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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” mortgage lender, a borrower qualifies for a mortgage based on the borrower’s income and credit history.


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 the property has been “abandoned” it is no longer the property of the owner or mortgage borrower, but the property owner’s name will still be on the land title, meaning that the property owner is still responsible for utilities, property taxes, etc.

In real estate, abandonment also can be a surrendering claim to a lease agreement by a tenant or assignee.

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, attachments, encumbrances, or judgments. The holder of the absolute title is free to sell the property at his or her discretion. A clear title is normally required before a mortgage is granted. Also known as a perfect title.

Accelerated Amortization

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

Acceleration Clause

A provision in a loan agreement that requires the borrower to pay off the loan immediately under certain conditions. An accelerated clause is typically invoked when the borrower materially breaches the loan agreement. For example, if a borrower is late with the loan payment, the loan is considered to be in default, thereby giving a lender the right to demand full payment of all amounts owing under the agreement. Acceleration clauses protect lenders when borrowers miss payments or break any covenants defined in the mortgage contract.

Accelerated Bi-Weekly Mortgage Payment

A mortgage payment frequency that requires payments every two weeks. In total, there are 26 payments per year. With an accelerated payment plan,  a borrower is repaying the Lender the equivalent of 13 months payments per year or one extra month’s payment amount towards principal repayment. This accelerated repayment of principal shortens the loan amortization. Also known as “rapid” bi-weekly payments.

Accelerated Weekly Mortgage Payment

A mortgage payment frequency that requires payments every week. In total, there are 52 payments per year. As with an accelerated Bi-weekly mortgage payment plan, a borrower is repaying the Lender the equivalent of 13 months’ payments per year or one extra month’s payment amount towards principal repayment.

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 as of a specific date 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, origination fees, 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

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 security lowers the risk for a lender when issuing a 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 mortgage payment calculation that combines the total principal amount borrowed and the total interest due into one amount owed, to be paid off in equal installments.

Adjusted Basis

A change applied to the original cost of a property to include a 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 directly associated costs like improvements, additions, new purchases, sales, payouts, fees, or other factors. ACB is a key component to calculate capital gains or losses at the time when the asset or property is sold. 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 or index rate to determine the fully indexed interest rate of an adjustable-rate mortgage (ARM). The margin rate is fixed for the life of the mortgage, while the index rate varies depending on the market conditions.

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. The index is a benchmark interest rate that reflects general market conditions, and changes based on the market. 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 increase 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 Date

The date on which the interest rate changes for an adjustable-rate mortgage (ARM).

Adjustment Interval

The amount of time between interest rate or mortgage payment changes on an Adjustable-Rate Mortgages. Most ARMs have two adjustment intervals. The first or initial interval is typically longer during which there is a fixed rate of interest and mortgage payment. After an initial fixed-rate period, the ARM interest rate adjusts once per interval for the remainder of the loan.
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 3/1 ARM is one on which the initial rate holds for 3 years, after which it is adjusted every year. The “1” represents how often your interest rate will adjust after the initial three-year period ends.

Advertised Rate

The nominal interest rate used when calculating the interest cost of a loan.


A person or company authorized to act on behalf of another person or an entity. In real estate and mortgages, the agent is a licensed professional who represents buyers or sellers in real estate transactions or who helps mortgage borrowers connect with lenders in order to obtain the best possible mortgage terms for the borrower.

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 or entity. It prevents transferring the loan to the new buyer and renders payment of the remaining balance due at once. An alienation clause voids certain contractual obligations to an asset if that asset is sold or if ownership is transferred to another entity. If a mortgage contract does not have an alienation clause, it’s known as an “assumable mortgage,” which means it can be transferred to a new buyer.

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 borrower 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. An alternative mortgage usually comes with higher interest rates and is a good option for borrowers who cannot qualify for a conventional loan or fixed-term standard mortgage. Examples of alternative mortgages are Adjustable-rate mortgages (ARM), Interest-only mortgages, Balloon mortgages.
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. 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 decline over time as the borrower makes periodic payments. During the earlier years, a higher percentage of the monthly payment goes toward interest. 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 Adjustment Cap

A limit on how much the variable interest rate on a loan can increase or decrease each year.

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 and other costs can include closing costs, mortgage origination fees, rebates, and discount points. APR is an accurate picture of total borrowing cost as includes all costs associated with borrowing the money. However, it is only accurate for loans based on simple interest.
The APR is almost always higher than the nominal or advertised 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.

In mortgages, APY is the measure of the yearly cost of a loan, including interest compounded.
APY is a more accurate measure of the yearly cost of a loan than the Annual Percentage Rate or APR as it includes compounding interest. If a loan only compounds once per year, the APR and APY will be the same, otherwise, APY is usually higher than APR on a loan. The inclusion of compound interest in APY can have significant implications for borrowing and investing, as increases the cost of the borrowing.
APY is also called the effective annual rate, or EAR, and is commonly used in credit card interest calculations.

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: The comparative sales approach, the Cost replacement approach, and the Income approach. Which method is used depends on the circumstances in which the real estate is to be used.

There are several occasions 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 Contingency

A contingency in a sales contract that the property must appraise at a value that is equal to or greater than the buyer’s offering price.

Appraisal Fee

The fee used to cover the cost of the 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 value, 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 properties in the area, the property’s neighborhood, the condition of the property, 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.

Assignment of Charge

An act of transferring a mortgage from one party to another. Lenders or holders of mortgages often assign mortgages to other lenders. The party that receives the assignment will step into the place of the original lender. An assignment transfers all of the original mortgagee’s interest under the mortgage or deed of trust to the new lender.

Borrowers also may assign their mortgages, if their loan note language permits, to third parties. The original borrower who assigned the mortgage remains responsible for the loan balance if the assignee does not make scheduled monthly payments.

Assumable Mortgage

A mortgage contract that allows, or does not prohibit, a creditworthy buyer from assuming the mortgage contract of the property’s 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” or alienation 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 investment is owned.

“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 known as 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 or “A” mortgage lenders. The two most popular bad credit mortgage providers are alternative (or “B” lenders) and private lenders. Bad credit mortgages have higher interest rates and may have higher fees.

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 financial statement of the assets, liabilities, and net worth of a company or a person at some given time. Also known as a statement of financial position.


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. The balloon payment is usually much larger than the earlier regular payments on the same loan.

Bank of Canada 

Canada’s central bank – was founded in 1934 and became a Crown Corporation in 1938. It is responsible for Canada’s monetary policy and promotion of the economic and financial welfare of Canada. The Bank of Canada sets the overnight lending rate, the main tool used to control inflation. The overnight lending rate is the interest rate that the Bank expects to be used in financial markets for one-day (or “overnight”) loans between financial institutions.

Bank Rate

The interest 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. The bank rate differs from the “overnight” interest rate which is charged by banks loaning funds to each other.

