interests of the seller.


A borrowed amount of money that will be repaid in full with a certain amount of interest and other financial charges.

Loan Agreement

A written agreement entered into by and between a borrower and lender, which regulates the mutual promises made by each party. Loan agreements are binding on both, the borrower and the lender: the lender’s promise to loan money to the borrower in exchange for the borrower’s promise to repay the money lent as as outlined in the agreement.

Loan Amount

The total amount of money given to the borrower in exchange for the borrower’s promise to repay it, as outlined in the loan contract.

Loan Application

A document in which a prospective borrower provides borrower’s contact information, address, financial and other vital information for the lender to consider before loans are granted.

Loan Application Fee

A non-refundable fee a lender charges to process a loan application documents. Application fees are common with mortgage loans and many lenders apply the cost of the application fee towards the closing costs.

Loan Commitment

A lender’s promise to advance a specific sum of money on specific terms.

Loan Consolidation

A process of combining multiple loans into one for the benefits of one monthly payment with the lower interest and with one servicer. For example, loan consolidation enables a student to consolidate multiple student loans into a single loan. By consolidating the student loans, the student only has to make one payment every month.

Loan Deficiency

Any amount one still owes on a contract after the creditor sells the collateral and applies the proceeds to the unpaid obligation.

Loan Fraud

A financial crime that entrails the falsifying of loan documents, or otherwise trying to illegally profit from the loan process. For example, when a person purposely provides false or misleading information on their loan application to help them qualify for a larger loan amount than they would normally be eligible for. 

Loan Origination

The process that occurs when a buyer obtains a mortgage loan from a lender. It involves several stages, starting with the loan application by the borrower, the submission of appropriate documentation, the lender’s assessment of the application and the final granting of the loan.

Loan Origination Fee

An upfront fee charged by a lender for underwriting a loan. Loan origination fees are quoted as a percentage of the total loan. Also known as discount fees or points.

Loan Officer

An employee of a lending institution that functions as the liaison between that lender and its customers that apply for a loan. 

Loan Pre-Approval

A fund pre-approved based on a preliminary evaluation of a potential borrower by a lender. For example, a loan pre-approval is when a borrower has the funds they need to purchase a property approved before they have found a property. This allows the borrower to clarify their budget and borrowing capacity and put in an offer for a property purchase. Pre-approval is often provided in writing and usually valid for a few months.

Loan Processing Fee

An up-front, non-refundable fee charged by a lender for accepting and processing a loan application and gathering the supporting documentation.

Loan Servicing

The activity of keeping the loan current after funds have been released to the borrower. This could involve administrating the loan, collecting re-payments, keeping accounting records, computing interest and principal, sending monthly and yearly payment statements, collecting and paying taxes and insurance and managing escrow funds, as well as following up any delinquencies.

Loan to Value Ratio (LVR or LTV)

The ratio of the amount a borrower has borrowed to the value of the security, where the security is usually the property the borrower has borrowed to buy. To calculate the LVR divide the loan amount by the property’s valuation amount, then multiply by 100. LVR is expressed as a percentage.  For example, if a borrower wants $100,000 to buy a home worth $120,000, the LTV ratio is $100,000/$120,000 or 83%.

Borrowing greater than 80% LVR will often require the borrower to pay lenders mortgage insurance.

Lock In

An agreement between a borrower and a lender that allows the borrower to lock in the interest rate on a mortgage for a specified period at the prevailing market interest rate.
A loan lock provides the borrower with protection against a rise in interest rates during the lock period.

Lock Period

A set amount of time during which the interest rates buyers have been promised cannot be made any higher.

Locked In Rate

A specific interest rate for a mortgage loan that is being held for a borrower. The locked rate stays the same for a period of time, generally between 30 and 60 days, while the mortgage progresses to closing.

Low-Documentation Loan

A type of loan product that allows a potential borrower to apply for a mortgage while providing little or no information regarding their employment, income, or assets. Low documentation loans are designed for people who are self-employed and who cannot provide the traditional income documentation required for loan approval. The interest charged on a low doc loan may be higher. Low doc loans and non-conforming loans often require that the borrower has mortgage insurance.

Low-Down Mortgage

A secured loan that requires a small down payment, usually less than 10%. These kinds of loans usually require that mortgage default or private mortgage insurance is purchased by the borrower. Also know as a low-down-payment loan.

Lump Sum Repayment

An additional repayment a borrower makes above the minimum repayment amount required on a loan. Some lenders require a minimum amount for a lump sum repayment, and others charge the borrower a fee to make a lump sum repayment.

Mandatory Disclosure

The array of laws and regulations dictating the information that must be disclosed to mortgage borrowers, and the method and timing of disclosure. 


The difference between a lender’s advertised interest indicator rate and the rate they actually charge to borrowers. The amount added to the interest rate index, ranging generally from 2 to 3 percentage points, to obtain the fully indexed interest rate on an ARM. 

Margin Lending

A program that allows a borrower to borrow money against the borrower’s existing assets such as cash or shares, for the purpose of financing investments.
A key feature of margin lending is that the ability to borrow funds is determined by the assets in the portfolio, their loanable value and a credit limit based on the borrower’s financial position.

Market Approach (To Value)

One of the methods on the property valuation. The property being appraised is compared with similar properties that have recently been sold or offered for sale. Adjustments are made to compensate for differences between the comparable and the subject property to obtain the market value of the subject.

Market Conditions 

The factors that influence the housing market in a particular area, such as cost of living, demographics, supply and demand, mortgage rates and more.

Market Value 

The highest price which a buyer, willing, but not compelled to buy, would pay, and the lowest a seller, willing, but not compelled to sell, would accept.

Marketable Title

 A title that may not be completely clear, but has only minor objections that a well-informed and prudent buyer of real estate would accept.

Maturity Date

The date when an investment, such as a certificate of deposit (CD) or bond, becomes due and is repaid to the investor. At that point, the investment stops paying interest and investors can redeem accumulated interest and their capital without penalty.

In the case of a mortgage, the maturity date represents the date when the final repayment is made to the lender and is the last day of the loan term.

Maximum Affordability

The maximum amount of money a lender is willing to finance the borrower’s purchase of a real estate property, as outlined during the mortgage pre-approval process.

Maximum Loan Amount

The total amount that the loan applicant is authorized to borrow. Based on the applicant’s income, expenses, deposit and property price the lender will calculate the maximum amount the applicant is eligible to borrow.

Maximum Loan to Value Ratio

The largest allowable ratio of a loan’s size to the dollar value of the property, usually expressed as a percentage.

Maximum Redraw Amount

The largest amount a borrower can withdraw at any one time. In most cases, this is equal to the total of additional repayments the borrower has made.
In mortgages, the redraw mortgage option allows a borrower access to extra principal repayments they have made on their loan. When the borrower makes additional loan repayments the borrower can access these funds using the redraw facility. The maximum redraw amount depends on how much extra a borrower has repaid on their home loan. Different lenders have different minimum and maximum redraw amounts which are outlined in the mortgage contract.

Maximum Term

The maximum amount of time a borrower has been given to repay the loan. Typical loan terms are 25 or 30 years, however, a maximum term may also refer to a portion within that term such as the maximum term of a fixed interest rate.

Mean Price

The actual average home sale price obtained by dividing the total sale price by the number of sold homes.


The sale price of the middle home in a list of properties ranked from highest sale price to lowest over a set period of time. For example, 15 sales are recorded and ordered from the lowest to the highest and the eighth price is the median price. Calculations of median house prices are usually conducted over three months or a full calendar year and can also be broken down further into the upper and lower quartile.
The median sale price is not the same as the average sale price. The average sale price is calculated by adding all the sale prices for homes sold in a specific area within a specified time frame and dividing that total by the number of properties sold. For instance, if ten properties sold in a city in the last 30 days, the average home price would be calculated by adding the sale prices for all ten properties and dividing that figure by ten.


Mortgage Finance Company, a non-depository  financial institution that underwrites and administers mortgages sourced through brokers. Its lending is funded mainly through public securitization or direct sales to third parties, primarily the banks. MFCs also generally service the mortgages they underwrite or contract with other MFCs that provide this service


Mortgage Investment Company, an investment and lending company designed specifically for mortgage lending in Canada. Mortgage investment corporations are generally provincially registered and licensed, with the management of the mortgage fund under the direction of provincially licensed mortgage brokers and real estate agents. 

Minimum Fixed Amount

The minimum amount that can be borrowed at a fixed interest rate. This is determined by the lender and the type of loan.

Minimum Loan Amount

The minimum amount that can be borrowed. This is determined by the lender and the type of loan.

Minimum Redraw Amount

The minimum amount a borrower can withdraw. Redraw mortgage option allows a borrower access to extra principal repayments they have made on their loan. When the borrower makes additional loan repayments the borrower can access these funds using the redraw facility, but it may be required to make a redraw of a minimum amount set by the lender in the loan contract.

Minimum Repayment

The monthly amount a borrower has agreed to pay in their loan contract to repay their loan within the term.

Minimum Payment

The lowest amount a customer can pay on their revolving credit account per month to remain in good standing with the credit card or a line of credit loan.

Mixed-Income Housing 

A development that comprises different levels of affordability, with some units at market rate and others available to low-income households at below-market rates. It includes diverse types of housing units, such as apartments, townhomes, and/or single-family homes for people with a range of income levels.

Monetary Policy

The actions undertaken by a nation’s central bank to control the money supply and achieve sustainable economic growth. In Canada, the Bank of Canada can influence the economy through changes in short-term interest rates and the money supply.

Monetary Policy Report

A quarterly report by a nation’s central bank outlining projection for inflation,  growth of the national economy, and its current risk assessment of household debt levels.

Monoline Mortgage Lender 

A non-bank lender that focuses only on providing loans such as mortgages. These lenders do not offer checking or savings accounts or provide other related non-lending services.

Monthly Mortgage Payment

A mortgage payment plan where a mortgage payment is made on the same day of each month so a borrower makes 12 payments per year.

Monthly Periodic Rate

The interest rate factor used to calculate the interest charges on a monthly basis. The factor equals the yearly rate divided by 12.


A debt instrument, secured by the collateral of specified real estate property, that the borrower is obliged to pay back with a predetermined set of payments. Also known as a lien or claim against real property given by the buyer to the lender as security for money borrowed.

