Accrued interest is interest that has been incurred on your loan but is yet to be charged and in turn paid by you. The interest on your mortgage is calculated daily, but you probably make your payments weekly, bi-weekly or monthly. Interest accrues from the time you made your last payment to the time you make your next payment.
Security over your loan guarantees your lender a portion of the value of your loan until the loan is repaid in full. Usually, the property you have taken out the loan to buy acts as the security over the loan, but in some cases, you may have a guarantor on the loan who puts up their property as security.
Additional repayments allow you to pay off your loan sooner. Any amount you pay above the minimum repayment amount is an additional repayment. The more you pay in addition to your minimum repayments the sooner you’ll repay your loan and the less interest you’ll pay. You can make additional repayments on an automated basis by paying a larger-than-required direct payment to your loan each month, or you can make additional repayments into your loan when you come across extra funds in your budget.
When you buy an existing property, you may have to reimburse the previous owner for legal or property tax or utilities that have already been paid. An adjustment is the process of allocating these expenses to be paid from your mortgage account.
The nominal interest rate used when calculating the interest expense on your loan.
An agent is a person or company authorized to act on behalf of the customer who is selling or arrange financing of customer’s property.
Agreement of Purchase and Sale
A written agreement between vendor and purchaser in which the purchaser agrees to buy certain real property and the vendor agrees to sell upon terms and conditions as set forth in that agreement.
An all-in-one loan allows you to use your loan account and savings, cheque and transaction account by having all of your wages and other income paid into your loan account, giving you access to all of the funds above the value of your minimum home loan repayment amount. An all-in-one loan is also known as a home equity loan or a transactional loan. Because you are leaving all of your savings and everyday funds in your loan account until you need them they work to offset the interest charged on your home loan.
An amount of money set aside for future investment in mortgages.
See Private Mortgage
An amenity is a feature of the home or property marketed as a benefit to the buyer. An amenity is an additional feature and not a necessity. 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.
Amortization is the practice of repaying a mortgage loan in monthly installments of principal and interest repayments.
A table showing the amounts of principal and of interest comprising each level payment due at regular intervals and the outstanding principal balance of the loan after each level payment is made.
An appraisal is an estimate of the market value of a property prepared by an expert.
The fee to cover the cost of appraisal which is requested by lenders. The appraisal fee is usually paid by the borrower as part of the loan application costs.
Appreciation refers to the increase in a property’s value through any range of economic factors, such as renovations, inflation, supply and demand, and many others.
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.
ARM (Adjustable-Rate Mortgage
A mortgage in which rate changes according to a formula specified in the loan document.
APR stands for ‘average annual percentage rate’. This rate is the average of all the rates that are offered with a particular product. The APR includes not only the interest expense on the loan but also all fees and other costs involved in procuring the loan.
The APR should always be 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 your interest expense.
A resource with financial value, which can be owned in the hope of providing future benefits or income.
The principal balance of a mortgage loan outstanding on maturity of the term. A balloon mortgage is one which does not fully amortize over its term to maturity.
A lump-sum payment made to your loan that is typically used to payout the remainder of the loan in full.
The rate at which the Bank of Canada charges on loans to the charted banks. This is also the rate at which the chartered banks lend demand money to their prime customers.
A legal status for a person or entity that cannot repay their debts to their creditors. This is usually imposed by a court order that is often initiated by the debtor.
One hundredth of 1%. In other words, 1% equates to 100 basis points. Used to describe the amount of change in yield in money debt instruments, including mortgages.
Single mortgage registered against two or more individual parcels of real property.
The method or repayment where periodical payments of principal and interest are made in such a way that the payments remain constant in amount.
An interest rate on an increased loan which is derived from a formula taking into account the interest rate on the existing loan and the interest rate required on the monies.
The allotment by a lender of funds for a number of loans for one builder.
The highest price you would be willing to pay for a property. Unless you are making a “take it or leave it” offer, you would initially offer a price lower than your bottom-line price and negotiate your way upward. Obviously, you never let a seller know your bottom-line price at the first place.
Typically used if you are selling one property and buying another at the same time. Bridging finance offers you a short-term loan to cover the money you need to buy a new home while you are waiting for the proceeds of the sale from your old home. It’s usually charged at a higher interest rate than a standard home loan.
A mortgage loan made to a builder for the purpose of erecting the house and for assumption of that loan by an approved purchaser.
A set of minimum regulations respecting the safety of the buildings with reference to public health, fire protection and structural sufficiency
A building inspection ensures the property you are looking to purchase is structurally sound and that there are no issues that will cause costly repairs in the future. Having issues uncovered in a building inspection can also offer you leverage in negotiating a better price and some contracts of sale can be signed subject to an acceptable building inspection report.
Buyer’s Agent (also the Selling Agent)
A buyer’s agent acts on the behalf of buyer to seek out suitable properties and negotiate with agents or vendors for a suitable price or contract, saving a buyer the time of travelling to dozens of properties that look good on paper but need further investigation.
A lump sum payment as consideration for the reduction in the interest charged on a loan from that which would normally be charged.
CMHC is a federal Crown corporation that administers the National Housing Act (NHA). Among other services, they also insure 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.
The value of your long-term assets if they were to be liquidated at their current value.
Capital Cost Allowance
A deduction from rental income such part of the capital cost of property as is allowed by regulation under the Income Tax Act.
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 you make from the sale of an asset. The home you live in as your primary residence is excluded from capital gains tax, or CGT, when you sell it.
You’ve made a capital loss if you sell an asset for less than what you paid for it.
The conversion of interest into a principal sum and the subsequent amortization of that sum with interest.
Capitalised interest can be best understood on an investment loan where you are making interest only repayments and you also have a line of credit to access the equity built up in your investment property. Capitalised interest uses your line of credit to pay your interest repayments so that your interest repayments are being added to the principal amount of the loan. Capitalised interest relies on you increasing the equity in your investment property through improvements and then extending your line of credit to continue repaying the interest. This can be a risky long-term strategy because if your loan grows faster than you can add equity to your property and your line of credit, then you will quickly run out of money.