Bank Spread

The difference between the interest rates a bank charges a borrower and the interest rate a bank pays to its lenders and consumers on their deposits. 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. The net interest rate spread plays a role in determining a financial institution’s profitability. When the interest that a bank earns from loans is greater than the interest it pays on deposits, it generates income from the interest rate spread.

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.

Base Rate

An interest rate used as a benchmark, or index, for pricing variable-rate loans such as adjustable-rate mortgages, auto loans, and credit cards.

Basis Point (BPS)

A unit of measure used in finance to describe the amount of change in yields and/or interest rate in money debt instruments, including mortgages. It is one-hundredth of 1%. In other words, 1% equates to 100 basis points.
Changes in basis points can impact the monthly mortgage payments if the mortgage rate is variable. The Adjustable-Rate Mortgages (ARM) payments may increase at adjustment dates due to the basis point increase. For example, if an interest rate of 2.5% increases by 25 basis points, it would mean a new interest rate of 2.75, which would increase the monthly payment of an Adjustable-Rate Mortgage.

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 repay the debt/loan 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 payment plan where 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 payment plan where the borrower pays half the monthly payment every two weeks. Because this results in 26 payments per year, the bi-weekly mortgage amortizes before the term. A bi-weekly mortgage payment can be accelerated or non-accelerated. With an accelerated payment plan, the Lender takes 13 months’ worth of payments and divides this by 26 payments, while with a non-accelerated or regular payment plan, the Lender takes 12 months’ worth of payments and divides this by 26 payments. The accelerated payment plan shortens the mortgage’s amortization.

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 existing mortgage early with a penalty, to access equity, and/or to take advantage of a lower interest rate to save money.
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 an amount over an agreed-upon amortization period.

Blended Rate

A combination of interest rates on various loans that gives the total amount of interest on loans aggregated in one. The blended rate is calculated in case a borrower receives an additional loan, like the second mortgage, without fully repaying the previous one. Blended rates are also 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 obtained a loan from a lender, and who is responsible for paying it back within a specified period of time.

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 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.

In commercial real estate, this interim financing option is used by companies and other entities to solidify their short-term position until a long-term financing option can be arranged. For example, while under bridge financing, the borrower can negotiate new leases or acquire new tenants, ultimately positioning the commercial property more positively for standard financing.

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.

In commercial real estate, bridge loans are used for a number of purposes. For example, this loan bridges the gap in cash flow between the time a business applies for mortgages to the time that funds are disbursed.

Broker Premium

The amount a mortgage broker is paid for serving as the middleman between a lender and 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.

In real estate, the housing price grows rapidly fueled by demand, speculation, and exuberant spending, which eventually results in a sudden, unanticipated drop in the value of the houses. 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 purchases, 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 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 are 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 between a buyer and a seller to purchase a certain 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 of a call has a right, but it is not obligated, to buy the security.

In mortgages, it is a clause in a mortgage contract 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. 

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 based on credit history, assets and liabilities, property value, and by assessing whether a borrower is likely to continue to earn their current income or improve upon it during the period of the loan
In commercial mortgages, lenders look at revenue, expenses, cash flow, and repayment timing as well business and personal credit scores.


The value of a long-term asset if it was to be liquidated at its 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)

A type of depreciation expenses in the Canadian income tax code that can be claimed by businesses on depreciable assets (except for the land) for income tax purposes under the umbrella of the Income Tax Act.

Capital Expenditure (CapEx)

Money spent by a company or corporate entity to purchase, maintain, or improve its fixed assets, such as buildings, vehicles, equipment, or land, with the expectation that they will benefit the company over a period longer than one year. Also called capital outlay.

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. 

Capital Gain Tax

A federal tax charged on the monetary gain an owner makes from the sale of a capital asset which can be real estate, stocks, bonds, jewelry, and coin collections.
On investment real estate 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 Canada, the primary residence is excluded from the capital gains tax, or CGT when the homeowners sell it. In the USA, the gain obtained in the sale of primary residences is taxable under certain conditions.

Capital Improvement 

Any permanent structure or other asset added to a property that improves it substantially, thereby increasing its overall value.

Capital Investment

Money used by the business to purchase capital assets such as machinery, land, or buildings, with the purpose of expanding its operation or archiving its business objective.

Capital Loss

The loss that results from a sale of a capital asset, such as stock, bond, or real estate, which decreased in value and sold for a price lower than the purchase price. The loss is the difference between a higher purchase price and a lower selling price.

Capitalization Rate (Cap Rate)

A ratio used to estimate the return on investment of a commercial real estate property. It is calculated by dividing the net operating income of a property in a given year by the fair market value of the property. Net operating income is the income derived from the property after subtracting operating expenses. For example, an apartment building that was 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. The range of good cap rates differs based on location and other factors, but in general, a good car rate is considered to be between 6% to 12%.

Capitalized Interest

The unpaid cost of borrowing or interest added to a loan balance. The loan balance is increased by the amount of unpaid added or accrued interest, and new interest is then charged on the whole amount. As a result, a borrower is not only borrowing the original loan amount but also borrowing to cover the interest costs. Capitalization of interest typically occurs with student loans, as well as construction or real estate loans. Interest will accrue on the loan even if it is not yet in repayment, but the capitalization of interest will not occur until the borrower starts repayment on the loan.

Capped Loan

A loan that has an interest rate that will not exceed a set level for a fixed period. If interest rates decrease, the loan rate will decrease. However, if interest rates rise, the loan rate cannot exceed the ‘cap rate.’

Cash-Back Mortgage 

A type of mortgage where the lender will advance to the borrower a lump sum of cash rebate at the time of 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 and could charge a higher interest rate.

Cash-In Refinance

A type of mortgage refinancing where borrowers make a larger lump-sum 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.
In real estate, cash flow refers to the amount of money a property generates after expenses are accounted for, including debt and mortgage.

Cash Flow Forecast

An estimate of when and how much money a business expects to receive over a particular period, along with the amount expects to pay out over the same period.
A cash flow forecast is essentially a breakdown of expected receivables versus payables, and it is an important tool for businesses when it comes to predicting future cash positions and making financial decisions such as funding, capital expenditure, and investments.

Cash Flow Statement

A financial statement that provides a summary of the business’s cash transactions, the inflows, and outflows, during the given period. This statement shows how money moved in and out of the business.

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 at the time the loan is refinanced. Also known as Cash-Out Mortgage.

Cash to Close

The amount a homebuyer needs in cash at the closing of the loan to cover closing cost and down payment.

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 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 apply to any type of property that has a title.

Certificate of Occupancy

A certificate obtained from the local authority that a building has been constructed under the authority of the issued building permit and it is suitable for occupancy.