Mortgage Acceleration Clause

A provision of a  mortgage loan agreement that lets a lender demand payment of the full balance under specified circumstances, such as sale of the property, default or refinancing. Not commonly used in Canada and/or by Canadian lenders.

Mortgage Amortization

The process of repaying a mortgage loan, usually using a consistent monthly scheduled payment. 

Mortgage Application

The document a borrower submits to the lender, in order to be approved for a mortgage loan. A mortgage application includes information about the property, as well as the financial and background information about the borrower(s). Mortgage underwriters use the information to determine how much money they will lend to the borrower(s), for how long and at what interest rate.

Mortgage Approval

A process of approving a mortgage application by a lender based on the ability of a borrower to repay a mortgage loan. The mortgage approval process is similar to a mortgage pre-approval. A mortgage approval specifies a mortgage term, interest rate and principal amount, and other information related to the borrower and a property that is financed.

Mortgage-Backed Security (MBS)

A fixed-income security that derives its cashflow from payments on a pool of underlying residential or commercial mortgages.

Mortgage Balance

The full amount owed by a borrower at any period of time during the duration of the mortgage and is the sum of the remaining principal owing and accrued interest.
A mortgage balance is used when calculating the equity in a real estate property. The mortgage balance is deducted from the market value of the real estate property to determine the equity.

Mortgage Broker

A licensed professional that obtains loans for borrowers from lenders. A mortgage broker aims to find their clients the best mortgage products at the best mortgage rates. A mortgage broker earns a commission known as origination fees, based on the size of the loan, in return for referring the borrower to the lender. In Canada, mortgage brokers are regulated by the provinces, with each having its own rules and regulations. Generally, mortgage brokers must be licensed and follow a code of ethics when providing brokerage services to the clients.

Mortgage Brokerage

A legal identity licensed to arrange or trade in mortgages. Mortgage Brokers and Licensed Mortgage Associates must be licensed under a brokerage. A Mortgage Brokerage must have at least one licensed mortgage broker in order to be eligible to provide mortgage brokerage services to the public.

Mortgage Company

A business with the principal activity of providing or servicing mortgage loans. A mortgage company may be a chartered bank, credit union, trust company or other financial institution providing mortgage loans.

Mortgage Deed

A document in which the mortgagor transfers an interest in real estate to a mortgagee for the purpose of providing a mortgage loan.

Mortgage Disability Insurance

A type of Insurance policy that covers mortgage payments if a policyholder becomes disabled.

Mortgage Discount Point

A form of prepaid interest whereby the borrower lowers the interest rate of the mortgage at closing. Also called loan brokerage fee, or new loan fee or mortgage discount.

Mortgage Fee

The cost associated with getting a mortgage loan that lenders and brokers include in the Good Faith Estimate. Each lender and broker have their list of fees, but here are the most common: Appraisal fee, Origination fee, Yield spread premium (YSP), Processing fee, Underwriting fee, Broker fee and Legal fee.

Mortgage Insurance 

An insurance policy that protects a mortgage lender or title holder if the borrower defaults on payments, dies or is otherwise unable to meet the contractual obligations of the mortgage. In
Mortgage insurance can refer to mortgage default insurance or mortgage title insurance.
Mortgage default insurance is a type of mortgage insurance a borrower might be required to buy as a condition of a conventional mortgage loan. This type of mortgage insurance protects the lender, not the borrower. In Canada, mortgage default insurance is available through CMHC or private insurers covering whole or partial losses of principal and interest of a mortgage loan.

Mortgage Insurance Premium

The up-front and/or periodic charges that the borrower pays for mortgage insurance. There are different mortgage insurance plans with differing combinations of up-front, monthly and annual premiums. The most widely used premium plan is a monthly charge with no upfront premium. 

Mortgage Holder

An individual or entity who owns the mortgage loan that was extended to a property owner, and is the party entitled to enforce the terms of the mortgage.

Mortgage Lead

A packet of information about a consumer whom a loan provider might be able to convert into a borrower. 

Mortgage Lender

An entity (a financial institution or an individual) that provides financing for the purchase of real estate. A mortgage lender uses a mortgage as security for the lending of money.

Mortgage Life Insurance

An insurance policy designed specifically to repay mortgage debt in the event of the death of the borrower or if the borrower is diagnosed with an eligible life-threatening condition. It may pay off either the lender or the heirs, depending on the terms of the policy.
This is a limited form of life insurance. The term of the life insurance policy matches that of the mortgage, and the death benefit is usually reduced each year to correspond with the new amortized mortgage balance outstanding as mortgage payments are made

Mortgage Loan Officer

A representative of a lending institution that acts as an intermediary between the institution and the borrower.

Mortgage Manager

An individual that arranges finance for a real estate buyer or owner to purchase or finance a real estate property, but unlike banks, building societies or credit unions, mortgage managers do not source the funds from their base of customer deposits, but instead through securitization.

Mortgage Originator

An institution or individual that works with a borrower to complete a home loan transaction. A mortgage originator is the original mortgage lender and can be either a mortgage broker or a mortgage banker. Mortgage originators are part of the primary mortgage market and must work with underwriters and loan processors from the application date until closing to gather the necessary documentation and guide the file through the approval process.

Mortgage Qualifying Interest Rate

A rate is used to assess a borrower’s eligibility. In Canada, all insured mortgages with a fixed term of less than 5 years and all variable rate mortgages had to qualify at the benchmark rate or the contract rate plus 2% whichever is the greater. The benchmark rate is the Chartered Bank Conventional Mortgage 5-year rate published by the Bank of Canada each Monday.

Mortgage Qualification 

A standard set by a mortgage lender to approve a potential borrower a certain mortgage loan amount. 

Mortgage Point

Stands for a percentage point of the loan amount typically makes up the origination fee, which can be a fraction of a point to multiple points. Often to get a lower interest rate, lenders will allow borrowers to “buy down” the rate by paying points. Paying a percentage point up front in order to get a lower rate will eventually be a saving to borrowers in the long run if they stay in the house for the duration of the loan.

Mortgage Pool

A group of mortgages assembled to form the collateral for securities. Mortgage payments of principal and interest into the pool are used to pay those who invest in the securities.

Mortgage Portfolio

The aggregate of mortgage loans held by an investor.

Mortgage Pre-Approval

An evaluation of a borrower’s affordability for a mortgage loan. In a pre-approved mortgage process, the lender will base its decision upon a borrower’s credit score, down payment amount and debt service ratios. During the pre-approval process, it is determined the maximum loan the borrower can afford, the maximum property purchase price they can consider, as well as the mortgage rate and payment that would go along with it.  When the borrower gets pre-approved, the borrower can also get a pre-approved interest rate hold.

Mortgage Professionals Canada

An association that provides the Accredited Mortgage Professional (AMP) designation in Canada (French: CHA), to qualifying mortgage professionals. It is the national association representing Canada’s mortgage industry.

Mortgage Referral

Advice on where to go to get a mortgage. 

Mortgage Renewal

A new agreement to extend or renew mortgage terms with the borrower’s mortgage holder. At the end of the current mortgage term, if the borrower still has a balance on the mortgage, the borrower will need to renew it for another term. At renewal, the borrower has an opportunity to renegotiate the terms of the mortgage contract, including the length of the mortgage term, interest rate, and even to find another lender.

Mortgage Refinance

The process of paying off and replacing an old loan with a new loan with a higher borrowed amount than the remaining principal balance and different terms than the original mortgage. Borrowers usually choose to refinance a mortgage to take cash out of their equity.

Mortgage Repayment

The act of paying back money borrowed from a lender. Mortgage paid at regular intervals to a lender and it may be comprised of interest only, or both principal and interest.

Mortgage Registration Fee

A fee charged by state/province or territory governments to register the security for a mortgage. In other words, it registers the physical property as the security on a mortgage. It is a part of the loan application process, and therefore payable before the settlement of the loan.

Mortgage Scam

An intentional, deceptive, and exploitative misstatement, misrepresentation, or omission of information relied upon in the process of ensuring a secured loan for a real property. Mortgage scams can take many forms and can involve multiple parties, including buyers, sellers, investors, creditors, and real estate agents. Signs of potential mortgage fraud may include property flipping, equity skimming, and credit or income misrepresentation

Mortgage Servicing

See Loan Servicing.

Mortgage Shopping 

The process of finding the best deal on a mortgage.

Mortgage Spam

Offers for great mortgage deals that appear unbidden in a person’s email.

Mortgage Statement

A document prepared by a mortgage holder and provided to the borrower. The mortgage statement shows the current mortgage balance, current interest rate, amount remaining on the mortgage term and amortization and the contact information for the mortgage holder.
The mortgage statement may also provide a history of payments from the date of the last issuance. The mortgage statement is provided to the borrower periodically, at least annually, and can be provided to the borrower upon request.

Mortgage Suitability

A fundamental concept both from a legal perspective and in terms of putting an investor’s money to work sensibly and prudently.  For mortgages, it means that mortgage lenders should be held liable for providing loans that are not suitable for the borrower. 

Mortgage Term

The length of time a borrower commits to one mortgage rate, lender, and associated mortgage terms and conditions. The term the borrower chooses will have a direct effect on the mortgage rate, with short terms historically proven to come with lower rates than long terms.

Mortgage Title Insurance 

A type of insurance that protects against loss in the event a sale is later invalidated because of a problem with the title. Mortgage title insurance protects a beneficiary against losses if it is determined at the time of the sale that someone other than the seller owns the property.
Before mortgage closing, a representative, such as a lawyer or a title company employee, performs a title search. The process is designed to uncover any liens placed on the property that would prevent the owner from selling. A title search also verifies that the real estate being sold belongs to the seller. 


The creditor or lender who is providing the funds in a mortgage agreement.


A person or company who borrows money to finance the purchase of real estate using the value of the property as collateral for the loan. In simple terms, the person buying a home using a mortgage is known as the mortgagor.


A building or home that has multiple units owned by one or more parties. Condo buildings and duplexes can be considered multi-family residences, but with a duplex, both the property and the land are recorded on one deed. With a condo, the owners own their individual units and have a tenancy in common with all of the owners in the complex for the shared space.