A capped loan 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 like a standard variable rate can.
In a rental property owned by an investor, this refers to the amount of money a property generates after expenses are accounted for.
This is Latin for ‘let the buyer beware’. It means that you are responsible for doing your due diligence in examining the property before you purchase it for any issues.
A notice registered on title by a person claiming to have a proprietary interest (i.e. a right to call for or receive a transfer charge) in land or in a charge of which he is not the registered owner to protect his interest. The registered owner of the land or charge cannot deal with the land of charge without consent of the cautioner.
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 mortgage document in the Land Titles System.
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
This document details the land dimensions and identifies ownership of the property. The certificate of title also shows whether there are any mortgages or encumbrances on the property. It’s usually held by your lender as security for your loan.
Certificate of Occupancy
A certificate provided by the City Building Inspector that a property 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.
Describes the fact that you are entering into a debt that uses your property as security. You are liable for the debt until you repay the loan.
A mortgage under the Land Titles Act is a charge. Like a mortgage a charge arises by contract. With a charge, however, there is no transfer of the title or possession buy the land is charged with the payment of a debt or the discharge of an obligation.
Another term for personal property. There are two types of chattels: real chattels which are buildings and fixtures of the property, and personal chattels which are things like clothing and furniture. Your purchase contract will detail whether real or personal chattels are included in the sale and contract price.
A mortgage given on 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.
This is when there are no restrictions on the certificate of title that prevent the sale of a property, such as existing mortgages. Clear title also refers to when ownership of the seller is established.
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 on the basis of the original investment.
A mortgage which does not contain any prepayment rights.
The miscellaneous costs associated with closing. These typically include a Loan Origination Fee and Discount Points, Appraisal Fee, other Lender Fees, Escrow and Title Fees, and the first year’s Insurance Premium.
The date on which the new owner takes possession of the property and the sale becomes final.
The conclusion or consummation or a transaction.
Cloud on Title
Any encumbrances or claim that affects title to real property.
A group of houses sharing a common space, such as an apartment block or a series of units. If you are considering purchasing a property that is part of a cluster, be aware that there may be body corporate fees and restrictions on what changes and additions you can make to the property.
A person applying with another for a loan.
An asset, such as term deposit, Canada Savings Bond, or automobile, that you offer as security for a loan. May be required as additional security over your loan if you don’t have enough deposit or you’re an undesirable loan candidate. Your lender may ask for collateral security in the form of savings, other investments or properties belonging to a family member who is able to act as guarantor.
A condominium fee is 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.
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.
A condo association is 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 fee 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. The units are generally attached (unlike traditional single-family detached homes).
When your application has been approved, subject to the lender’s terms and conditions. These conditions need to be met before the lender will give full approval and release the funds.
These are a type of loan that are structured to best suit a borrower who is constructing their property rather than purchasing in a pre-built property. As the payment process for constructing a property is so different to purchasing a pre-built property there is often a need for a unique loan type.
An agreement of two or more persons on a sufficient consideration to do or not to do a particular thing. 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.
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 ‘Hi-Ratio’ mortgage and the lender will require insurance for that mortgage.
A short-term closed mortgage with a fixed interest rate and the flexibility to convert to a long-term closed mortgage at any time.
This is when the ownership of the property is transferred from the seller’s name, into your name.
This is the legal process which transfers the ownership of the property, and to make sure you understand the process and that it is completed correctly many property buyers enlist the services of a conveyancer.
Interest charged not only on the principal sum but also on interest amounts charged in preceding periods which accumulate as new principal. In interest law the words compounded, calculated, computed, converted, or convertible are considered to by synonymous terms.
A contract issued by a lender reciting the basic terms of a loan and accepted by the borrower
The fee paid to an agent for their services. A real estate agent often takes a commission from the deposit paid to secure the property, whereas a buyer’s agent might need to wait until the purchase has been processed. Mortgage brokers often receive a trailing commission, which is a portion of the percentage of interest you are paying over the life of the loan.
The areas of a property that is accessible to all residents such as gardens, hallways and driveways. Common property is maintained by using the body corporate fees, and decisions are made by the body corporate committee
Properties that are similarly sized and have similar features to a subject property. By reviewing comparable properties, buyers and their agents can get an idea of a property’s market value.
Comparative Market Analyses
Conducted by a real estate agent, this assessment of a property’s value is used to determine a reasonable offering price.
Compound interest (or compounding interest) is 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
A form of multiple ownership of real estate in which a corporation or business trust entity holds title to a property and grants the occupancy rights to – shareholders by means of proprietary lease or similar arrangements.
Cost Approach (To Value)
One of the steps in the property appraisal process. 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
This is the terms and conditions which are in place specifying the accepted use of a block of land or property, for example whether you are able to use it properly for just residential purposes or for commercial uses as well.
Many home loan applications will not be approved unless you have sufficient insurance on the property you are purchasing. As a result you can take out cover note which acts as temporary insurance while the property is under contract, and before you have secured and organised an official insurance policy.
In a real estate negotiation, a counter-offer is typically a response by the seller to the buyer’s initial offer. It is usually lower than the initial listing price and higher than the buyer’s offer.
The contractual interest rate stated in the mortgage document.
Money that is available for the sake of a loan.
A person or company of legal nature that is owed money.
Private companies that collect and maintain individuals’ credit histories, which they provide to creditors for a fee. The three major credit bureaus are Equifax, Experian and TransUnion.
In respect to a lending transaction, the aggregate of all charges against, and amount paid or payable directly or indirectly by or on behalf of a borrower
Your credit history includes all credit card applications you have made, any personal loans you have in your name as well as details of your repayment history with regards to your bills and other debts. Your credit history will be assessed by a lender to determine how likely you are to responsibly repay your home loan, however even if you have defaults or a lot of credit card that it is still possible to secure a home loan.