Cessation of Charge

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

Chain of Title

A real estate record showing the history of a property’s ownership as it passes from one person to another. A chain of title traces the sequential transfers of title from the current owner back to the original owner of the property The purpose of a chain of the title search is to ensure 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 the amount of the mortgage payment and/or interest rate changes in an adjustable-rate mortgage, or ARM once the initial, fixed-rate period has expired. . Also known as the mortgage adjustment frequency or adjustment interval. 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 if the interest rate goes up after the initial rate period.


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 from a contract. With a charge there is no transfer of the title or possession, it is merely an encumbrance on the land.
Registering a charge on the title provides a means of securing a mortgage or other loan or debt against the property.

Chartered Bank

A financial institution, licensed by the federal or state government to operate a banking business within the country that issued a charter. Each chartered bank has a charter that guides its actions and ensures that its operational conducts are in line with the relevant banking rules.
Chartered banks accept and safeguard monetary deposits from the public and extend loans (such as mortgages) for personal, commercial, and other purposes.


Another term for movable personal property. There are two types of chattels: real chattels which are land, buildings, and fixtures of the property that are held for a limited period (when the land or building is leased), and personal chattels like clothing, jewelry, 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, chattels like refrigerators and stoves in an apartment building, or a car or boat can be used as security to extend the loan. 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 encumbrances such as a mortgage, a lien, or levy from creditors or other parties that would pose a question as to legal ownership. A clear title in real estate means that the owner has unrestricted ownership of the property. 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

A type of investment in real estate equities or mortgages on a one-time-only basis. Closed-end real estate funds are pooled funds obtained from investors during a pre-determined period of 12 to 18 months. Investment capital is locked up for a specific investment period, usually 10-12 years from the date of inception. 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), fully paid off early, renegotiated, or refinanced throughout the mortgage term, without paying breakage costs or prepayment penalty to the lender. Closed mortgage interest rates can be fixed or variable and are lower than open mortgage interest rates.


The conclusion or consummation of a transaction. Closing is one of the final components in executing a real estate transaction. Closing is also the final phase of mortgage loan processing in which the property title passes from the seller to the buyer.

Closing Adjustment

An adjustment to the purchase price in a transaction at closing. When a deal is closed all costs with respect to the property are deemed to be the responsibility of the buyer commencing on the day of closing. 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 will be adjusted at closing. The amount that has been overpaid by the seller is pro-rated, and 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), rent and last month deposit, or utilities.

Closing Cost

The miscellaneous costs associated with a real estate transaction closing. It can include a Loan Origination Fee and Discount Points, Appraisal Fee, Land Transfer Tax, Legal Fee and Disbursements, other Lender Fees, Escrow and Title Fees, Insurance Premium.

Closing Date

The date upon which all paperwork associated with a mortgage/property sales exchange is finalized and on which the ownership of the property is transferred to the buyer 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

Cloud on Title

Any encumbrance or claim that might invalidate or impair title to real property and 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 private housing units sharing a common space (parking, swimming pool, gyms, and other recreational facilities, and landscaping) such as an apartment block, terraced houses, semi-detached houses, townhouses, 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. All parties who sign the same note evidencing a debt are 100% liable for repaying the entire debt.


A party or individual who co-signs for a mortgage loan and shares the liability for full repayment of the 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 its shareholders through proprietary lease or similar arrangements. In this type of housing arrangement, a shareholder does not own equity or deed of the property but owns shares of the unit, the common areas, and shared amenities. The proprietary lease gives the shareholder the exclusive right to use the apartment or unit in the co-operative housing complex. The shareholder can sell only shares, not the unit. Also known as “co-op”.


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 gives the lender additional assurance that the loan will be repaid.


The personal property or other assets that a borrower offers to a lender to secure a loan. Collateral minimizes the risk for lenders. As part of the loan agreement, if the borrower fails to pay the loan, the lender has the right to seize the asset used as collateral. The lender’s claim to the collateral used for a loan is called a lien.
Loans secured by collateral are typically available at substantially lower interest rates than unsecured loans.

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 financed property is registered with a collateral charge which allows the lender to approve a loan amount that is higher than the actual mortgage the borrower needs, up to the total value of the property or even surpasses it. Collateral mortgages cannot be transferred to another lender, not even at the end of the mortgage term. An example of a collateral mortgage is a home equity line of credit.

Collateralized Mortgage Obligation (CMO)

A type of mortgage-backed security that contains a pool of mortgage loans bundled together and sold as an investment. The mortgages in a CMO are grouped based on a loan’s maturity or due date, and its risk level. Each of these groups carries loans with different principal balances, maturity dates, interest rates, and risk levels. Investors in CMOs receive their return on the investment, based on agreed-upon schedules and rules, 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. After a set period of time, a creditor may send outstanding debts to a collection agency for collection. This is known as a “charge-off” debt.


The process to recover funds that are past due, or from accounts that are in default. Credit card debts, bank loans, car loans, student loans, medical bills, mobile phone bills, utility bills, judgment debt, small business account payables, and even overdue library fees can be assigned to collection agencies for recovery. Once the debt is assigned to a collection agency for collection, the collection record 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, the first mortgage of $50,000 and a $20,000 equity line of credit 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. An example, when a combo loan is useful, is when one loan can provide 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. The combo loan can be useful when a borrower does not have a 20% down payment for a house purchase, so can take one loan to supplement the 20% down payment and avoid the private mortgage insurance (PMI). The second loan can be a conventional mortgage.

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 that measure creditworthiness, and predicts the financial health of a company over the next 12 month.

Commercial Mortgage

A mortgage loan secured by a commercial property.

Commercial Property

Any property zoned or used solely for business purposes. There are three types of commercial properties: retail, office, and industrial. The commercial properties include shopping centers, strip malls, hotels, retail stores, warehouses, restaurants, industrial spaces, farms, office buildings, factories, and even vacant lots that have been designated as commercial property by a local government.

Commercial Real Estate

A property used exclusively 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 a property intended to generate profit through capital gain or rental 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 legal document issued by a lender after pre-approval reciting the basic terms of a loan. The commitment means that the lender agrees to fund the borrower, as long as the borrower complies with the conditions set out in the commitment agreement.

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. Lenders often base the amount on a percentage of the loan. Lenders charge commitment fees in exchange for processing a loan and guaranteeing the funding.

Commitment Letter

A document issued by a lender for a borrower that officially lays out the terms of a loan

Common Areas

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

Common-Area Assessment

The cost that members of condominium and homeowners associations must pay to maintain common areas, such as swimming pools, landscape, 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. Comparables are a list of recent asset sales that reflect the characteristics of the asset an owner is looking to sell. Comparables are used in real estate in the process of an appraisal to find the fair value of a home, or by real estate agents to determine a reasonable offering price for a real estate property.

Comparative Market Analyses

A method used in real estate to estimate a property’s value based on recently sold, comparable 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

The interest acrrued on the initial principal plus any accumulated interest from previous compound periods of a deposit or loan. The compound interest is added into the existing balance on the investment or loan, and new interest is accrued on the whole amount. Compound interest essentially means “interest on the interest”. The rate at which compound interest accrues depends on the compounding frequency or how frequently the interest is added to the principal. 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. Also known as compounding interest.