Multiple Listing Service (MLS)

A group of private databases that provides real estate brokers with a comprehensive look at available housing in a particular market or across markets. Each MLS database serves specific regions and is available only to agents who pay for membership. The information, which used to be guarded, is now available at numerous websites.

Negative Amortization

A method of loan repayment in which the borrower does not pay back the full amount of interest owed each month. The portion of interest that remains unpaid is added to the total amount owed to the lender.

Negative Amortization Cap

The maximum amount of negative amortization permitted on an ARM, usually expressed as a percentage of the original loan amount. Reaching the cap triggers an automatic increase in the payment, usually to the fully amortizing payment level, overriding any payment increase cap.

Negative Equity

A situation when the value of an asset is less than the outstanding balance of the loan used to purchase the asset.

Net Effective Rent 

The total gross rent for the entire term of a lease divided by every month period, including free months or other promotions.

Net Income

A situation when the value of an asset is less than the amount owed on a loan to buy it. The sum of a person’s or business’s total earnings or pre-tax earnings after factoring deductions and taxes in gross income.
Net income is the total amount a person earns in a given period from all taxable wages, tips, and investment income like dividends and interest. The net income is calculated by subtracting all allowable deductions from a person’s total income for the year.

In a business context, it is the last line on a company’s income statement. Net income is the same as the “profit” of a business, or its “earnings.”

Net Lease

A lease that provides that all expenses attributable to the real estate are paid by the tenant. Local terminology may require some expenses to be paid by the landlord. Net leases are commonly used in commercial real estate.

Net Operating Income

In the valuation process the annual income available after operating expenses and real estate taxes to service the debt and provide the owner with a return on the investment.

Net Pay

An employee’s gross pay minus deductions and taxes.

Net Proceeds

The amount of money a seller takes away from selling a home. This is different from the property owner’s equity in the home because it takes into account agent commissions and closing costs, which are paid by the seller and subtracted from the sale price. Closing costs include:
• Balance of all outstanding mortgages and additional liens on the property
• Commission to the seller’s agent
• Commission to the buyer’s agent
• Any additional closing costs owed by the seller
While the borrower may know the mortgage balance, the remaining costs can vary and depend on their specific property, location, and type of transaction.

Net Worth 

A measure of wealth. Net worth is the sum of all assets owned by a person or a company, minus any obligations or liabilities. Net worth provides a snapshot of a person’s or a company’s current financial position.

Net Worth Statement

A document containing a list of the assets and liabilities of a person or company at one particular point in time.

Net Yield

The interest rate return on a mortgage after deducting the percentage equivalent of mortgage servicing from the coupon rate of the mortgage.

New To Canada Mortgage Program

The mortgage financing program offered to the new Canadian by the Canada Mortgage and Housing Corporation (CMHC), Genworth Financial and Canada Guaranty. The program is aimed at helping newcomers obtain a mortgage to purchase a home.

No Deposit Mortgage

A type of home loan that does not require any upfront deposit on the property purchase. Typically, the borrower does not need to demonstrate a savings history and only requires funds to cover the transaction costs such as legal fees and any statutory charges. Often these loans require some form of guarantee or guarantor.

No Documentation Loan

A loan that does not require the applicant to provide much personal information. When a borrower applies for a mortgage, the lender wants to see certain documents, including verification of income through bank statements, tax returns or pay stubs. With a no-documentation loan, lenders do not require them. When lenders allow borrowers to simply state their income rather than depending on verification through personal financial documents

Nominal Interest Rate

A quoted interest rate that is not adjusted for either intra-year compounding, or inflation. A quoted rate of 6% on a mortgage, for example, is nominal. 

Nonrecourse Loan 

Also known as nonrecourse debt or nonrecourse plan, is a loan that is secured by collateral. Nonrecourse loans are a type of mortgage loan secured by the real estate itself. However, the borrower is not liable for any loss incurred by the lender if the collateral loses value.

Non-Conforming Loan

A loan that fails to meet bank criteria for funding. Reasons include the loan amount is higher than the conforming loan limit, lack of sufficient credit, the unorthodox nature of the use of funds, or the collateral backing it. In many cases, non-conforming loans can be funded by hard money lenders, or private institutions/money. A large portion of real-estate loans are qualified as non-conforming because either the borrower’s financial status or the property type does not meet bank guidelines. 

Nonconforming finance is also called subprime lending.

Non-Conforming Use

A property that is being used in contravention of current zoning by-laws but is permitted to remain because it pre-dates the enactment of the zoning by-laws.

Non-Liquid Asset

An asset that can be difficult to liquidate quickly. Assets are classified as either liquid or non-liquid. A liquid asset can quickly and easily be turned into cash, while a non-liquid asset cannot. A home is a non-liquid asset because it might take several months to find a buyer for it and several more weeks before you receive the money from the transaction.

Non-Qualified Syndicated Mortgage

A high-risk mortgage product. Non-qualified syndicated mortgages are all syndicated mortgages that do not meet the regulatory definition of a qualified syndicated mortgage (See Qualified Syndicated Mortgage).

Non-Resident Speculation Tax (NRST)

A 15 percent tax that applies to purchases of certain types of properties located within the Greater Golden Horseshoe area in Ontario by certain prescribed entities. This tax is in addition to the Land Transfer Tax which applies to all purchase transactions in Ontario and the Municipal Land Transfer Tax which applies to all purchase transactions in the City of Toronto.
NRST applies to purchases of land containing at least one and not more than six single-family residences. The NRST does not apply to purchases of multi-residential buildings containing more than six units, or commercial land, agricultural land or industrial land.
NRST is payable by individuals who are not Canadian citizens or who are not permanent residents of Canada, Foreign Corporation and Taxable Trustees
The NRST is payable with respect to transfers that are registered on title and that are not registered on title.


Also known as a promissory note, is a legal debt instrument where one party makes a promise in writing to pay a certain amount of money to another party under certain terms.
The promissory note contains all the terms that pertain to the indebtedness that the issuer sets, such as the amount owed, maturity date, interest rate, date and place of issuance, as well as the signature of the issuer.
In the case of a loan, the lending party may be entitled to interest on the amount owed up to that time when the loan is fully repaid.

Note Rate

The percentage paid by a borrower for the use of money, usually expressed as an annual percentage on a promissory note.

Notice of Assessment

Also known as an NOA, is the summary form that Revenue Canada sends to the taxpayer after the payer’s income tax has been filed. It specifies what the taxpayer claimed on their taxes the previous year, as well as the amount of taxes they owe, or the amount of money that they will be received as a tax refund.

Notice of Default 

A note from a lender indicating that the borrower has fallen behind on his payments or otherwise breached the terms of the mortgage loan. At this point, the borrower usually has an opportunity to make up his missed payments and get out of default before the bank officially sells or forecloses on the home. 


A conditional proposal made by a buyer or seller to buy or sell an asset which becomes legally binding if accepted. Offers are made in a manner that a reasonable person would understand its acceptance and will result in a binding contract.

Offset Account/Mortgage Offset Account

A saving account held by the same institution which issued the loan/mortgage, where the interest borrowers earn in their savings account offsets the interest the borrower pays on their mortgage. Some offset accounts will offset at the same rate of interest as the mortgage. These are known as 100% offset accounts.

Off the Plan

A contract to purchase a property that is yet to be built. It is part of a construction process when the buyer has seen and agreed to the plan of the property. This most typically applies to new apartment complexes when apartments are purchased before or during the construction stage.

One-Year Adjustable

A variable Interest mortgage whose annual rate is adjusted yearly. The rate is usually based on movements of a published index plus a specified margin, chosen by the lender.

Ongoing Fee

A fee charged by the mortgage lender to cover the internal costs of maintaining the loan.


An independent governing agency that handles any customer issues or complaints regarding their product or service.

Open House 

A scheduled period of time in which a house or other building for sale is designated to be open for viewing by potential buyers. Buyers have an opportunity to view the property, ask questions of the real estate agent on hand and get information about the neighborhood, including schools, parks, churches, hospitals, and any upcoming development projects.

Open Listing 

A property that multiple brokers have the option to market and sell to earn commission on the sale of the home.

Open-End Mortgage

A type of mortgage that allows the borrower to increase the amount of the mortgage principal outstanding at a later time. An open-end mortgage allows a borrower to take a portion of the loan value for which they have been approved to cover the costs of their home. By taking only a portion, the borrower can pay a lower interest rate since they are only obligated to make interest payments on the outstanding balance.

Open Mortgage 

A privilege given to ta borrower permitting the borrower to prepay all or part of the principal amount at any time with or without notice or bonus. Open mortgage rates are usually higher than closed mortgage rates.

Option ARM (Pay Option ARM)

An adjustable-rate mortgage (ARM) that gives the borrower a set of choices of how much interest and principal to pay each month. The option period is typically limited, for example, to five years.

Option to Purchase

A legally binding contract between two parties giving the purchaser the exclusive right (without the obligation) to buy the property. During the term of the option, no-one else can buy or sell the property including the owner. For accepting this obligation the seller received and keeps an option fee whether the option is exercised or not.

Ordinary Income

Money earned from working. This includes hourly wages, salaries, tips, commissions, interest earned from bonds, income earned from business, some rents and royalties, short-term capital gains that are held for no more than a year, and unqualified dividends. It excludes anything that can be classified as long-term capital gain, which in most cases refers to the sale of a property and the income derived from that transaction.


The process that involves the preparation of a borrower’s loan, including submitting and evaluating the loan application, running a credit check, verifying employment details, and completing a valuation of the property.

Origination Fee

Also known as the application fee, covers the lender’s costs to originate the loan. This fee may include an application fee, appraisal fee, fees for all the follow-up work and other costs associated with the loan.


In the real estate context, is overestimating the market value of a property or investing more funds into the property than it is worth at sale time.

Overnight Rate

The interest rate at which large banks charge each other when they borrow funds among themselves.


A credit limit granted by the lending institutions which a borrower can exceed the borrower’s account balance by. The overdraft allows the account holder to continue withdrawing money even when the account has no funds. The overdraft is often charged interest and must be repaid but there is no set monthly repayment amount

Overdraft Fee

The fee a lender charges an account holder for granting overdraft protection to the account.