The maximum amount a borrower can use at any one time, typically applies to equity or line of credit loans.
The market where fixed-income securities are traded. Among these are mortgage-backed securities, pools of mortgages that are sold to investors, such as pension plans and hedge funds.
Produced by credit reporting agencies, this reveals the borrower’s history and current status of obligations.
A system that assesses a borrower on a number of items, assigning points that are used to determine the borrower’s credit worthiness.
Cross Default Clause
Mutual clauses in two or more mortgages which state that a default under one mortgage constitutes a default under the other(s).
Lenders will typically calculate the interest charges on your loan account daily regardless of whether you make your repayments weekly, fortnightly or monthly. This means that the interest calculations can vary depending on the balance of the account each day.
The removal of funds from a financial account.
A person or company that owes money to a creditor.
Debt to Income Ratio
Your debt to income ratio is calculated by looking at the ratio of the money you make to the money you owe. When you are considered as a home loan candidate the repayment of the debt on your home loan will be considered in this ratio to help the lender decide whether or not you will be overextended, and the lower your debt to income ratio the better.
A legal document which shows who has the legal right to possess a property and states whether there are any agreements or obligations on the property.
If you do not pay your minimum home loan repayment by the due date then you will be in default. If you do not make loan repayments and remain in default your lender may take legal action to repossess the property. Defaults can also be listed against your name for failure to pay bills such as a phone or electricity bill. These then show up on your credit history and can impair your credit when it comes time to apply for a loan.
When you do not make your mortgage repayments on time under your loan agreement. If you do not make your repayments then you become at risk of defaulting on your loan due to delinquency.
A loan where the balance must be repaid upon request.
Over time many assets will lose value as they become older, outdated and less useful, and this is known as depreciation. When it comes to the value of long-term tangible assets a periodic cost can be assigned to calculate the cost of depreciation to you.
If you choose to pay your home loan repayments with direct debit, then you are a green for your lender to automatically debit payment amount from your chosen cheque or savings account. If you choose to make your payments by direct debit you will need to be very sure that there will always be enough funds available on the day the direct debit comes out so that your account does not become overdrawn.
This is the name given to fees which are often incurred during the conveyancing process of purchasing a new house. These can often include title search fees and costs paid to government authorities and these are often unavoidable and may be included in the fee you are paying your conveyancer.
This term is used for persons or entities who have previously been declared bankrupt but have had their bankruptcy discharged, this typically occurs three years and one day after you filed for bankruptcy personally.????
If you finalise your loan account and pay the amount in full before the end of the agreed term you may be charged discharge fees which are administration fees to cover the costs incurred by the lender to process your loan.
Discharge of Mortgage
A 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 them from all obligations and covenants contained in the mortgage.
The sale of a mortgage for less than the principal balance thereby effecting an increase in the percentage of interest paid on the investment.
This is the amount you have left over from your wages and other income once all of your bills and expenses have been paid. It does not include any lifestyle or entertainment expenses, but is the amount your lender will look at to determine how much you have remaining from your total income each month to service a loan.
The deposit plus any other money you’ve set aside to pay towards the purchase price of the property.
If you’re building a home, there are usually five stages of construction from pouring a slab to the stage where the house can be locked-up. A draw down is a payment required by your builder at each of these stages. With a construction loan, you can make these payments and only pay interest on the amount of the drawdown payment, and not the full amount of the loan. This also applies to non-construction loans when they are used to pay the vendor for the property as per the agreed upon price.
Stands for ‘debt service ratio’, this is the portion of your income which will go towards servicing your loan for the entire term and you will usually see this expressed as a percentage.
Early Termination Fees
Also known as early exit fees or deferred establishment fees, early termination fees are charged if you pay out your loan early within a designated time period specified by your lender.
A right given to someone to use a piece of land for a specific use even if they aren’t the owner of it, e.g a driveway shared between the landowner and a neighbor.
This is 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.
The estimated period over which it is anticipated that a property may profitably by utilized.
Electronic Funds Transfer (EFT)
When funds are transferred electronically from one account to another. Lenders sometimes allow you to make additional repayments to your loan by making electronic transfers in internet banking.
Can be anything which is a liability or charge on a property and can include an easement which runs through the property, or a charge stating you may choose to repaint your boundary fence from an approved colour list.
When money, property, a deed or bond is put into the care of a third party, and is to be delivered only once specific conditions are fulfilled. When you refinance a mortgage for example, your loan application, title and paperwork may have to go through an escrow agent until your income and details have been verified for approval of the loan.
Lender-established accounts 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 in the East, especially where the LTV of an original loan exceeds 80%. In these situations, borrow equity is not high and if foreclosure became necessary, the lender would not want to recoup the cost of back taxes payment.
After an offer is made, an escrow officer (or a representative of an attorney’s office) facilitates the transaction from the time the contract is signed through the close of escrow. These include inspections, earnest money agreements, disclosures, lender issues, and title and escrow issues. This is different from an escrow coordinator attached to a real estate broker’s office — a person whose services you should not pay for.
All of your possessions, property and debts which will be left behind when you die.
In mortgaging, the difference between lending value, or cost, and indebtedness.
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.
A mortgage which has a claim solely on the equity of redemption and not to the title of the property itself.
Exchange of Contracts
When you legally exchange contracts with the vendor you are purchasing from to allow formal inquiries to begin towards the settlement of the sale. This is where you present any conditions to the contract such as signing it subject to finance being approved or subject to satisfactory building inspection reports.
The highest estate or absolute right in real property.
Created by the Fair Isaac and Co., this mathematical scoring system is the major credit scoring model used to assess the relative risk of an individual borrower.
A fee or commission paid by a lender or borrower to a broker for respectively, referring or obtaining a mortgage loan.
A mortgage registered before all others on title.
Fixed Interest Rate
When the interest rate charged on your home loan is locked in for a certain period of time. Your rate will not change during the fixed interest rate term of your choosing which is often between one year and 10 years.