Compound Period

The period between the points when interest is paid or when it is added to the principal. As compound interest earns interest on the principal as well as the interest earned in prior periods the number of compounding periods in a year makes a significant difference. The higher the number of compounding periods, the greater the amount of compound interest accrued.

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.

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 the seller may allow the purchaser to gain possession of the property before paying the full price, while the seller holds title to the property until the full purchase price is paid.
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.

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 repairs and 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. It is 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, parking, garage, lobby, elevator, community town hall, library.

Condominium Fee

A fee paid by all property owners of a condominium complex to cover ongoing maintenance costs. The condominium fee can include three components: common expense fee used to cover the ongoing maintenance of shared common areas, reserve funds used for major repairs and or replacements of the common elements, and special assessment used to cover unforeseen urgent repairs.

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 building 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 or improvement of a home or commercial building, when a construction loan is converted into a permanent loan after the construction or improvement 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

A credit extended to consumers for the purchase of goods or services for personal use or to refinance the debt. The most common examples of consumer credit are credit cards, lines of credit, personal loans, car loans, retail store cards, and loans for consumer goods. Also known as consumer debt.

Consumer Credit File

The collection of an individual consumer’s debt repayment records, stored at a credit reporting agency or credit bureau. The consumer credit files contain information that determines the consumer’s credit score, a number used by lenders to evaluate the credit risks, and the probability if the consumer will repay loans in a timely manner.

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 federal law that regulates the collection, dissemination, and use of consumers’ credit information and access to their credit files.
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 competent parties for a particular purpose. The contract protects the interests of all parties of the contract, by placing requirements on the parties to fulfill their obligations under the contract. If one party doesn’t uphold its end of the agreement, the other party can take legal action.
In mortgages, it is a written agreement between a borrower, called the mortgagor, and the lender called the mortgagee, where a lien or legal claim is created on the property to secure repayment of the loan.

Contract for Deed

A type of purchase and sale agreement in real estate, where the buyer takes possession of the property while making payments directly to the seller, but the seller holds title until full payment is made. It is an agreement for buying property without obtaining a mortgage from a traditional mortgage lender. 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 does not exceed 80% or a statutory percentage, of the purchase price of the property. A mortgage exceeding 80% of the fair market value of the property, also called the lending value, is referred to as a ‘High-Ratio’ mortgage, and mortgage insurance is required for that mortgage.

In the USA, it is a type of mortgage that is not backed or insured by a government agency, but a mortgage that must comply with lending rules set by Fannie Mae and Freddie Mac, and conform to the loan limits set by the Federal Housing Finance Administration, or FHFA.

Conversion Clause

A provision in the mortgage agreement allowing a borrower to switch from one type of mortgage into another, like from an adjustable-rate loan to a fixed-interest rate loan, or from an interest-only loan to a fully amortized loan during the mortgage term, usually for an additional charge.

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. The term is commonly used in real estate purchase and sale transactions when the legal title of a property is transferred from the seller to the buyer. A conveyance is executed using a conveyance instrument or a legal document such as a contract, lease, title, or deed.


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 may choose to cancel a purchase and get out of a contract for no reason, with no penalty. 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, the cooling-off period of 10 calendar days is automatically granted to all pre-construction condo purchases from a builder in Ontario. During the cooling-off period, a purchaser can rescind their sales agreement for any reason and essentially walk away from a deal free of penalty.

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. Also known as “share loan”.

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.


A promise to engage in or refrain from a specified action. In real estate, it means the terms and conditions tied to the ownership or use of land and property. For example, restrictive covenants prohibit the use of a property in a certain way by tenants, homeowners, or other occupants. Many of the restrictions are often focused on preserving a certain style, appearance, or functionality of the community.

In mortgages, mortgage loan contracts require borrowers to covenant, or guarantee, certain items to their lenders. For instance, mortgage borrowers are required to guarantee that they will lawfully own the properties, that they have the right to mortgage the properties to obtain their loans, and that no competing title claims exist. Also, the other borrower’s covenants in regards to mortgages include obligations to repay the loan, to pay property taxes, insure property, maintain the property and other obligations listed in the Standard Charge Terms.


A party who makes a promise by covenant. In mortgages, is a borrower 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 a 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 access to 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 the 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 a lender for credit report information from a credit-reporting agency. A credit inquiry is created when a lender pulls a 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.

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 different types 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, the FICO credit score considers the credit mix to be worth 10 percent of the score.

Credit Muling

Credit fraud in which consumers (“victim” or “mule”) persuaded by the fraudsters, uses their real identities and personal information with minor variations to obtain multiple, high-value products with no intention of honoring their contractual agreements. 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 consumer. Credit ratings are calculated by the credit bureaus, based on the consumer’s past payment behavior, 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 counselor to reduce the customer’s debt and improve credit score.

Credit Report

A summary of one’s credit history. Produced by credit reporting agencies, a credit report reveals the customer’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, judgments, and tax liens.
Potential creditors and lenders use credit reports as part of their decision-making process to decide whether to extend borrower’s 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 abide by the terms and conditions of a contract, like the failure to make required payments on loans. The credit risk is usually assessed by a combination of the borrower’s credit history, credit score, income level, debt-to-income ratio, loan amount, and collateral.
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 as a borrower. 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, credit history, credit utilization ratio, outstanding balance or debts, credit inquiries, derogatory items, 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 Score Factor

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. Also known as a reason code or adverse action code.

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, total available credit, credit history, payment history, credit inquiries, derogatory items, and other factors.

Credit Scoring Model

A risk management tool that evaluates financial data to predict a borrower’s future behavior and probability of default. Developed by the credit bureaus, banks, and FICO, there are several slightly different scoring models used to generate credit scores and assess the creditworthiness of a borrower.

Credit Union

A type of not-for-profit financial institution owned and controlled by its members. The credit union uses the money that its members deposited to make loans to other credit union members. While traditional banks are run by shareholders whose goal is to maximize profits, credit unions return all profits to their members in the form of more favorable interest rates, better saving rates, and reduced banking fees. 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 the credit utilization ratio to determine a borrower’s creditworthiness and it is a factor that is used to determine the borrower’s credit score, and credit risk the borrower possesses to the lender.


A legal entity that lends money or extends credit to another party, intended to be repaid in the future.


The assessment of whether a potential borrower will be able to repay a loan or meet loan 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.
Creditworthiness is measured by the borrower’s credit score which is determined by several factors including the borrower’s repayment history, credit history, available credit, total liabilities the borrower has, credit utilization ratio, credit inquiries, and derogatory items if any.