Overdraft Protection 

A service provided by a bank to account holders that protects against nonsufficient funds up to a certain amount. If an account holder spends more than what is in the account holder’s checking account, overdraft protection guarantees that the transaction will clear up to the credit limit granted by the bank. Banks charge a fee for overdraft protection.

Owner Occupier

A buyer that plans to live in the property as their main place of residence.

Package Loan

A real estate loan used to finance the purchase of both real property and personal property, such as in the purchase of a new home that includes carpeting, window coverings and major appliances.


An expression used when a mortgage is sold or purchased for the outstanding balance without premium or discount.

Pari Passu

On an equal basis. A Latin phrase that describes situations where two or more assets, securities, creditors, or obligations are equally managed without preference. No party has preferential access to gains or can opt-out of losses. Pari-passu can describe any instance where two or more items can claim equal rights as the other. It can be used in any financing context where different parties have equal claims or seniority (like wills, trusts, bonds, different share classes).

In mortgages, it is a financing arrangement that gives multiple lenders equal claim to the assets used to secure a loan. If the borrower is unable to fulfil the payment terms, the assets can be sold, and each lender receives an equal share of the proceeds.

Partial Discharge 

A release from the mortgage of a definite portion of the mortgaged property usually given after the mortgagor has prepaid a specific portion of the mortgage debt. A partial discharge can happen in situation when a more than one property is secured by a loan and, once when a portion of the mortgage is repaid, the borrower can release one of those properties as security, without repaying the full loan.

Participation Mortgage

A mortgage wherein the lender, or mortgagee, is entitled to share in the rental or resale proceeds from a property owned by the borrower, or mortgagor. A participation mortgage may or may not require principal and interest payments, and may or may not contain a balloon payment.

Past Due

The status of a bill or an account when the minimum payment has not been received by the due date.


The process of reducing the amount owed on a mortgage or other loan over time by making partial payments toward the debt. A paydown can refer to any debt, such as a car loan, credit card debt or school loan.

Payment Adjustment Period

The time period where payments on an adjustable-rate mortgage (ARM) may fluctuate.

Payment History

A record of a person’s past debt payment. Payment history shows how the person has paid his/her accounts over the length of the person’s credit. The payment history makes up 35% of the credit score and is a major factor in its calculation. A long record of on-time payments is the most important element for good credit scores and for obtaining loans at favourable rates.


The complete repayment of loan principal, interest and any other sums due. Payoff occurs either over the scheduled full term of the loan or through one or more prepayments.

Payroll Taxes

Taxes that employees and employers must pay based on wages and tips earned and salaries paid to employees. The employee pays part of these taxes through a payroll deduction, and the employer pays the rest directly to the government revenue agency.

Pay Stub

Also known as a paycheck stub or payslip, is a document received by an employee that provides detailed employment income and deduction particulars for a specific period of time called a pay period.

Per Diem Interest 

The amount of interest charged daily for a just-closed mortgage. Lenders calculate per diem interest to cover the period between the time a loan closes and the day before repayment officially begins. To calculate the per diem interest amount, lenders may use a daily interest rate.

Periodic Expense

Any expense that comes less frequently than once per month, like insurance premiums, property tax, car registration or maintenance, holiday or birthday gifts that are due a few times per year.

Periodic Rate

The interest rate charged on a loan over a certain number of periods. The periodic rate equals the annual interest rate (APR) divided by the number of compounding or billing periods. Lenders typically quote interest rates on an annual basis, but the interest compounds more frequently than annually in most cases.
For example, if the annual interest rate on that mortgage is 8%, the periodic interest rate used to calculate the monthly interest rate is calculated as 0.08 divided by 12, which is 0.0067 or 0.67%. Also called the nominal rate.

Periodic Rate Cap

The limit how much an interest rate can increase or decrease from one adjustment period to the next in an adjustable-rate mortgage (ARM).

Perfecting Title

The elimination of any claims against title.

Personal Cheque

A cheque issued from a personal chequing account. A personal cheque operates as a mandate or authority to the drawee’s bank to pay the party named as drawer and debit the account of its customer, the drawer.

Personal Income

The income that individuals receive from all sources, including wages and salaries, dividends and interest, rents, profits, and transfer payments.

Personal Guarantee

A person’s legal promise to accept liability for one’s own or a third party’s obligations. For example, with a business credit card or a loan agreement, when a person gives her or his guarantee, the person is essentially a co-signer on the business credit card or loan account and remains liable for any debts the business incurs.

Personal Loan

A form of unsecured debt, meaning that they are not backed by collateral, unlike mortgages and auto loans. Personal loans have fixed repayment schedules and higher interest rates than secured loans. Rates vary, depending on a person’s credit score and loan eligibility.

Personal Property 

A class of property that can include any asset other than real estate. The distinguishing factor between personal property and real estate, or real property, is that personal property is movable or not fixed permanently to one particular location.

Piggyback Loan 

A second loan on top of a conventional mortgage that makes it possible to finance a real estate purchase without the need to put down a full 20 percent deposit. The primary mortgage is for 80 percent of the property’s value and the second loan funds the balance of the purchase price less the deposit.

Piggyback Transaction

A transaction by which two separate mortgages are originated at once. Typically utilized by borrowers who wish to avoid paying private mortgage insurance (generally a requirement when a person makes a down payment of less than 20%), piggyback transactions can be a mortgage split into 80-10-10% mortgages, for example. The first position lien has an 80% loan-to-value ratio and the second position lien has a 10% loan-to-value ratio. The remaining 10% is accounted for in the form of a down payment.


Acronym used for the four elements of the monthly housing costs, including mortgage principal + interest, taxes and heating expenses. Used when calculating borrowers’ debt service ratios and determining the borrower’s maximum affordability.


Acronym for the four elements of a mortgage payment: principal, interest, taxes and insurance.


A unit for measuring fees related to a loan. A point equals 1% of a mortgage loan. Some lenders charge “origination points” to cover the expense of making a loan. Some borrowers pay “discount points” to reduce the loan’s interest rate.


Transferring the existing mortgage along with its current rate and terms from one property to another. A portable mortgage allows a borrower to transfer the terms and conditions from an existing property loan to a new property loan.


A grouping of investment or financial assets, like stocks, bonds, commodities, currencies, cash equivalents, mutual funds, exchange-traded and closed funds, real estate, arts and private investment, and other assets of value.

Portable Loan

A type of mortgage that may be carried by the borrower from one home purchase to the next, portable.
With a portable loan, the borrower can sell their house and move without having to refinance their loan, saving money in exit fees and new application fees. To qualify for portability the new loan amount may need to be the same or less than the existing loan, and the borrower may also have to pay the lender a portability fee, however, this fee is often much less than the costs to refinance.


In a real estate transaction, the term refers to the direct occupancy, use, or control of a property after signing closing documents and receiving the keys to the property. After the sale is recorded with the local government and the purchase funds have been received by the seller, ownership of the property is transferred to the buyer.

Posted Rate

The mortgage rates the banks and other lenders publicly announce.

Power of Attorney

A legal document that grants a person the right to act on behalf of another. For example, if a borrower dies or becomes incapable of managing his or her home loan or mortgage, a power of attorney assigned by that person could manage his or her mortgage and related decisions.

Power of Sale 

A mortgage clause giving the mortgagee the right and power, on default by the mortgagor on mortgage payments, to recover the loan by selling the mortgaged property.


The commitment from a lender stipulating how much money a person may borrow and under what terms and conditions.

Pre-Approval Letter

A document from a lender or broker that estimates how much a potential borrower could borrow based on current interest rates and the borrower’s credit history. The letter is not a binding agreement with a lender. Having a pre-approval letter can make it easier to shop for a home and negotiate with sellers.

Predatory Lending

Any practice of a lender employing unscrupulous tactics to entice, induce, and assist a borrower in taking a loan that they otherwise are unable to pay back reasonably.

Predatory Loan

A secured or unsecured loan containing terms and conditions heavily favouring a lender. These loans are often detrimental to the borrower. Many predatory loans have high-interest rates, high fees, and are designed to strip the borrower of equity. Predatory lenders often use aggressive sales tactics and deception to get borrowers to take on loans they can not afford.

Preferred Lender

A lender that is closely affiliated with a mortgage brokerage based on reputation and other industry factors. 

Preliminary Title Report

An official document that establishes ownership of a property.  A preliminary title report sets forth the conditions under which a title insurance company will issue a title insurance policy. The preliminary title report reveals title defects and other matters which must be dealt with for a seller to convey clear and marketable title and issuance of a title insurance policy. This report provides buyers with information on a property’s title and whether there are any easements, liens and encumbrances on a particular property.


The amount often stated as a percentage, paid in addition to the face value of a mortgage when the mortgage is being purchased.


Settlement of a debt or loan before its official due date.

Prepayment Clause

A clause inserted in a mortgage, which gives the mortgagor the privilege of paying all or part of the mortgage debt in advance of the maturity date.

Prepayment Option

The flexibility to increase the monthly mortgage payments and/or make a lump sum payment against the principal of the outstanding mortgage balance each year.

Prepayment Penalty

A provision in a mortgage contract that requires the borrower to pay a penalty (usually equal to an amount of interest)  if the mortgage is paid off within a certain time period.


The evaluation of the creditworthiness of a potential borrower by a creditor to provide a pre-approval. The lender gives information about the exact amount the borrower is able to borrow. This is usually an informal process and does not secure the amount or the application.


An informal, but not binding assessment of how much money a person could potentially borrow from a lender. Pre-qualification is an opinion rather than a promise and is thus different from pre-approval.

Pre-Qualification Letter

The lender’s best estimate on how much loan a borrower can afford based on the information provided to the lender. A pre-qualification letter is a less formal version of a pre-approval letter. The pre-qualification letter is a lender’s intent to provide the borrower with a loan of a specific amount, but it is contingent on a large number of conditions. It’s often the first step in the mortgage application process, but it doesn’t hold any weight.


The amount of money, determined by the interaction of buyers and sellers, that a buyer must pay to acquire a good, service, or resource.

Prime Lending Rate

The rate of interest charged on loans by chartered banks to their most creditworthy customers.

Prime Rate

The lowest rate a financial institution charges its best customers.

Prime Mortgage

A conforming loan, one whose loan limits fall within those set by CHMC and usually awarded to borrowers with good credit.