Fixed-Rate Closed Mortgage
The security of a fixed interest rate, so you always know exactly what your payments will be.
Fixed-Rate Open Mortgage
The security of a fixed interest rate and the flexibility to pay off as much of your mortgage as you want, when you want.
Flat Interest Rate
A flat interest rate is an interest rate that is calculated from the original loan amount throughout the term of the loan.
An all inclusive monthly 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.
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.
Protects you against loss or damage of property during a flood and if the property you are purchasing is located in a floodplain your lender will require you to show proof of flood insurance before they will approve your loan.
The waiving of a covenant in a mortgage document.
The legal process by which a lender enforces payment of a debt secured by a mortgage, or deed of trust. During a foreclosure, the lender takes possession of the home, evicts the mortgagor, and sells the mortgaged property. If the sales price is not enough to pay off the loan, the lender may have other remedies dependent upon state laws, which vary from state to state.
This is the approval given once the lender has made all the necessary checks and review of your application. Once you receive formal approval of your loan you are able to proceed with settlement.
Freehold is a type of title. If you have freehold title over land, you own it outright forever. You’re also free to enjoy the property as you see fit within local and government guidelines. Freehold gives you complete control and ownership for as long as you like, until you choose to sell. While your land or property is mortgaged it is of course partially owned by your lender, and you want to make sure that if you are choosing a 30 year loan term for example, that at the end of that term you will have freehold over the property with no obligations remaining.
A freestanding property is one which stands independently of others.
The Financial Services Commission of Ontario (FSCO) is a regulatory agency of the Ministry of Finance that 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.
FSCO’s legislative mandate is to provide regulatory services that protect the public interest and enhance public confidence in the sectors it regulates.
Full doc loan
This is the standard loan type when talking about home loans and requires a lot more documentation when applying than a low doc loan.
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 mortgage payments, property taxes, approximate heating costs, and 50% of any maintenance fees, and this sum is then divided by the gross income of the applicants. Ratios up to 32 % are acceptable.
The income amount due to a person or company before tax and superannuation has been deducted. Even though your gross annual income is not your take-home wage, lenders will still generally assess your borrowing capacity by asking for your gross annual income.
A lease which provides that all expenses attributable to the real estate are paid by the landlord. Local terminology may require some expense to be paid by the tenant.
Gross Leasable Area
The total floor area designed for tenant occupancy and exclusive use and is that area on which tenants pay rent. As adopted by the shopping centre industry it is measured from the centre line of joint partitions and from outside wall faces
Gross Rental Yield
The gross rental yield on your property is used to compare the investment return. To calculate your gross rental yield you divide the rental income you receive in a year by the purchase price you paid for the property. For example if the yearly rent on your investment property is $18,200 and the median house price for the area is $509,250 then your gross rental yield will be 3.57%.
This is a term used when referring to all the fees and charges that you will pay to the government when purchasing a property, they include property land transfer tax and others.
A formal and legal promise of fulfilling certain terms and conditions such as being a guarantor on a home loan.
Someone who agrees to be responsible for your mortgage debt if you default. If you do not have the required deposit amount, you have a poor credit history, or you want to avoid paying lenders mortgage insurance (LMI) you may need a family member to act as your guarantor to secure your home loan. Keep in mind you are asking them to put their own home and financial security at risk for you, so make sure you have official payment agreements in place.
The harmonized sales tax (HST) is 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. Buyers of new homes may receive a rebate of up to certain limit of the provincial portion (8%) of the HST.
A home equity line of credit (HELOC) is a loan that leverages the equity in your home. The HELOC functions like a revolving line of credit where you can choose when and how much money to withdraw, so long as the amount does not exceed more than 65% of the value of your home.
The interest charged on a home equity loan is often higher than a standard variable rate, and the loan requires significant discipline not to overspend because while you do not need to make repayments until you have reached your credit limit, you do not want to be controlled by large mortgage debt.
High Ratio Loan
A loan that exceeds statutory loan to value limits (80%) and is therefore required by statute to be insured.
The withholding of or nonadvancement of a portion of a mortgage loan to maintain adequate security, 1 ) pending achievement of a performance requirement, or as 2) protection against liens
A holding deposit is an amount you pay to a vendor to show them and other buyers that you’re seriously interested in a property. A holding deposit does not secure the property for you, but is given in good faith for the vendor to start organising the sale.
This is the difference between the value of your home and the amount you still owe on your mortgage, and any other outstanding debts over the property. The amount of equity in your home changes as you make repayments to reduce your mortgage or as the value of your property fluctuates. As your property appreciates in value your equity increases, but if your property depreciates in value, you could be at risk of negative equity, where you owe more than your property is worth. To avoid this situation, most lenders will ask for a home loan deposit so you can avoid borrowing more than your property is worth, and if you refinance to access your equity you can usually only access 80% of the equity in your home, or 55% with a reverse mortgage if you are retired.
A policy which protects the homeowner against damages to their property 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. In order to protect lenders’ interests, they are typically named on casualty insurance plans as additional insured parties.
This is an examination of a property to determine if it is structurally and mechanically safe. A home inspection can make you aware of any repairs which will be required on the home and this can give you leverage to negotiate a lower purchase price, or inform you of expensive home maintenance ahead.
A home loan is 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 Contents Insurance
An insurance policy which protects you against the loss or damage of both your home and all of your possessions, fixtures and fittings. Home and contents insurance should also protect you against claims of negligence or injury, protecting your liability if someone decides to sue you.
A statement showing your income and your expenditure for a designated period, showing your lender the proportions of your income which go to savings, bills and other debts, and how much disposable income is left to service a loan.
Income Approach (To Value)
One of the steps 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.
Real 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.
Indemnity insurance is security against any damage or loss, where if compensation is required, indemnity is the amount paid to compensate for a loss.
Lenders use an index to determine when and how to adjust their variable interest rates. The index takes into account their own financial position, their cost of lending, and inflation, the official cash rate and Reserve Bank decisions.