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. For example, one asset, like a home or car, is backing multiple loans concurrently, like a mortgage.
It can also be when a pool of several assets is used to secure one or more loans. For example, a vehicle can be used to secure a mortgage, and another type of financing, such as a credit card used by the same lender. This type of cross-collateralization most often occurs when a borrower holds these loans with the same lender because that lender can aggregate the borrower’s assets to collateralize all of those loans.

Cross Default Clause

A mutual clause in two or more mortgages which states 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 is the opposite of credit.


The amount of money owed by one party to another.

Debt Consolation

A process of combining debts into one loan with a repayment plan. With debt consolidation, multiple borrower’s loans are all rolled into a new consolidation loan that usually has lower interest and monthly payment.
For example, a borrower with several high-interest credit card debts and other outstanding loans may obtain a new loan with a lower interest rate and longer repayment term, to payout outstanding high-interest credit card debts and other loans.

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

The percentage of a borrower’s total available credit that is currently being utilized. 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 what interest rate. Also known as credit utilization ratio or debt-to-limit ratio.

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 the proportion of the borrower’s gross monthly income spent on housing-related payments and other debts. 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).


A legal entity that owes money to another entity.

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 written, sealed, and signed legal document used to transfer the title or an interest in real property from one owner to another, and grants its holder the legal right to possess property. A deed describes the real property, the party transferring the property, the party to whom the title is transferred, and contains various covenants, warranties, and special granting clauses.

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 property owner behind on mortgage payments and the lender that relinquishes all property ownership rights to the mortgage lender.

Deed of Reconveyance

A legal document that transfers the title of the real property to the borrower from the lender once the mortgage on the property is paid off. The document indicates that the borrower is now the sole owner of the property, and it confirms that the mortgage loan has been paid in full. 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 from the lender, the borrower transfers legal title to real property to 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. In mortgages, the default is created when a borrower fails to fulfill the obligations of a mortgage contract. If a borrower fails to pay the required mortgage payment by the due date, then the borrower will be in default. However, the borrower can be in default if fails to fulfill other mortgage’s terms and obligations, like paying property taxes, having adequate insurance for the property, failing to keep the premises in a reasonable state of repair.
Defaulting on mortgages can lead to a range of serious consequences, including legal action and repossession of the property by the lender.
Defaults can also be listed against the borrower’s name for failure to pay bills such as a phone or electricity bill. Defaults can show up on the borrower’s credit history and can impair the borrower’s credit and chances to obtain a new loan.
mpair 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, judgment, forgery, or other encumbrances. Because third parties can claim an interest in the property or asset, the defective title may jeopardize the ownership rights of a new property owner. 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.
A typical example of deferred interest payments is purchasing with credit cards. Deferred interest allows a consumer to make purchases on a credit card without paying interest on the balance until the payment due date.
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 or lower debt payments. In certain circumstances, young people with large student loan debts are granted loan deferments. Under a student loan deferment, interest is temporarily 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 during the forbearance period.

Delinquent Account

Any account past due. In the context of mortgages, an account is delinquent with one or more missed mortgage repayments for a certain period of time. In the context of credit cards, an account is delinquent if the cardholder has not made at least a minimum payment by the payment due date or within 30 day period. Legally, any loan becomes delinquent when a borrower does not make the minimum required payments 30 to 60 days past the day on which the payments were due.

Delinquent Mortgage

A mortgage loan for which the borrower has failed to make mortgage payments, or failed to fulfill other contractual obligations set out in the mortgage contract.


A situation when a borrower misses the 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 formal demand in writing made by a creditor or collection agency to a borrower or debtor requesting an action or a payment. The letter outlines debt obligations, 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, charge-offs, settled accounts, repossession, foreclosure, 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 miscellaneous expenses other than lawyer fees incurred during the conveyancing process of purchasing a new real estate property. Examples of these expenses are title search fees, title insurance, and other costs paid to government authorities, as well cost of photocopies, couriers, faxes.

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 form of a seller’s disclosure. It’s a legally binding document in real estate transactions that outlines any known problems, flaws, or defects that would impact the property’s value or safety.

Discretionary Expense

A type of expense that an individual, household, or business can be without. Discretionary expenses are often defined as nonessential, desirable spending, where an individual, household, or business has discretion over whether to spend on them or not. These are the nice-to-have expenses in a budget. Examples include entertainment, traveling, magazine or TV subscriptions, gifts, personal care, or dining out.

Discretionary Income

The amount of a person’s monthly post-tax income that is left for spending, investing, or saving after paying for necessary expenses, such as food, housing, and clothing.

Discount Brokerage

A business that provides a platform for clients to buy and sell securities at low cost, 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 offer limited services at a cheaper price.

Discount Mortgage

A type of variable rate mortgage where the interest rate is set a certain amount below the lender’s standard variable rate (SVR) for either a fixed period or the entire term of the mortgage. A discount rate mortgage tracks that SVR, but at a discount. If the standard variable rate (SVR) rises, the monthly mortgage payments would rise but a borrower would be paying more interest, rather than repaying more of the principal. Also known as a discounted variable rate mortgage.

Discount Point

Upfront fees paid by a borrower directly to a lender at closing in exchange for a reduced interest rate. Discount points help borrowers to reduce their monthly mortgage payments and interest rates. Points are calculated in relation to the loan amount. One point is 1% of the total amount of the loan, and each point typically lowers the interest rate by 0.25 percent. Also called loan brokerage fee, or new loan fee or mortgage discount.

Disposable Income

The amount of money an individual or household has leftover from the wages and other income after personal income tax has been paid. Disposable income is the amount of money that is available for spending after deducting taxes.


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 an owner’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 at the beginning 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 size of the down payment needed varies based on the type of loan a borrower is getting, but a larger down payment generally means better loan terms and cheaper borrowing.


A portion of the loan released to a borrower on a per need basis. Drawdowns are common in construction mortgages, which allow a builder or property owner to draw down on the full amount of the mortgage at predetermined stages of the home/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. Also known as a progress payment.

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 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

The situation when the same real estate agent or brokerage represents both the seller and the buyer in the same real estate transaction. In most cases, it is not a good idea for one agent to represent both parties in a real estate transaction. A buyer’s agent must act in the buyer’s best interests, and a seller’s agent must act in the best interest of the seller. A single agent acting as a dual agent would require loyalty to both sides. Real estate agents must fully disclose dual agency relationships. All parties must understand the terms and give full and express consent to remain compliant with the law.

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. Mortgage lenders use due-on-sale clauses to prevent the buyer of a property from assuming the current mortgage at the original interest rate. 

Early Mortgage Renewal

The 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

The fee imposed to a borrower who terminates a mortgage contract and pays out the full mortgage balance early within the time period specified in the mortgage contract. Also known as early exit fees or deferred establishment fees.

Earnest Money

A sum of money put down by a buyer when a signed contract agreement to purchase a home or property is made. The earnest money is a good faith deposit, a symbol that the buyer is seriously pursuing the purchase. If the real estate transaction is finalized or “closed” the earnest money deposit may be applied to closing costs or the down payment. If the contract is terminated for a permissible reason, the earnest money is returned to the buyer. If the buyer does not perform in good faith, the earnest money may be forfeited and paid out to the seller. Also called a deposit.