Primary Mortgage Market

The market where borrowers can obtain a mortgage loan from a primary lender. Banks, mortgage brokers, mortgage bankers, and credit unions are all primary lenders and are part of the primary mortgage market.


The amount borrowed from a lender. This is the amount upon which the interest payment is computed. All loans start as principal, and for every designated period that the principal remains unpaid in full the loan will accrue interest and other fees.

Principal and Interest Loan

A loan where both the principal amount and the interest charges are repaid over the term of the loan.

Principal Place of Residence (PPOR)

The property a person lives in most of the time rather than an investment or holiday home.

Private Mortgage 

A loan that is offered by an individual or a company who is not a a traditional mortgage lender or alternative institutional lender.   The private lender can be a small, medium or large mortgage investment company (known as a MIC) or even individual investors who are lending their own money to borrowers.   A private mortgage does not have the same restrictions as a traditional mortgage from a bank.

Private Mortgage Insurance (PMI)

A form of insurance that protects the lender by paying the costs of foreclosing on a house if the borrower stops paying the loan. Private mortgage insurance usually is required if the down payment is less than 20% of the sale price.

Private Mortgage Lender

An individual or organization who have the funds available to finance a real estate investment and make profits from private mortgage loans. Private mortgage lenders like B lenders are equity-based. They lend money for property purchases secured by the property as the collateral. This means that the lenders are primarily interested in the available equity of the property than they are in the applicants’ income and credit.

Private Sale or Treaty

A process of selling a real estate property without employing the help of a real estate agent. This will require the owner to do their own advertising and open inspections but will mean they avoid paying a percentage of their sale price as a commission to an agent.

Progress Advance Loan

A loan made usually to a builder where funds are advanced from time to time as construction progresses.

Promissory Note

A written promise that one party will pay the other party by a specified time. Promissory notes are different from contracts in that contracts spell out all the terms of a legal agreement while promissory notes only cover when, how, and how much someone is paid.

Property Insurance

A policy that provides financial reimbursement to the owner or renter of a structure and its contents in the event of damage or theft. Property insurance can include homeowners insurance, renters insurance, flood insurance and earthquake insurance. Personal property is generally covered by a homeowner or renters policy, unless it is of particularly high value, in which case it can usually be covered by purchasing an addition to the policy called a “rider.” If there’s a claim, the property insurance policy will either reimburse the policyholder for the actual value of the damage or the replacement cost to remedy the damage.

Property Manager

A person or company that manages a real estate property and its tenants on behalf of the property owner.

Property Tax 

A real estate levy calculated by a local government, paid by the owner of the property. Property tax in Ontario has two components: a municipal portion and an education portion.
The rates for the municipal portion of the tax are established by each municipality. The rates for the education portion of the tax are established by the Minister of Finance and help to fund the elementary and secondary education system in Ontario.
Property taxes are calculated using the Current Value Assessment of a property, as determined by the Municipal Property Assessment Corporation (MPAC) and multiplying it by the combined municipal and education tax rates for the applicable class of property.

Property Value 

The worth of a piece of real estate based on the price that a buyer and seller agree upon. According to economic theory, the value of a property converges at the point where the forces of supply meet the forces of demand. In other words, the value of a property at any given time is determined by what the market will bear.


An adjustment made on a payment to account for unused service so that the buyer and seller each pay their respective share of costs in proportion to the time in which they own the property.

Public Record

Information that is available to any member of the public. Public records like bankruptcy, tax lien, foreclosure, court judgment or overdue child support registered on someone’s credit, can harm the credit report and credit score significantly.

Purchase Agreement 

In real estate, it is a document outlining the purchase price and other conditions associated with the transfer of title. Real estate purchase contracts contain critical information, including the purchase price, mortgage contingency provisions, the earnest money deposit, down payment requirements, and many other terms that summarize the conditions of the transfer of title or sale.

Purchase Price

The actual price a real estate property is purchased for.

Purchase-Money Mortgage

A loan that the seller of a property issues to the buyer of a home as part of the property transaction. Also known as owner or seller financing, with a purchase-money mortgage the seller takes the role of the bank in offering the money to buy the home.

QuitClaim Deed

A legal instrument used to transfer the whole of the ownership of a property from one party to another. Also, it can be used to remove any person’s name from the original title however has no warranty as the grantee, the person transferring the property, has the same power as the grantor, the person receiving the property. It is typically best used with transfers of property between family members.

Qualified Mortgage

A loan that a borrower can be reasonably expected to pay. Mortgage lenders consider a borrower’s ability to repay mortgage loans before extending them credit. To be eligible for a qualified mortgage, borrowers must meet certain requirements, which are meant to determine a borrower’s ability to repay the mortgage.

Qualified Syndicated Mortgage

A syndicated mortgage that meets all of the following criteria:

• It is negotiated or arranged through a mortgage brokerage.
• It secures a debt obligation on property that,

o is used primarily for residential purposes,
o includes no more than a total of four units, and
o if used for both commercial and residential purposes, includes no more than one unit that is used for commercial purposes.

• At the time the syndicated mortgage is arranged, the amount of the debt it secures, together with all other debt secured by mortgages on the property that has priority over, or the same priority as, the syndicated mortgage, does not exceed 90 percent of the fair market value of the property relating to the mortgage, excluding any value that may be attributed to proposed or pending development of the property.
• It is limited to one debt obligation whose term is the same as the term of the syndicated mortgage.
• The rate of interest payable under it is equal to the rate of interest payable under the debt obligation.

A syndicated mortgage that secures a debt obligation incurred for the construction or development of property is not a qualified syndicated mortgage.

Qualifying Rate

The mortgage rate that one must qualify for when applying for a variable rate or a term less than 5 years so that if rates increase, the borrower can continue to make payments.

Qualifying Ratio

The percentage of income that is spent on housing debt and combined household debt. Qualifying ratios are used by lending institutions in their loan underwriting process in determining whether to approve the loan and under what terms.


Percentage a borrower pays for the use of money, usually expressed as an annual percentage.

Rate Hold

A time period during which a borrower can lock in the current best mortgage rate. If rates go down during this time, most lenders will honour the lower rate.

Rate Lock 

A freeze of the interest rate on a mortgage loan for a period of time. It is a guarantee from a lender that the mortgage rate offered to a borrower will remain available to that borrower for a specific amount of time.

Rate of Return (RoR)

The net gain or loss of an investment over a specified period, expressed as a percentage of the investment’s initial cost.


An inverse relationship between a mortgage interest rate and the upfront fees paid. When borrowers opt to pay more upfront fees, in return they can get the lower interest rate on their mortgages.

Rate Shopping

The process of inquiring or applying for credit with several lenders to find the best interest rate for a loan.


The indicated quotient of two mathematical expressions. In the context of finance, a ratio is used to evaluate business performance, such as debt/equity ratio and return on investment, as a measure of lending risks before approving loans to borrowers and for other measures.

Readvanceable Mortgage 

A feature of some mortgages that allows the borrower to add a line of credit to the loan, permitting the borrower to re-borrow any part of the principal paid down. Example includes home equity lines of credit (HELOC).


A process when the loan balance has changed significantly from the original amount. For example, if the borrower has made a lump-sum payment or been paying their loan for some time, they may have their lender recalculate the minimum repayment required to repay the outstanding amount over the loan term. It is also called loan recasting.

Real Asset

A tangible item that has intrinsic value due to its substance and properties.

Real Estate

The physical land and appurtenances including structures affixed thereto.

Real Estate Agent

A licensed professional who serves as the facilitator of real estate transactions.

Real Estate Bubble 

A type of economic bubble that occurs periodically in local or global real estate markets. Also referred to as a “housing bubble,” occurs when the price of housing rises at a rapid pace, driven by an increase in demand, limited supply and emotional buying. Once speculators recognize that housing prices are on the rise, they enter the market, further driving up demand. The phenomenon is called a bubble because at some point it will burst.

Real Estate Investment Trust (REIT)

An investment trust that specializes in investing in real estate-related investments including mortgages, construction loans and real property in varying combinations. Investors can invest in the collection of properties a REIT company manages, and benefit from the dividends earned. The investors also bear the cost of taxes and any other losses incurred.

Real Estate Owned (REO)

A term referring to properties owned by banks as the result of a foreclosure.

Real Rate of Return

The rate of return on the investment minus the inflation rate.


A real estate broker or agent who is affiliated with the National Association of Realtors. 

Real Property

The interests, benefits, and rights inherent in the ownership of the physical real estate. It is the bundle of rights with which the ownership of real limitations, and does not include personal property. 


The transfer of a title to the borrower after a mortgage has been fully paid.

Recourse Loan 

A type of loan whereby the lender can seek financial damages in the event that the borrower defaults in his loan payments. With a recourse loan, if the value of the asset used as collateral is not enough to cover the loss, the lender may seize other assets or extract compensation on top of the collateral.


The return of an investor’s principal on a fixed income security such as a bond, mutual fund or preferred stock. In the mortgage context, it is referred to as a process of paying off a mortgage completely.


A facility attached to the borrower’s home loan, that allows the borrower to take out any extra repayments that they have made over the required minimum repayments on their home loan. Any additional repayments the borrower makes goes towards their ‘available redraw’ which can be drawn down when required.

Referral Fee

A fee paid by service providers to other parties as quid pro quo or consideration for referring customers. In the real estate and mortgage businesses, it is the fee charged by one agent or broker to another party for a client referred.


A process of revising and replacing the terms of an existing mortgage or a loan agreement. There are two main types of refinancing: rate and term refinance and cash-out refinance. Rate and term refinance would mean either shortening or extending the term of the outstanding mortgage, or/and also lowering the interest rate. Cash-out refinance replaces the outstanding mortgage with the new one with a larger amount than allowing borrowers to cash out an equity of the property.

Registry System

A system of land registration where all interests in land are recorded in chronological order. 


A sum of money agreed upon between a landlord and tenant for the use of real property.

Rent Control

A government program that places a limit on the amount that a landlord can demand for leasing a home or increasing a rent to a residential tenant. Rent controls are intended to keep living costs affordable for renters and lower-income residents.