These are the interest rates some lenders use to work out their advertised or interest rates for loans.
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.
A loan where all or part of the principal and interest and permitted costs are insured against loss by CMHC under the NHA or by a private mortgage insurance company.
This is the amount your lender is charging you to let you borrow their money, or paying you for keeping your money in their savings account.
Interest Adjustment Date
The date one month prior to commencement of amortization – when accrued interest computed on the monies advanced becomes due.
Interest in Advance
Is an investment loan, typically interest only, that the borrower pays their interest in advance in order to possibly save on tax.
Interest in Arrears
This is interest charged at the end of a specified time.
The decimal equivalent for an interest rate on a unit amount for a period of time. Computed by interest rate divided by number of days in basic year times the number of days accrued.
A loan that requires a borrower to pay back interest only for a set number of years. After the interest-only period has expired, the remaining principal is typically amortized over the remainder of the life of the loan.
Usually a loan requires you to pay both the principal (the amount you’ve borrowed) and the interest charged on that amount. An interest-only loan requires you to pay only the interest portion of your repayments. Interest-only loans are targeted primarily at investors because they are able to repay the principal amount of the loan at the end of the term or when they sell the property with a portion of the sale price.
The rate, which fluctuates according to various economic forces, that is the measure of the price at which money can be borrowed. Interest rate is the cost of borrowing the principal.
For example, if you were considering a mortgage loan for $200,000 with a 6 percent interest rate, your annual interest expense would amount to $12,000, or a monthly payment of $1,000.
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.
Internal Rate of Return
This is calculated to help determine the return on investment you 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 you can see the point at which your investment turns a profit.
Also known as an ‘introductory rate’, this is a lower initial interest rate offered on a home loan for a period between one month and five years, depending on the lender. You could save as much as 2% on your interest rate if you take advantage of a honeymoon offer which may include a fixed lower interest rate, a discounted variable rate or a capped rate. At the end of the honeymoon period your home loan interest rate will revert to the lender’s standard rate for your type of loan.
The list of items which will be included in a property sale. This could include furniture or any fixtures or fittings the vendor is including the sale price.
These are loans that are specifically tailored to a borrower looking to purchase an investment property where they will not be living but earning income from.
A property which has been purchased with the sole intention of achieving a return. Property 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.
An investment return is derived from a very similar calculations to the capital growth figure and is the percentage of change in the value of your investment over a period of time. This can help you determine whether your investment property is increasing in value, how much it is increasing and allow you to calculate whether it is likely to continue to increase.
Applies to loans where there is more than one borrower on the account. If joint and several liability applies, the creditor – your lender – has as many rights of action as there are other debtors listed. 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.
When two or more people have an equal holding in a property. In the event of one person’s death, the ownership of the property passes onto their surviving partners. This relates to actual property ownership, and not your status as someone tenanting a rental property.
An association 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.
A mortgage that is subsequent to the claims of the holder of a prior (senior) mortgage.
An additional charge a borrower is required to pay as penalty for failure to pay a regular installment when due.
Land Transfer Tax
When you buy land or an interest in land in Ontario, you pay Ontario’s land transfer tax. Land includes, but is not limited to, any buildings, buildings to be constructed, and fixtures (such as light fixtures, built‑in appliances and cabinetry).
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.
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 is payable on the closing date when the Transfer is registered.
These are charged to you throughout the sale or loan application process by your lawyer or your lender. The fee can cover the lender’s legal costs in having your loan contracts drawn up, as well as the time your own solicitor spends reviewing your property sale or purchase contracts.
A contract between 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 of time and for a specified consideration (rent).
An estate or interest in an estate in real property held by virtue of a lease for a term of years. A leasehold is considered personal property.
A mortgage given by a lessee on the security of his leasehold interests in the land.
Lenders Mortgage Insurance (LMI)
Lenders mortgage insurance protects your lender in the event you default on your home loan repayments, they sell your home and the sale price doesn’t cover the remaining loan amount. If your lender requires LMI you must pay for it, but you can often avoid paying it if you have a loan to value ratio of less than 80%. Non-conforming loans such as low doc loans may require you to provide more than a 20% deposit to avoid paying LMI. LMI is calculated as a percentage of your loan amount and is usually payable before loan approval.
The property value for mortgage purposes. Usually the lesser of appraised value or sale price.
A lessee is a person that leases a property.
A lessor is the owner to a property that is leased.
These include your debts and obligations. Your debts include your mortgage, personal loans, student loans or credit card debts, and your obligations are your outgoing expenses and bills.
A lien is a legal claim over a property to hold it as security against a debt or loan. You may put your own property up as security to access equity in your home, or a family member may provide their property as security against your debt as a guarantor.
A claim by one person or entity on the property of another. Commonly, this is security for money owed, created by the lender when you buy a property. Liens also include obligations not met or satisfied, judgments, unpaid taxes, materials, or labor.
A limited title is a title where the boundaries of the property are not certain. This will usually be solved when a survey is conducted.
Line of Credit
A very flexible loan arrangement which gives you the ability to draw down on an agreed amount of equity through your loan account. You are not required to pay off your line of credit until you have reached the limit of available credit.
The percentage of assets that can be quickly turned into cash. Liquidity is also a measure of the funds available for down payment, closing costs, and reserves.
The agent who represents the interests of the seller.
The contract or document that is provided for you to sign in order to receive the funds from a lender in order purchase a property.
A loan pre-approval is when you have the funds you need to purchase a property approved before you’ve found a property. This allows you to clarify your budget and borrowing capacity and bid freely at auction or put in an offer on a private sale. Pre-approval is often provided in writing and can be valid for three to six months.
When you purposely provide false or misleading information on your loan application to help you qualify for a larger loan amount than you would normally be eligible for. Loan fraud can result in civil liabilities or criminal penalties.