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


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 title 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 an easement is a Right of Way when the owner grants access rights to another to pass over the land of another.

Economic Life 

The estimated period over which it is anticipated that a property may profitably be 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 consumer’s credit. A score of 150 represents the worst credit possible, whereas a credit score of 934 represents the best credit possible. Empirica is a score that TransUnion only provides to lenders who use the Empirica score as one of the tools in evaluating a borrower’s creditworthiness. Empirica is based on the FICO scoring model.

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. An encumbrance is a restrictive covenant registered against a real estate property, placing restrictions and conditions on how a property owner can deal with the property. Examples of encumbrances include an easement that runs through the property, mortgages, liens, or even 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 property minus the unpaid mortgage principal and liens.  Also called the lendable value or net value.

Equity Capital

A 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 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 by which escrow money is held by a third party on behalf of two other parties that are in the process of completing a transaction. The third-party holds the funds until both parties have fulfilled their contractual requirements.

Escrow Account 

An account established temporarily in which escrow money is held. In real estate, two escrow accounts can be established: at the beginning of the purchase process, and at the time of mortgage closing.

At the beginning of the purchase process, the buyer and seller may agree to use escrow Placing the funds in escrow allows the buyer to perform due diligence on a potential acquisition. Escrow accounts also assure the seller that the buyer can close on the purchase.

At the time of mortgage closing, a lender established the account through which a borrower makes payments, and a lender takes deductions to cover the costs like mortgage insurance premiums, property tax payments, and/or property insurance premiums. No one earns interest on the funds held in an escrow account, but the account is used to collect money so the lender can send payments for property taxes and insurance on the borrower’s behalf. To fund the escrow account, escrow payments are added to a monthly mortgage payment.

Escrow accounts are customary where the LTV of an original loan exceeds 80%. Also known as an “impound account”.

Escrow Officer

A legal entity that holds property in trust for third parties during a real estate transaction from the time the contract is signed through the close of escrow.


All of a person’s possessions, property, and debts 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 real estate transactions, like 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.
An estoppel certificate used in leases records specific information about a tenant, lease, and property. The content of an estoppel certificate can vary widely, but generally include the following information:
• Lease start and end date
• Names of tenants
• Lease terms, including renewals, extensions, and dates
• Rent amount and payment schedule
• Rights and responsibilities of either party in case of default
• Details regarding deposits, including how collected, interest rate, return requirements
• Parking and storage allotments

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 or using the money.


A type of expenditure incurred to obtain 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 USA national credit bureaus that collect and provide 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 highest price that a willing buyer will pay for an asset or property to an unrelated, but a willing seller. In real estate, the fair market value is the reasonable amount a buyer would pay to purchase a real estate property at a given moment in time.

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 900, where higher scores demonstrate lower credit risk, and lower scores demonstrate higher credit risk. FICO has many different scoring models, but each scoring model uses customer’s data from the credit report. The main categories considered are a customer’s payment history (35%), amounts owed (30%), length of credit history (15%), new credit accounts (10%), and types of credit used (10%).


A legal relationship of confidence that gives one the right to act on behalf of another person or entity. A fiduciary relationship gives rise to specific duties of loyalty, disclosure, good faith, and due care. For example, 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 cost imposed on a consumer for obtaining and repaying credit or loan. Any amount a consumer pays beyond the amount borrowed is a finance charge. Besides interest charges, the finance charge may include other costs such as cash-advance fees, transaction fees, account maintenance fees.

Finder’s Fee 

The compensation or commission given to an intermediary in a business transaction. In mortgages, it is a referral fee or commission paid by a lender or borrower to a mortgage broker or agent 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 on a property by a lender for satisfaction of the outstanding debt. The first mortgage creates the first lien. As the first loan that pays for the property, the loan has priority over all other liens. In essence, the lien priority determines the order in which creditors get paid following a default in a loan.

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 in Canada or 3 years in the USA, before the date of purchase of a property. This includes a current 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 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 offered by the government of Canada for qualifying first-time homebuyers with the purpose to encourage Canadians to enter the real estate market by making home-buying more affordable.

Fixed Expense

An expense whose amount does not change from month to month. Fixed expenses stay the same, or change very little over time. Examples of fixed expenses include mortgage, rent payments, car loan payments, student loan payments, childcare service, property taxes, and insurance premiums.

Fixed Installment

Periodic payment on a loan whose sum does not vary.

Fixed Interest Rate 

A rate charged on a liability, such as a loan or a mortgage that doesn’t change during the borrowing period, or at least for a specific period. With a fixed interest rate, the cost of borrowing stays constant throughout the term of the loan and won’t change with fluctuations in the market. With a fixed interest rate, the amount of regular loan payment is constant throughout the loan term.

Fixed-Rate Closed Mortgage

A mortgage with a fixed interest rate that cannot be paid off without penalty before the end of the mortgage term.

Fixed-Rate Open Mortgage

A mortgage with a fixed interest rate that can be paid off without penalty before the end of the mortgage term.

Flat Interest Rate

An interest rate calculated as simple interest on the original loan amount throughout the term of the loan. Flat interest rates require no calculations to blend principal and interest into a level payment and the interest amount remains the same 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 flexible expenses include groceries, entertainment, luxuries items, utilities, and gas.


An increase or decrease of the interest rate with changes in market conditions or with a benchmark 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 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 type of mortgage financing, where a lender advances a partial amount of loan in order to enable the builder to commence the development of a commercial property. The rest of the loan, called the “holdback,” is paid after the builder reaches certain stages in the project that are decided upon by the lender. 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 or lower 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 the power of sale or foreclosure. The borrower must demonstrate the cause for repayment postponements, 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 verifications of the borrower’s application. Formal approval means that the borrower meets the lender’s qualification requirements.


Any form of dishonest or deceptive behavior that is intended to result in financial or personal gain for the fraudster, and does harm to the victim.

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 real property without legal encumbrances, being completely paid off and no creditor has a claim on it. Free and clear most often refers to outright ownership of real property or real estate.


A type of 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 a 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 other building structures.

Front-End- Ratio or Front Ratio

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%. Also known as the mortgage-to-income ratio.


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 is based on the side of the sellers. This includes the 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 is 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 loan used for financing a real estate property purchase. Full Documentation Loan requires the borrower’s income and assets verification.

Funding Date

The date on which the proceeds from a loan are available to or disbursed for the benefit of the borrowers.


A legal process in which a creditor receives legal permission to take a portion of a debtor’s assets (from the 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.

General Warranty Deed 

A legal document that protects the buyer/grantee by assuring them that the seller/grantor has full title and is the sole property owner with rights to sell. It also promises that the seller/grantor has no knowledge of any property issues that may come up. A general warranty deed provides the highest level of protection to the grantees, as the grantor is held responsible for any breach that occurs, and they’re still held liable even if it happened without their knowledge.