Rent-to-Own Contract

In real estate, it is a written contract between the owner of the property (the seller) and the tenant (the buyer) renting the property. A rent-to-own contract is applicable when tenants want to rent properties for a certain period, usually multiple years, while having the option to buy a property at or before the end of the lease. Various types of residential rent-to-own agreements in use by builders can be grouped into two main categories:
• a binding purchase and sale agreement, with transfer of ownership at or before the end of a specified period of occupancy.
• a lease, license or similar arrangement with an option to purchase the unit at any time within or at the conclusion of the occupancy period.

Rentable Area Multiple Tenancy Floor

A concept used for measuring floor area in commercial building. It is calculated by measuring the inside finish of permanent outside building walls, or glass line if at least 50% of the outer wall is glass, to the office side of corridors and/or other permanent partitions, and to the centre line of joint partition walls.

Rentable Area Single Tenancy Floor

A concept used for measuring floor area in commercial building. It is calculated by measuring the inside finish of permanent outer building walls or from the glass line where at least 50% of the outer building wall is glass. It includes all areas within outside walls less areas not used exclusively by the tenant.

Rental Cap

A limit on the number of renters allowed in a condo building or development (also known as owner-occupancy rates). It is a mechanism used to limit the number or percentage of units that may be rented at any one time in a community. Some condominiums also have a rental cap which limits the number of renters allowed in the condominium building at one time.
The rental cap on the property may affect property financing as some mortgage loans have rental cap requirements.

Rent Roll 

A statement listing the tenants in occupancy, the area or unit occupied by each, their lease expiry date and rent payable and other leasing details which may be required.


See Mortgage Renewal.

Remaining Balance

The current balance owed on a mortgage.

Remaining Mortgage Term

The current amount of time remaining in the length of the mortgage.

Repayment Holiday

A break from repayments offered to borrowers who are ahead in their repayments.

Repayment Period

The period of a loan when a borrower is required to make payments. Usually applies to home equity lines of credit. During the repayment period, the borrower cannot take out any more money and must pay down the loan.

Repayment Schedule

Mortgage payments laid out over the life of the loan. Some mortgage calculators let borrowers see their repayment schedule based on the amount of the home loan, the interest rate and monthly payments. See also Amortization.

Replacement Value

The amount that an entity would have to pay to replace an asset at the present time, according to its current worth.


The action of a creditor to claim property (cars, boats, equipment, etc.) that was used as collateral for the debt which is significantly overdue.

Reserve Fund 

A saving account or other liquid asset managed by a condominium, business or individual for anticipated future expenditures, such as major repairs and improvements. Reserve funds usually are set aside in an account separate from the general operating funds.

Resident  Alien

A person who is a legal permanent resident, but not a citizen.

Residential Real Estate 

Any property used for residential purposes. Examples include single-family homes, condos, cooperatives, duplexes, townhouses, and multifamily residences with fewer than five individual units. As defined by local zoning ordinances, residential real estate cannot be used for commercial or industrial purposes.

Residential Mortgage-Backed Security (RMBS)

A security that relies for payment on cash flows generated by a pool of residential mortgage debt obligations.

Restructured Mortgage

A mortgage in which basic terms, such as interest rate, term and monthly payment have been changed to prevent foreclosure.

Retirement Home

A private multi-residence housing facility intended for the elderly.


The sum of money gained or lost on investment compared to the invested amount. Return is synonymous with profit, yield, capital gain, interest, dividend or revenue produced by an investment. It is usually stated as a percentage of the amount invested. For example, a $25 gain on a $100 investment would have a 25 percent return.

Return on Equity (ROE)

Also known as return on common equity (ROCE), is a measure of a business’s profitability. Specifically, it is a ratio describing the rate of profit growth a business generates for shareholders and owners. In real estate, that is the percentage that the annual cash flow after debt service is of the equity in the property.

Return on Investment (ROI)

Also called rate of return or yield, is a measure of the performance and efficiency of an investment. ROI is represented as a percentage of profit yielded by an amount of capital after costs and expenses over a certain period. In real estate, that is the amount of profit a property generates divided by its value. A $100,000 property that generates $8,000 per year would produce an 8% ROI.


The total amount of money received by a business during a specified period. This includes all of the money that the company’s business activities generate, in other words, its sales of goods or services.

Reverse Mortgage

A type of mortgage designed for homeowners over 55 years of age, who wish to access the equity they may have built up in their home in order to assist them with costs associated with aged care. There is no requirement for repayment of the loan until the end of the loan term or the death of the borrower.

Right of Survivorship

The distinguishing feature of joint tenancies and tenancies by the entirely which provide that, where land is held in undivided portions by co-owners, upon the death of any joint owner, his interest in the land will pass to the surviving co-owner, rather than to his heirs or devisees.


An easement or a privilege to pass over the land of another, whereby the holder of the easement acquires only a reasonable and usual enjoyment of the property, and the owner of the land retains the benefits and privileges of ownership consistent with the easement.


The potential of losing money when investing, or the level of uncertainty regarding what an investor will earn or lose on the investment. Every type of investment involves some risk. Generally, the higher the potential return, the higher the risk. In terms of credit, risk refers to the likelihood of a borrower being able to make payments on time and, ultimately, to pay off a loan. Lenders determine risk by reviewing a borrower’s credit score and credit history.

Risk-Based Pricing

The practice in the financial services industry of offering different interest rates and loan terms to different consumers based on their creditworthiness and on the estimated risk that the consumers will fail to pay back their loans. The higher the perceived risk, the higher the interest rate the borrower will pay. Risk-based pricing is generally based on credit history.

Risk Score

Another term for a credit score. See Credit Score, FICO Score, Beacon Score and Empirica Score.

Risk Tolerance 

A measure of an investor’s ability to psychologically endure the potential of losing money on an investment. A person’s risk tolerance can change throughout his life and determines what type of investments he or she is likely to make.

Roll In

The process when the costs of a loan are added to the principal balance. Rolling is fairly common, so most loan costs can be included in the loan balance, especially in the case of a mortgage. Lender fees, such as origination fees, mortgage fees are frequently rolled in, while “prepaid,” like per diem interest, cannot be included in the roll-in.

Roll Over Mortgage

A type of mortgage that has different interest rates at different points in time while the loan is being repaid. The initial interest rate is typically set at a lower point than a standard fixed-rate mortgage, but every three to five years or so, the unpaid balance gets refinanced according to the interest rates at that time.
If interest rates drop, the borrower benefits from renegotiating a lower rate, but if interest rates rise, the lender benefits from renegotiating a higher rate.


A fixed regular payment made by an employer to an employee in return for work, as specified in the employment contract. Salaries are generally an annual amount paid monthly, bimonthly or weekly for a specified number of hours per week.

Sales Holdback

A percentage of the principal amount of the mortgage held back by the mortgagee until the property in question has been sold to a party satisfactory to the mortgagee who has assumed the responsibility of the mortgage by the appropriate legal document.

Sales Leaseback

A technique in which a seller deeds property to a buyer and the buyer simultaneously leases the property back to the seller usually on a long-term basis.

Sale of Loan Portfolio 

A type of transaction when a lender sells off a large batch of its loans, which gives the lender more cash to fund additional loans. Loan portfolio sales are common in the mortgage industry in the USA.

Score Factor

Also called a reason code or adverse action code, is a numerical or word-based code that describes the reasons why a particular credit score is not higher. For example, a code might cite a high utilization rate of available credit as the main negative influence on a particular credit score. The codes are often provided with credit score reports, or with adverse action reports issued after denial of credit. Different sources of credit scores use different code systems.


In the real estate context, the process of retrieving documents evidencing events in the history of a piece of real property, to determine relevant interests in and regulations concerning that property. Before an owner can sell his/her property the lender and the buyer will carry out searches to make sure the owner is entitled to sell the property and there are no encumbrances on it.

Seasoned Mortgage

A mortgage that has been in effect at least for one year and on which principal and interest payments are being made on time.

Second Home

An additionally purchased property, often a vacation or a rental property.

Second Home Mortgage

A mortgage used to purchase a property, often a vacation or a rental property.

Second Mortgage

A mortgage registered secondly on title after the first mortgage. A third mortgage is registered thirdly and so on. In the event of default, the first mortgage would receive all proceeds from the liquidation of the property until it is all paid off. Since the second mortgage would receive repayments only when the first mortgage has been paid off, the interest rate charged for the second mortgage is usually higher and the amount borrowed will be lower than that of the first mortgage.

Secondary Financing 

Financing real estate with a loan, or loans, that are subordinate to a first mortgage.

Secondary Mortgage Market 

The segment of the mortgage and real estate security market where mortgages and servicing rights are bought and sold between lenders and investors. Mortgage originators sell mortgage loans to investors on the secondary mortgage market. Loan aggregators buy mortgage loans from originators, bundle them together into mortgage-backed securities (MBS), and sell them to investors such as pension funds and hedge funds.


The process whereby assets that produce an income stream such as mortgages, are pooled and converted into saleable securities for investors. Mortgages are packaged into low-risk bonds and then issued to investors. Securitization offers opportunities for investors and frees up capital for originators.


An asset that guarantees the lender all or part of the loan until the loan is repaid in full. It is usually the property the borrower borrowed to buy which is the security for the loan.

Security Freeze 

Also known as a credit freeze, is a notice placed in a consumer’s credit report, at the request of the consumer, that prohibits the credit rating agency from releasing the consumer’s credit report or any information from it relating to an extension of credit or the opening of a new account, without the express authorization of the consumer. The purpose of a security freeze is to avert unauthorized use of the consumer’s credit score which, among other things, makes it difficult for someone to fraudulently obtain credit in their name.

Secured Loan

A loan that requires a piece of property, such as a house or car, to be used as collateral. This collateral provides security for the lender since the property can be seized and sold if the borrower does not repay the debt. A common example is a mortgage loan. It is also called Secured Debt.

Self Employed

A person who earns living from any independent pursuit of economic activity, as opposed to earning a living working for an employer (a company or another individual). A sole proprietor, freelancer, partner in the partnership, or an independent contractor are examples of self-employed persons.

Self Employed Income

The income of self-employed persons, derived from owning a business or from working as an independent contractor. Self-Employed Income is calculated by taking the gross income and deducting business expenses.