Loan to Value Ratio (LVR or LTV)
The ratio of the amount you have borrowed to the value of the security, where the security is usually the property you have borrowed to buy. To calculate your LVR divide the loan amount by the property’s valuation amount, then multiply your answer by 100. LVR is expressed as a percentage. Borrowing greater than 80% LVR will often require you to pay lenders mortgage insurance.
A ratio that expresses the amount of a first mortgage lien as a percentage of a property’s total appraised value. 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%.
Allows you to lock in an interest rate which is current at the time of your application, so you can be guaranteed that same rate at the time your loan settles. Since interest rates can fluctuate so often and quite significantly, the interest rate quoted in your application could be different to that offered by the lender at loan settlement weeks later, this can be a useful feature.
Lock periods are set amounts of time during which the interest rates buyers have been promised cannot be made any higher.
Low doc loan
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, but you are able to self certify your income and do not need to show BAS if your LVR is less than 80%. Low doc loans and non-conforming loans often require that you have mortgage insurance.
Lump Sum Repayment
An additional repayment you make above the minimum repayment amount required. These can be made whenever you have spare cash and can often be any amount, although some lenders will require a minimum amount for a lump sum repayment, and others will charge you a fee to make a lump sum repayment.
The difference between a lender’s advertised interest indicator rate and the rate they actually charge to borrowers.
When you borrow money against your existing assets such as cash or shares, to make a new investment.
Market Approach (To Value)
One of the steps in the valuation process. 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.
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.
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.
In the case of 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 Loan Amount
Based on your income, expenses, deposit, property price and status – whether you are a couple, or have children – your lender will calculate the maximum amount you are eligible to borrow.
Maximum Loan to Value Ratio
This is the maximum amount you’ll be able to borrow, usually expressed as a percentage.
The maximum amount of time you have been given to repay your 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.
The mean price of a property market is the actual average value and is calculated on the total of the list of sales, divided by the number of sales on that list. The mean house price can often be significantly skewed by a sale which was exceptionally high or low and so does not always depict a typical house price.
You will often hear house prices in certain areas referenced by the median value of the area and this is different to the average price of house sales because averages can be affected by adverse view properties which were sold for significantly high were significantly low prices, where the median value is the middle price in a series of sales half of which are of a lower value and half are of a higher value. 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 a three-month period or a full calendar year and can also be broken down further into the upper and lower quartile, where you can look at the top 25% or the bottom 25% of sales.
Minimum Fixed Amount
This is the minimum amount which can be borrowed at a fixed interest rate, and each lender and each type of loan will have a differing amount.
Minimum Loan Amount
The minimum amount which can be borrowed. This is determined by the lender and the type of loan.
Minimum Redraw Amount
When you make additional loan repayments you can access these using the redraw facility, but you may be required to make a redraw of a minimum amount set by your lender.
The monthly amount you have agreed to pay in your loan contract to repay your loan within the term.
A lien or claim against real property given by the buyer to the lender as security for money borrowed.
The creditor or lender who is providing the funds in a mortgage agreement.
The borrower in a mortgage agreement.
A person or company who obtains loans for borrowers from a number of lenders. A mortgage broker receives a trailing commission which is a portion of the interest you pay on your loan, over the life of your loan in return for referring you to your lender.
Mortgage insurance is an insurance policy that protects a mortgage lender or title holder in the event that the borrower defaults on payments, dies or is otherwise unable to meet the contractual obligations of the mortgage. Mortgage Insurance is available through CMHC or private insurers covering whole or partial losses of principal and interest of a mortgage loan.
Mortgage Life Insurance
Mortgage life insurance is designed to protect heirs if the borrower dies or diagnosed with an eligible life-threatening condition to pay out your loan or make repayments depending on the cover while owing mortgage payments. It may pay off either the lender or the heirs, depending on the terms of the policy.
This is a very limited form of life insurance, and your loan repayments may be able to be covered under your complete life insurance policy, which will also cover your other bills and living expenses.
Mortgage Loan Officer
A representative of a lending institution who acts as an intermediary between the institution and the borrower.
A mortgage manager can arrange finance for you to purchase your home, but unlike banks, building societies or credit unions, mortgage managers do not source the funds from their base of customer deposits, but instead through securitisation.
Will generate mortgage applications for a mortgage trust and then pool a group of mortgages which can be sold on to investors as an income producing asset. An originator will receive applications for finance, assess the applicant’s credit and monitor the transaction to settlement. A mortgage originator may manage the loan throughout the term, or appoint a mortgage manager.
The aggregate of mortgage loans held by an investor.
Is paid at regular intervals, to a lender and may be comprised of interest only, or both principal and interest.
Mortgage Registration Fee
A fee charged by the State Government to register your mortgage. Part of the loan application process, and therefore payable before the settlement of your loan.
The task carried out either by the lender or another party, of collecting mortgage payments falling due and managing other mortgage administrative duties.
Mortgage Title Insurance
Mortgage title insurance 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 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. Despite a thorough search, it isn’t hard to miss important pieces of evidence when information is not centralized.
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. The information, which used to be guarded, is now available at numerous websites.
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.
To calculate your net income, deduct all expenses which come out of your gross income before it arrives in your bank account. This includes tax, superannuation contributions, and any mandatory health insurance premiums which come out of your gross income. The remainder is your take home pay, or net income, before depreciation or distribution of earnings – that is, before you have paid any of your own bills. Often when you are considered for a loan, your gross income is used, however this amount can be significantly higher than the income you actually net, and can use to service your loan.
A lease which 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 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 his investment.
The interest rate return on a mortgage after deducting the percentage equivalent of mortgage servicing from the coupon rate of the mortgage.
No Deposit Mortgage
This is a type of home loan that does not require any upfront deposit on the property purchase. Typically you do not need to demonstrate a savings history, and only require funds to cover the transaction costs such as legal fees and any statutory charges such as stamp duty. Often these loans require some form of guarantee or guarantor.
A non-conforming loan is 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.