Genworth MI Canada

A private mortgage insurance service provider in Canada.

Gift Letter 

A letter explicitly stating that money received from a recipient (usually a friend or a family member) is a gift. The key component of a gift letter is that it lets the lender know that the money does not need to be paid back and will not form a financial burden on the recipient. Usually used by a borrower to obtain a mortgage loan. In the case where the mortgage applicants cannot come up with the full down payment 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 down payment. If the down payment for a mortgage is gifted in full or in part, a gift letter is required to prove the authenticity of the gift.

Gift of Equity

A contribution of equity from a seller to buyer that is used toward the down payment on the home purchase.

Good Faith Estimate (GFE)

An itemized, detailed list of certain estimated costs and other terms associated with a reverse mortgage home loan that the lender is required to provide to the borrower within 3 business days of the application.

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

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. Also known as gross profit.
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 the area on which tenants pay rent. The 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 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 currently 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 made by a third party or guarantor to fulfill certain terms and conditions of a loan agreement in case of the borrower’s default. Loans guaranteed by a third party are called guaranteed loans.

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.
Homebuyers who do not qualify for a conventional mortgage, for example, or don’t have an adequate down payment may qualify for a guaranteed mortgage.


A person agreed to be responsible for a borrower’s debt or performance under a contract if the borrower defaults on the loan payments. In mortgages, a guarantor personally guarantees payments will be made if the original applicant defaults, but the guarantor has no claim to the property.

Guarantor Mortgage

A type of mortgage that requires a guarantor to co-sign a loan contract.

Hard Inquiry 

A type of credit check done to determine a potential borrower’s creditworthiness. It results when a consumer applies for 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. Also known as a hard pull.

Hard Money Loan 

A type of asset-based financing in which the borrower acquires funds that are secured by real property. Also known as a mortgage of the ‘last resort’ for borrowers who can not obtain financing in the standard market due to poor or no credit. Hard money lenders are individuals or private companies.

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.
Unlike a home equity loan, HELOCs usually have an adjustable interest rate, 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.

HELOC Fixed-Rate Option

A home equity line of credit financing option that allows borrowers the ability to switch it from a variable rate to a fixed rate. Most HELOCs have variable rates, meaning your interest rate can rise and fall based on market conditions. A fixed-rate option allows a borrower to lock in some or all of the HELOC balance at a low fixed rate and potentially save money over time. This option protects borrowers against a rising interest rate.

High Ratio Mortgage 

A mortgage where the loan to value ratio is more than 80%. Any real estate purchase where less than 20% down is paid requires a “high-ratio” mortgage. High-ratio mortgages usually require mortgage loan insurance, which is an extra premium that is added to regular mortgage payments and protects the lender in the event of the borrower’s default.

Hold Back

An amount of money withheld or not advanced by the lender to the borrower to maintain adequate security, pending achievement of a performance requirement, or as protection against liens. Hold-backs are common in construction loans, where the lender does not release the full loan amount upfront but holds back a portion of the loan during the construction progress to ensure that construction is satisfactory at every stage.

In real estate transactions, it is an agreed-upon dollar amount that is not released to the seller on the closing of a real estate transaction until the seller has completed certain outstanding contractual obligations.

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 provides security to the seller in the act of good faith that the buyer will complete the financial transaction on the date specified in the agreement. The deposit is considered part of the purchase price and is ultimately credited towards the purchase price on closing.

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 the property owner’s equity increases, but if the property depreciates, the property owner could be at risk of negative equity, where the property owner owes more than the property is worth.

Home Equity Debt

The debt secured by the equity in the borrower’s home.

Home Equity Loan (HEL)

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. A home equity loan usually has a fixed interest rate.


An organization established to manage shared expenses such as landscaping and other maintenance costs for a planned subdivision or other organized community.

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’ Association (HOA)

An organization established to manage shared expenses such as landscaping and other maintenance costs for a planned subdivision or other organized community.

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. The policy usually covers interior and exterior damage, loss or damage of personal assets, and personal liability in the case someone is injured on their property. Three basic levels of coverage exist: actual cash value, guaranteed replacement cost, and specified limit cost/value replacement. Most policies are “guaranteed 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. The actual cash value coverage is equal to the replacement cost, minus depreciation. Specified limits mean the insurer will reimburse the insured for the cost of repairing or rebuilding the home, up to the coverage amount written in the policy.

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 by demand and speculation due to expectations that prices will continue to rise. During a housing bubble, homes become overvalued until the bubble bursts.

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 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.

Housing Tenure

An arrangement under which someone has the right to live in a house or apartment. The most common types of housing tenure are freehold and leasehold. Types of tenure include ownership by a member of the household or rental of all or part of the housing unit by a member of the household.

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, 5/25 means adjustable for 5 years and fixed for 25. This type of mortgage allows borrowers to better manage risks and borrowing costs. Hybrid mortgages generally have a lower starting interest at the beginning of the mortgage. 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 

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. Also known as an escrow account.


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. It’s calculated by dividing the net operating income by the capitalization rate. 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. With the income approach, a property’s value today is the present value of the future cash flows the owner can expect to receive. Also called income capitalization.

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 type of insurance policy where the insurance company guarantees compensation for losses or damages sustained by a policyholder. Indemnity is the amount paid to a policyholder or beneficiary of the policy as compensation for a loss.

Index Rate

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 as 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.
Also known as the underlying benchmark interest rate.

Initial Interest Rate

The introductory interest rate on an adjustable-rate mortgage (ARM), which usually changes at a predetermined time. Also known as a teaser rate or start rate.


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 can buy a consumer less and less. There are two types of inflation: Demand-Pull Inflation and Cost-Push Inflation. Demand-pull inflation occurs when aggregate demand for goods and services in an economy rises more rapidly than an economy’s productive capacity. When demand outpaces supply, sellers will raise prices and consumers will need more money to buy the same items.
Cost-push inflation occurs when aggregate demand remains the same but there is a decline in aggregate supply due to external factors (such as increasing cost of labour, raw material, energy) that cause a rise in price levels. The increased price of the factors of production leads to a decreased supply of these goods.


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.

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. Home inspections provide an opportunity for a buyer to identify any major issues with a home 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 regularly scheduled installments over time. For each installment payment, the borrower repays a portion of the principal borrowed and also pays interest on the loan.


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 policyholder 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 the 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 is the cost of using 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,  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 from which a lender starts calculating the normal ongoing interest that a borrower will pay. The interest adjustment date is also the first day that interest will begin to accrue on a mortgage.
The interest adjustment date can also be referred to as the pro-rated interest amount based on the mortgage funding date. The lender may collect the amount of accrued interest from the adjustment date to the date of the first payment when the property closes.