Self Employed Mortgage

A type of mortgages designed specifically for entrepreneurs and self-employed persons. Many self-employed people find it hard to secure a mortgage through banks and other lenders because it is harder for them to prove their monthly income and assets. Some lenders who cater to the self-employed look at credit history over income generation, as well as equity in the purchased property when deciding on the loan approval.


A form of financing in which the seller of a property accepts a down payment and agrees to accept payments until the property is paid for.

Seller’s Market

A real estate term, indicating that there are more real estate buyers in the market than there are sellers. When demand is higher than the supply, home prices increase, which benefits sellers.


A building that shares one common wall with the next building.

Semi-Monthly Mortgage Payment

A mortgage payment plan that allows the borrower to make payments 2 times per month, for instance, on the 1st and 15th of each month. Sometimes, semi-monthly payments are referred to as bi-weekly payments, but the two methods are not necessarily the same.

If payments are structured to be paid on two dates per month, such as the first and 15th days of each month, the borrower will make 24 annual payments. If the payments are made bi-weekly, such as every other Monday, the borrower will make 26 payments annually. The two methods of payment can make a great deal of difference in the ultimate total of payments made, and the total interest paid. Bi-weekly payments (if accelerated) are the equivalent of making 13 monthly payments, whereas semi-monthly payments are the equivalent of making 12 monthly payments. Non-accelerated bi-weekly payments are a little less per payment period.

Scoring Model

A complex mathematical formula that evaluates financial data to predict a borrower’s future behavior. Developed by the credit bureaus, banks and FICO, there are thousands of slightly different scoring models used to generate credit scores.

Shared-Appreciation Mortgage

A home loan in which the lender offers a below-market interest rate in exchange for sharing in the profit when the home is sold. Usually done only with private funds/lenders.

Short Sale

A type of real estate transaction that occurs when a financially distressed property owner sells his or her property for less than the amount due on the mortgage. The seller submits a financial package, seeking a lender’s approval to sell the property for less than the amount the seller owes on it. If a lender approves a short sale, the seller is in charge of selling the property. However, the lender is responsible for the negotiations and determines whether to accept or reject buyers’ offers as it is the lender who is trying to recoup costs. All proceeds from the sale go to the lender. The lender either forgives the difference or gets a deficiency judgment against the borrower requiring the borrower to pay the lender all or part of the difference between the sale price and the original value of the mortgage. In some states, this difference must legally be forgiven in a short sale.
Useful tool for lenders and homeowners in the USA when foreclosure could be a worst-case scenario. The seller enters into the short-sale process voluntarily, which is not the case for foreclosures.

Signature Loan

An unsecured personal loan offered by banks, credit unions, and other financial institutions. Instead of relying on the applicant’s assets as collateral, a signature loan relies on a borrower’s signature as a promise to pay. Alternative names for this type of loan are good faith loans or character loans.


A party who has signed a loan agreement. In the case of multiple parties, for instance, a joint application for a loan, there would be more than one signatory to the loan.

Simple Interest

The interest calculated on the principal portion of a loan or the original contribution to a savings account. Simple interest does not compound, meaning that an account holder will only gain interest on the principal, and a borrower will never have to pay interest on interest already accrued.

Simple Interest Loan 

A type of loan in which the interest has been calculated daily instead of on a monthly basis.
Simple interest is determined by multiplying the daily interest rate by the principal by the number of days that elapse between payments. The formula for simple interest calculation is: I (interest) = P (principal) x R (interest rate) x N (number of the days between payments).

Single-Family Residence

A private unit or house intended for occupancy by a single family.

Skipped Payment

An option allowed by lenders for borrowers to skip between 1 and 4 monthly mortgage payments each year without any penalty. The interest accrued during the skipped periods will instead be added to the principal, and monthly payments will then be recalculated once they resume. With a skipped payment, it will take longer to pay down the mortgage balance, plus the interest is still charged and added to the mortgage balance.

Soft Inquiry

Also known as a soft pull, is a preliminary review of a person’s credit history by a lender or other entity. This may be done without the consumer’s consent, like by a credit card issuer, for example, looking to preapprove potential customers for certain card offers. Soft inquiries do not impact a person’s credit score.

Special Assessment 

A levy that homeowners’ associations or local governments impose to pay for the installation or repair of common services when the cost of such work exceeds what can be met through normal budgets.


A written document that will outline all the conditions and materials that have been used in construction.

Speculative Home Market

A market in which investors snatch up homes for quick re-sale hoping to cash in on improving markets and a higher price in the near future. The investors in the speculative home market usually seek to take advantage of changes in markets rather than relying on longer-term market behaviour that is expected to continue.

Split Rate Home Loan

A loan that combines two types of loan, a fixed interest rate loan and a variable rate loan. Different rates of interest are paid on each portion of the loan, and each split will also be entitled to different features. For example, a borrower may be able to make additional repayments and use a redraw facility on their variable loan portion, where the interest rate and repayments will stay the same for the fixed-rate portion. The borrower can also choose the split and allocation of interest rates, for example, 50-50 or 60-40.

Standard Variable Rate

The interest rate charged on a lender’s most feature packed loans and allows a borrower interest rate to be cut when official rates fall, but also exposes the borrower to interest rate rises. In exchange for this movability is flexibility of loan features such as redraw, portability, transaction account and offset account.

Standby Commitment

An agreement by a lender to provide a certain amount of money on specific terms in the future. Neither party expects funding of the loan. This commitment enables the borrower to arrange construction financing from other sources. The commitment is issued for a fee and the lender is willing to disburse the committed funds if a permanent loan on more favorable terms is not obtained.

Standby Fee

A sum of money given by the borrower to the lender to hold a mortgage commitment for a certain period.

Standing Mortgage

A mortgage that provides for equal, regular lump sum payments of principal, usually quarterly, plus accrued interest.

Statement of Adjustment

A document prepared by the real estate lawyer that outlines the closing costs the buyer or seller will have to pay on the closing day.

Step-Rate Mortgage

A type of adjustable fixed-rate mortgage in which the interest rate will change after consummation, and the rates and periods in which they will apply are known. For example, a two-step mortgage loan would involve initiating the loan at one interest rate and then adjusting that interest rate at some pre-defined time to a rate consistent with the market.

Streamline Refinance

An expedited mortgage refinance process that reuses the original mortgage’s documentation allowing quicker refinancing.


A tract of land divided by the owner, known as the subdivider, into blocks, building lots, and streets according to recorded subdivision plat that must comply with local ordinances and regulations. Subdivision also refers to a process of dividing a tract or tracts of land to create new title(s). Subdivision of land into parcels (or lots) is an integral part of the land development process and is subject to both Provincial regulations and Municipal bylaws and policies in Canada.

Subordinated Loan

A mortgage whose priority is below that of another mortgage. For example, a second or third mortgage or a home equity loan is behind the first mortgage registered on a property. Subordinated loans are paid after all first liens have been paid in the event of a default. Because they are secondary, they often have higher interest rates to offset the higher risk taken by the subordinated lender compared to primary lenders.

Sub-Prime Borrower

A borrower considered to be a relatively high credit risk for a lender. Subprime borrowers have lower credit ratings or no credit history and who are perceived as likely to default on a loan.

Sub-Prime Credit

The below-average credit score of a person taking out a loan, indicating that he might be a credit risk The interest rate associated with a subprime loan is usually high to compensate lenders for taking the risk that the borrower will default on the loan. There is no one exact score that divides prime credit and subprime credit consumers. It depends on the product and each creditor sets its own rules.

Sub-Prime Lender

A lender who specializes in lending to sub-prime borrowers. 

Sub-Prime Market

The network of sub-prime lenders, mortgage brokers, warehouse lenders and investment bankers who make possible the delivery of loans to sub-prime borrowers.

Sub-Prime Mortgage

A loan offered to high-risk or subprime borrowers and thus carries the highest interest rates.

Super-Prime Credit 

A credit score that is at the highest end of a credit bureau’s score range. Consumers with super-prime credit are considered to have excellent credit and pose the least risk to lenders and creditors. No exact score divides the super-prime tier of credit from its lesser credit cousin prime and subprime; it depends on the product and each creditor sets its own rules.

Sweat Equity

An equity created by a buyer or homeowner by performing work on a property being purchased or refinanced.

Switching Fee

A fee the borrower pays when chooses to change from one loan type to another while retaining the same lender. The switching fee is used to cover the lender’s administration costs to complete this change.


Securities, instruments, or other property deposited by two or more persons with a third person, to be delivered on the performance of a certain event.

Syndicated Mortgage

A mortgage or loan offered by a group of lenders referred to as a syndicate, who work together to provide funds for a single borrower. Typically, they involve investors becoming the lender to a developer to build a project, such as a condo, low-rise, single-family or commercial development, although a single residential mortgage can also be syndicated. The loan can involve a fixed amount of funds, a credit line, or a combination of the two.

A syndicated mortgage provides developers with the capital and equity they need to take their project from conception to completion by working in conjunction with bank financing and developer equity,

Syndicated mortgages are passive income investments. They can earn revenue through fees and interest charges, and are secured by real estate.

Take-Home Pay

The net amount of income received after the deduction of taxes, benefits, and voluntary contributions from a paycheck. It is the difference between the gross income less all deductions. Deductions include federal, provincial and local income tax, employment insurance premium, retirement account contributions. The net amount or take-home pay is what the employee receives.

Take-Out Loan

A first mortgage loan that is committed and expected to be made upon completion of a property with the loan proceeds to be used to repay an interim or construction loan.

Tax Lien

A legal claim imposed by law upon a property to secure the payment of taxes. The property’s title can not be transferred until tax liens are paid.

Teaser Loan

An adjustable-rate mortgage, or ARM, that offers low introductory interest rates, or what lenders call teaser rates, to attract borrowers to switch to a new lender or to take out a new loan.
ARMs adjust after a certain period, such as the 5/1 ARM with a low rate for five years and adjusting each year after that. A true teaser loan offers an even lower rate for a short period, before adjusting to the normal ARM rate.

Teaser Rate

Also known as an introductory rate, is a below-market interest rate offered for a limited period.


The right to occupy the property.

Tenants in Common

A form of ownership of real property where two or more people share the holding of a property. This may be an equal or unequal share, however, when one person dies, their share of the property forms part of the estate and does not pass onto the other tenants. While similar to a joint tenancy, in that tenants in common each own the property, they may own different proportions of interest.