A property which 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-Resident Speculation Tax (NRST)
The NRST is a 15 per cent tax which 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 transaction 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 which are registered on title and which are not registered on title.
A potential buyer indicating their intention to purchase a property will put forth an offer on the property, usually in writing, for the consideration of the vendor.
Offset Account/Mortgage Offset Account
A savings account held by the same institution which issued your loan, where the interest you earn in your savings account offsets the interest you pay on your mortgage. Where you would ordinarily be taxed on interest earned from a traditional deposit account, a mortgage offset account allows you to offset your tax bill against interest savings made. Some offset accounts will offset at the same rate of interest as your mortgage these are known as 100% offset accounts, where others may be slightly less.
Off the Plan
This is when you purchase a property that has not yet been built but it is part of a construction process and you have seen and agreed to the plan of the property. This most typically applies to new apartment complexes that the apartments are purchased before or during the construction stage.
Fees charged by your home loan lender to cover the internal costs of maintaining your loan these are typically charged monthly or yearly. Some basic or standard home loans do not charge ongoing fees.
This is an independent governing agency that handles any customer issues or complaints regarding their product or service. Home loans are overseen by The Credit & Investments Ombudsman.
Option to Buy
This is a legally binding contract which can give you first right of refusal on a property.
This is the process which involves the preparation of your loan, including submitting and evaluating your loan application, running a credit check, verifying your employment details, and completing a valuation of the property.
This can also be called the application fee and covers your lender’s costs to originate the loan.
A fund which continually receives new money and adds new property or mortgages. Investors get into or out of the fund by buying or selling unit shares. Shares are valued on the basis of appraised values.
A privilege given to the mortgagor permitting him to prepay all or part of the principal amount at anytime with or without notice or bonus.
When you overcapitalise you will be spending more money on your home than you will get when you sell the home.
A limit determined by your lender which you are able to exceed your account balance by. Your overdraft is often charged interest and must be repaid but there is no set monthly repayment amount.
A purchaser that plans to live in the property as their main place of residence
An expression used when a mortgage is sold or purchased for the outstanding balance without premium or discount.
On An Equal Basis. When mortgages are syndicated the lenders participate equally. No one party has preferential access to gains or is able to opt out of losses. In company stock it refers to equal ranking of a company’s preferred shares.
A release from the mortgage of a definite portion of the mortgaged lands usually given after the mortgagor has prepaid a specific portion of the mortgage debt.
The elimination of any claims against title.
This is a cheque issued from your personal chequing account rather than issued by the bank.
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 or 80-10-10 mortgages as they are alternately called, are transactions by which two separate mortgages are originated at once. 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.
With a portable loan you can sell your house and move without having to refinance your loan, saving you potentially thousands of dollars in exit fees and new application fees. To qualify for portability your new loan amount may need to be the same or less than the existing loan, and you may also have to pay your lender a portability fee, however this fee is often much less than the costs to refinance.
Power of Attorney
A written instrument duly signed and executed by an owner of property which authorizes someone to act on behalf of the owner, to extent indicated in the instrument.
Power of Sale
A clause generally inserted in mortgages giving the mortgagee the right and power, on default by the mortgagor of monies due, to sell the mortgaged property by public auction, private contract or tender.
A commitment from a lender stipulating how much money a person may borrow and under what terms and conditions.
Preliminary Title Report
Once escrow is opened, a preliminary title report is issued. 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.
Prepayment refers to a loan which is paid off early.
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.
The sum of money (usually equal to an amount of interest) a mortgagee may require from a mortgagor to prepay all or part of any outstanding principal.
Your lender gives you information about the exact amount you are 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.
The amount borrowed from a lender. This is the amount upon which the interest payment is computed.
Principal and Interest Loan
Where both the principal amount and the interest charges are repaid over the term of your loan.
Principal Place of Residence (PPOR)
The property you live in most of the time rather than an investment or holiday home.
The lowest rate a financial institution charges its best customers.
It is a type of mortgage loan whereby funds can be sourced from another person or business rather than borrowing from a bank or other finance provider. Private or alternative mortgages are funds that come from private individuals or companies who lend out for investment purposes.
Private Sale or Treaty
When you sell your property without employing the help of a real estate agent. This will require you to do your own advertising and open inspections, but will mean you avoid paying a percentage of your sale price as commission to an agent.
Progress Advance Loan
A loan made usually to a builder where monies are advanced from time to time as construction progresses.
It is 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 homeowners 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.
Someone who manages a property and its tenants on behalf of the property owner.
Property tax is a real estate levy, calculated by a local government, which is 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.
This refers to an adjustment made on a payment to account for unused service so that buyer and seller each pay their respective share of costs in proportion to the time in which they own the property.
A Quitclaim deed is used to transfer the whole of the ownership of a property from one party to another, 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.
An inverse relationship exists between a mortgage interest rate and the upfront fees paid. When borrowers opt to pay more upfront, the lower the interest rate becomes. It is much better to buy down the rate if you are going to be in a home for more than five years.
The physical land and appurtenances including structures affixed thereto.
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.
When your loan balance has changed significantly from the original amount – for example if you have made a lump sum payment, or been paying your loan for some time – you may have your lender recalculate the minimum repayment required to repay the outstanding amount over your loan term.
Real Estate Agent
A licensed professional who negotiates the sale of real estate, typically on behalf of its owner. A buyer’s agent represents the buyer in a real estate transaction.
Real-Estate Owned (REO)
A term referring to properties owned by banks as the result of a foreclosure.
A real estate broker or agent who is affiliated with the National Association of Realtors.
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.
When you replace or extend your existing loan with funds from a new lender or from the same institution.
A system of land registration where all interests in land are recorded in chronological order. The registrar assumes no responsibility for the documents legal effect.
Rentable Area Multiple Tenancy Floors
Generally calculated by measuring to 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 Floors
Generally calculated by measuring to 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 area within outside walls less areas not used exclusively by the tenant.
When the mortgage term has concluded, your mortgage is up for renewal. It is open at this time for prepayment in part or in full, then renew with same lender or transfer to another lender at no cost (we can arrange).
When renewing your mortgage, the banks often only offer the posted rates. You have to push a little harder for them to give you a break. They know that most homeowners don’t want to have to shop around, so, they offer you a higher rate and hope that you will take it.
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.
This is a break from repayments offered to borrowers who are ahead in their repayments.
Return on Equity
The percentage that the annual cash flow after debt service is of the equity in the property.
Return on Investment (ROI)
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.
Is a special home loan for home owners 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 death of any joint owner, his interest in the land will pass to the surviving co-owner, rather than to his heirs or devisees.
A general pathway may be part of your property, giving them the right to cross your land.
In terms of credit, risk refers to the likelihood of a borrower being able to make payments in a timely fashion and, ultimately, to pay off a loan. Naturally, lenders prefer low-risk borrowers to those who pose a high risk. Lenders determine risk by reviewing a person’s credit score and credit history.
The higher the perceived risk, the higher the interest rate the borrower will pay.
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.
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.
Before you are able to sell your property your lender and the purchaser will carry out searches to make sure you are entitled to sell the property and there are no encumbrances on it.
Financing real estate with a loan, or loans, that are subordinate to a first mortgage.
A mortgage registered secondly on title after another mortgage. A third mortgage is registered thirdly and so on.
Second Mortgage Market
An unorganized market where existing mortgages are bought and sold.
Mortgages produce an income for those who hold them, be it a lender or other investor. Therefore, securitisation is the process whereby assets which 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.
Security is an asset which guarantees your lender all or part of your loan until the loan is repaid in full. It is usually the property you have borrowed to buy which is the security for the loan.
Semi-detached buildings are buildings that are partially attached to each other
A party who has signed an agreement where there are multiple parties who have signed for instance a joint application for a loan there would be more than one signatory to the loan.
Unlike a condominium, in which certain areas are shared between individual homeowners, a SFR is a private unit intended for occupancy by a single family.
The specification is a written document that will outline all the conditions and materials that have been used in construction.
Split Rate Home Loan
A loan which 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 you may be able to make additional repayments and use a redraw facility on your variable loan portion, where the interest rate and repayments will stay the same for the fixed rate portion. You 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 your interest rate to be cut when official rates fall, but also exposes you to interest rate rises. In exchange for this movability is flexibility of loan features such as redraw, portability, transaction account and offset account.
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 in the event that a permanent loan on more favourable terms is not obtained.
A sum of money given by the borrower to the lender to hold a mortgage commitment for a certain period of time.
A mortgage which provides for equal, regular lump sum payments of principal, usually quarterly, plus accrued interest
When a piece of land has been split into more than one part for the purpose of building properties onto them.
Refers to loans offered to high-risk individuals (with low down payments and/or bad credit scores) and thus carry the highest interest rates.
A plan showing the boundaries of a property and where buildings are positioned within those boundaries. A survey report is often obtained by your conveyancer during the settlement period to ensure the property you intend to purchase is within its boundaries.
If you choose to change from one loan type to another while retaining the same lender your lender may charge you a switching fee to cover their 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 performance of a certain event.
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.
Is the document you need to register with the Land Titles office to confirm a change of ownership, which has been noted on the Certificate of Title.
The tenancy is the right to occupy the property.
Tenants in Common
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.
An ownership of property by two or more persons, 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.
The length of time a 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.
A non-amortizing mortgage under which the principal is paid in its entirety upon the maturity date. Sometimes called a straight loan.
A terrace is a row of buildings all connected.
Third Party Guarantee
When another person, usually a close family member, offers their property as security for your loan.
The means of evidence by which the owner of land has lawful ownership thereof.
Contains the legal description of a property, and details the ownership of the property.
Fees for a title search, transfer ownership of the property, register a new mortgage or discharge an old mortgage on a property.
Searches public records to ensure that the seller has the right to sell the property and transfer the ownership.
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 purchaser, mortgagee or otherwise.
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.
Townhouses are usually two storey properties, and registered under a strata title.
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.
A written instrument duly executed, sealed, and delivered, conveying or transferring property to a trustee, usually but not necessarily covering real property.
Securities, instruments, or other property deposited by two or more persons with a third person, to be delivered on performance of a certain event.
An agreement in writing conveying property from the owner to a trustee for the accomplishment of the objectives set forth in the agreement.
See Wrap-Around Mortgage
These are the fees you are obligated to pay upfront for any loan or property purchase they may include establishment or legal fees or LMI as well as the government fees associated with purchasing a property.
A property which is not affected by liabilities, charges or restrictions such as easements on the property, mortgages or leases which can affect your ownership.
A commitment issued by a mortgage insurer stating the mortgage and terms that it will insure.
Is the process which is conducted when your loan application is analysed and determines the amount of risk involved in lending to you.Underwriting reviews your credit history, and includes a judgement of the property’s value.
The maximum legal rate for interest, discounts, or other fees that may be charged for the use of money.
This is when you purchase a property and the contract of sale stipulates that the property will be empty upon settlement and you taking ownership. This may refer to the previous owners moving out or if there are tenants they will vacate before you take ownership.
Variable Interest Rate
An interest rate which varies in line with money market rates.
Variable Interest Mortgage
A mortgage which provides that the interest rate chargeable will change on a periodic basis during the term of the loan according to a pre-determined formula
Variable Terms Mortgage
A mortgage which provides – for 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 which is made to any part of the loan contract to satisfy your individual lending or application requirements, or to encompass changes or additions to your loan product.
The person or party who is selling the property.
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.
A mortgage on real property given by a purchaser 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.
The return of a property, as a percentage, calculated by dividing the net income of a property by it’s market value or price.
A yield curve is 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.
A new mortgage which is 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, court, etc., issued to official or other person and directing him to act or abstain from acting in some way.
Zoning guidelines are set by the municipal authorities to outline the permitted uses for the land, and the buildings on that land.