An ownership of property by two or more parties, each of whom has an interest which may be voluntarily transferred by alienation devise or descent and is not subject to any rights of survivorship.


A period of time until a loan or any type of deposit or investment achieves maturity. In the case of a mortgage, it is the length of time the mortgage will take to be repaid or a portion of that loan. For example, the loan term may be 30 years, but the term of the fixed portion of that loan may be 5 years.
Terms can be expressed in months or years, depending on the details of the account or loan.

Term Mortgage

A non-amortizing mortgage under which the principal is paid in its entirety upon the maturity date. Also known as a straight loan.


A row of buildings all connected.

Thin File

A term used in the credit scoring context to describe the credit report of someone with little or no credit history. Consumers who are just starting and may never have taken out a loan or had a credit card are said to have thin files.

Third-Party Guarantee

A form of securing loans, where the guarantor is liable for the outstanding debt including interest in case the borrower defaults.


The evidence by which the owner of land has lawful ownership thereof. The term is frequently associated with real estate law, where a legal document called a deed provides evidence of the transfer of title between buyer and seller. 

Title Deed

A signed legal document that transfers the title of an asset to a new holder, granting them the privilege of ownership. It contains the legal description of a property and details the ownership of the property.

Title Fee

A fee for a title search, transfer ownership of the property, register a new mortgage or discharge an old mortgage on a property.

Title Insurance

A type of insurance that protects buyers of real estate and issuers of mortgage loans from defects or problems with a land title in the transfer of property. If there is a title dispute resulting from a sale, the title insurance company may be responsible for paying specified legal damages, depending on the type of policy.

Title Insurance Policy

A contract by which the insurer, usually a title insurance company, agrees to pay the insured a specific amount for any loss caused by defects of title to real estate, wherein the insured has an interest as a buyer, mortgagee or otherwise.

Title Loan

A type of personal loan secured by the title of an asset such as a house, vehicle, boat as collateral. If the borrower defaults, the lender can seize that asset to recover the amount it lent.

Title Report

A report that reveals any competing claims, liens, or other problems relating to a property. A title report is required before title insurance to be issued. Also known as a Preliminary Title Report or Prelim.

Title Search

An examination of public records by a title company, lawyer, or escrow agent to determine the history of ownership of a particular piece of property and identify any liens, encroachments, easements, restrictions, or other factors that might affect the title. This step must be completed before a buyer can purchase title insurance.

Total Debt Service Ratio (TDS)

The ratio of an amount equal to the annual mortgage charges and acceptable instalment account payments to an amount equal to the effective gross annual income of the borrower. It takes into account the mortgage payments, property taxes, approximate heating costs, and 50% of any maintenance fees, and any other monthly obligations (i.e. personal loans, car payments, lines of credit, credit card debts, other mortgages, etc.), and this sum is then divided by the gross income of the applicants. Ratios up to 40 % are acceptable by the lenders.


A building complex with several houses that are either attached or built very close together. Townhouses differ from condominiums in that townhomes allow for ownership in the land on which they are built.


The official term for an account listed on a credit report. Each account’s details including payment history, balances, limits and dates are recorded in a separate tradeline. Tradelines are used to determine consumers’ credit scores.

Trade Equity

A swap of property, such as real estate or a car, as part of a down payment for other real estates.


A document registered in the municipal office responsible for land titles that records any change of property ownership.

Transfer of Charge

Assignment of a mortgage.

Transfer Tax

The tax paid when the title to a piece of real property changes hands from one owner to another. This tax applies to property that requires a title and is imposed when the title is transferred to the new owner’s name.


One of the three national credit bureaus that collects and provides consumer financial records. TransUnion operates the TrueCredit and FreeCreditProfile brands.


A legal relationship between one person, the trustee, having an equitable ownership or management of certain property and another person, the beneficiary, owning the legal title to that property. The beneficiary is entitled to the performance of certain duties and the exercise of certain powers by the trustee, which performance may be enforced by a court of equity.

Trust Account

Securities, instruments, or other property deposited by two or more persons with a third person (trustee), to be delivered on the performance of a certain event.

Trust Agreement

A written instrument duly executed, sealed, and delivered, conveying or transferring property to a trustee, usually but not necessarily covering real property.

Trust Deed 

An agreement in writing conveying property from the owner to a trustee for the accomplishment of the objectives outlined in the agreement.


The person or institution that supervises property and assets in a trust. Trustees oversee several different types of financial situations, including trusts, bankruptcies and certain types of pensions or retirement plans. It is the trustee’s job to make the best possible decisions for beneficiaries, those who benefit from the property or assets over which the trustee is in charge. 


A term used in real estate to describe a home or property that is ready for occupation for its intended purpose, like a home that is fully functional, needs no upgrading or repairs and is move-in ready.


Umbrella Mortgage

See Wrap-Around Mortgage.  


A property that is not affected by liabilities, charges or restrictions such as easements on the property, mortgages or leases which can affect the ownership.


A commitment issued by a mortgage insurer stating the mortgage and terms that it will insure.

Underwater Mortgage

A mortgage whose balance exceeds the value of the property.  Also known as an “upside down” mortgage.


An individual working for mortgage lenders who determines whether or not a borrower’s loan is approved. The underwriter evaluates the loan application, including the appraisal of the home, and decides whether to approve or decline the application based on the risk presented by the loan.


The process conducted when a borrower’s loan application is analyzed to determine the amount of risk involved in lending. Underwriting considers the applicant’s credit history and the property’s value in determining whether to assume risks and lend the money.

Unearned Income

Income such as interest, dividends, capital gains, alimony, rent, or other forms of passive income an individual did not actively work to earn.

Upfront Cost

Any fee the buyer pays out of pocket once the buyer’s offer on a real estate property has been accepted. Upfront costs include but not limited to earnest money, the inspection fee, and the appraisal fee.

Upfront Fee

A fee the buyer is obligated to pay upfront for any loan or property purchase. They may include the establishment of legal fees or LMI as well as the government fees associated with purchasing a property.

Usury Rate

The maximum legal rate for interest, discounts, or other fees that may be charged for the use of money.


Vacant Possession

A term used to describe a situation in which a real estate property is vacant when it is sold so that the new owner can move in immediately. This may refer to the previous owners moving out or if there are tenants they will vacate before the buyer take ownership.

Vacancy Rate

The percentage of vacant units in a rental property, like an apartment building. A low vacancy rate indicates strong rental interest, while a high vacancy rate can mean that units are not renting well.

Variable Interest Rate

An interest rate that varies in line with a specific benchmark or index rate.

Variable Interest Rate Mortgage

A type of mortgage where the interest rate is not fixed during the duration of the mortgage term. Instead, interest payments will be adjusted at a level above a specific benchmark or index rate. Variable Interest Rate Mortgage offers predictability, as the monthly mortgage payments remain the same during the mortgage term. If the prime interest rate decreases, although the payment remains the same more of the payment will go towards paying down the principal. If the prime rate increases, more of the mortgage payment will go towards paying interest costs.

Variable Terms Mortgage

A mortgage that provides variation of specific terms of the loan particularly the interest rate and or the amortization period, on a predetermined formula during the loan term.


A change made to any part of the loan contract to satisfy the borrower’s lending or application requirements, or to encompass changes or additions to the borrower’s loan product.


A person or party who is selling the property.

Vendor’s Liens

A notice registered on title by the vendor, protecting the vendor, for the unpaid balance of the purchase price. It is usually collaterally secured by a mortgage.

Vendor-Back Mortgage 

A mortgage on real property given by a buyer to the seller to secure a portion of the purchase price and delivered at the same time that the property is transferred, as a simultaneous part of the transaction.

Warranty Deed

A deed in which the seller warrants that the title to the real estate to be sold is good and salable.

Weekly Mortgage Payment 

A mortgage payment plan that allows the borrower to pay a quarter of the monthly amount due each week. The monthly mortgage payment is multiplied by 12 months and divided by the 52 weeks in a year or 52 payments per year.

White Elephant

A term used for a property or a business that is so costly to maintain or operate that it is impossible to make a profit.

Whole Loan

A mortgage loan sold in its entirety. When a whole loan is sold by the original lender to an investor, all of the contractual rights and responsibilities of the original lender pass to the investor.

With Full Recourse

A term used in the secondary mortgage loan market. It refers to a written clause in a sales agreement by which a lender sells mortgages to an investor. It means the seller/lender will fully reimburse the buyer/investor for any losses resulting from the purchased loans. This may be accomplished by the seller taking back any loans that become delinquent.

With Partial Recourse

A secondary mortgage market term referring to a clause in the sales contract by which lenders sell their mortgage loans to investors. It means the seller/lender is obligated to reimburse the buyer/investor for an agreed-on portion of any losses resulting from default or other problems in the purchased loans.

Without Recourse

A term used in the secondary mortgage market. It is a clause in a sales contract by which a lender sells mortgage loans to an investor. It means the seller/lender is under no obligation to reimburse the buyer/investor for any losses resulting from the purchased loans.

Working Capital

The sum of the cash and highly liquid investments that a business has on hand to pay for day-to-day operations. Working capital is equal to the total of a company’s current assets minus its total current liabilities.

Wrap-Around Mortgage

A new mortgage registered on title which encompasses a prior existing mortgage for a lower amount and usually for a lesser rate of interest. Payments under the new mortgage include the payments under the original mortgage, and the new mortgagee undertakes to service the prior debt. This is also called Umbrella Mortgage.


A form of written command in the name of sovereign, state or court issued to official or other person and directing him to act or abstain from acting in some way.


The return of a property, as a percentage, calculated by dividing the net income of a property by its market value or price.

Yield Curve

The representation of the relationship between an interest rate and the time to maturity of a debt. The shape at any given time will determine the difference between. 

Yield to Maturity

A percent returned each year to the lender on actual funds borrowed considering that the loan will be paid in full at the end of maturity.

Zero Down Mortgage 

A loan that does not require a down payment. The borrower obtains a mortgage for 100 percent of the purchase price.


A set of rules and regulations established by the municipal authorities to outline the permitted uses for the land, and the buildings on that land.

Zoning Variance

An exception to a zoning ordinance that’s granted on a case-by-case basis by a local government.