Interest Adjustment Period

The period between interest rate changes 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 (initial and adjustment) 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. The face of the note is the amount borrowed. Interest is added to each payment on the unpaid balance.

Interest Cost

The cumulative amount of interest a borrower pays on a debt obligation over the life of the borrowing.

Interest Ceiling

The highest interest rate possible under an ARM contract. Also known 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. It is computed by multiplying the loan
balance at the end of the preceding period times the annual interest rate divided by the interest accrual period.

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

An interest rate is either the cost of borrowing money or the reward for saving it. It is calculated as a percentage of the amount borrowed or saved.

Interest Rate Differential (IRD)

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

Interest Rate Differential (IRD) Penalty

A penalty a borrower pays to a lender for breaking a closed fixed mortgage before the end of the term. The IRD penalty takes into account the difference between the current interest rate on the borrower’s mortgage and the rate the lender can get today on a term closest to the time remaining on the borrower’s term.

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 in the sale price.


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

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 profit. Investors can earn a profit or 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 both 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 shares ownership of 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 assume full ownership of a 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, 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 shares 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 a 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, commercial property, 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 any debt, financial obligation, or loan payment when is due.

Late Payment

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

Latent Defect 

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. Also known as an inherent defect.

Lead-Generation Site

A website designed to gather and capture leads to businesses. Lead generation is the initiation of consumer interest or inquiry 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 secured by a mortgage lien placed on the tenant’s (lessee) leasehold interest.

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 of time a solicitor spent on the transaction, like mortgage documents preparation and registration, and disbursement or out-of-pocket expenses and fees paid by a solicitor, such as a title search and registration, title insurance, courier cost.

Lender Fee

A fee associated with processing, approval (or decline), and funding a mortgage loan. Fees are designed to cover costs incurred by lenders during the loan process.

Lender Title Insurance

Insurance that protects the lender against potential losses in the event that the seller is not legally able to transfer title rights of the mortgaged property. The lender is covered up to the amount of the mortgage and the insurance premium is covered by the borrower. Also known as Mortgage Title Insurance.


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. It is a concept of borrowing to increase the potential return of investment: using the equity generated by the rising value of an existing property to purchase a new one. If the new property grows in value, it allows the investor to repeat the process and purchase another property.


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 the property of another to hold it as security against a debt or loan. In real estate, 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 or loan withholding up to 15% of mortgage funds advanced on any construction or renovation. It provides a form of security to contractors, subcontractors, workers, and suppliers who work on a building that is under construction in the case of any claim.

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 finance 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, checking or savings accounts, mutual funds, money market instruments, and other 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 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 the borrower’s contact information, address, financial, and other essential information for the lender to consider before loans are granted.

Loan Application Fee

A non-refundable fee charged by a lender to process 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 Capitalization

The conversion of a 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 loan or mortgage payments or when lenders allow the borrower to make minimum payments on the loan for some time.

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 Modification

A change in loan terms. The modification is a type of loss mitigation. A modification can reduce the monthly payment to an amount the borrower can afford. Modifications may involve extending the number of years to repay the loan, reducing the interest rate, and/or forbearing or reducing the principal balance.

Loan Origination

The process that occurs when a buyer applies for and 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 Portfolio

A pool of loans that a lender or investor owns.

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 is 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% of the purchase price. The size of the mortgage down payment impacts the amount approved, interest payments, and mortgage insurance costs. Low-down mortgages usually require private mortgage insurance to be purchased by the borrower. Also known 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 number of percentage points added by a mortgage lender to the interest rate index, ranging generally from 2 to 3 percentage points, to obtain the fully indexed interest rate on an adjustable-rate mortgage ARM after the initial rate period ends. The margin amount depends on the particular lender and loan.

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 of real 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 property.

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 that a property would sell for in a competitive market based on the features and benefits of that property.

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 highest amount of money a lender will approve for a borrower. Based on the borrower’s income, credit history and credit score, debt-to-income ratio, down payment, and property price the lender will calculate the maximum amount the borrower is eligible to borrow.

Maximum Loan to Value Ratio

The largest allowable ratio of a loan’s size to the dollar value and the liquidity of the asset pledged as collateral 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 5 properties are sold in a city in the last 30 days, the average home price would be calculated by adding the sale prices for all 5 properties and dividing that figure by 5.


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. With monetary policy, a central bank increases or decreases the money supply and credit in circulation to ensure price stability, growth, employment, and to reduce inflation.

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 the sale of the property, default, or refinancing.

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)

Fixed-income security such as a bond that derives its cash flow 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.
The 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 clients.

Mortgage Brokerage

A legal identity licensed to arrange or trade-in mortgages. Mortgage Brokers and licensed Mortgage Associates or Agents 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 Charge

A right to transfer an interest in ownership of immovable property by the mortgagor as a security for the repayment of debt to the mortgagee, where no transfer of interest is executed.
There are two types of charges a lender can register: standard or collateral. A standard charge is a traditional or conventional charge, registered on title in a document that includes the details of a particular mortgage, such as the principal amount, interest rate, term, payment amount, and more. A standard charge is registered for the actual amount of the mortgage loan, securing only the one mortgage loan.

A collateral charge, also called a collateral mortgage, is a method of securing a mortgage or loan against a property. With a collateral charge, a borrower may be able to borrow more funds against the property in the future without registering a new charge.

Mortgage Company

A specialized financial institution engaged in the business of originating, funding, and/or servicing mortgages for real estate. A mortgage company may be a chartered bank, credit union, trust company, or other financial institution providing mortgage loans.

Mortgage Deed

A legally binding agreement, using a property as collateral for a loan. By this document, the borrower transfers an interest in real estate to a lender for the purpose of providing a mortgage loan. The mortgage deed allows the lender to put a lien on the property until the loan is paid.

Mortgage Disability Insurance

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

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 titleholder. Mortgage insurance can refer to mortgage default insurance or mortgage title insurance.
Mortgage default insurance helps offset the lender’s risk when a borrower makes a low down payment. It protects a lender if the borrower defaults on payments, dies, or is otherwise unable to meet the contractual obligations of the mortgage. 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 and is required for the borrowers with less than 20% of downpayment.
In the USA, mortgage default insurance on a conventional mortgage is referred to as private mortgage insurance (PMI). Borrowers with a conventional mortgage will pay PMI if they make a down payment of less than 20%. On FHA mortgages, mortgage default insurance is obligatory for all loans. The mortgage insurance paid on an FHA loan is referred to as a mortgage insurance premium (MIP). Borrowers pay upfront MIP (UFMIP) at closing, and an annual premium added to their monthly mortgage payments.

Mortgage title insurance protects lenders against losses due to title defects. The insurance benefits the lender, even though borrowers pay the premiums.

Mortgage Insurance Premium (MIP)

The up-front and/or periodic charges that the borrower pays for mortgage insurance. The mortgage insurance premium is paid by the borrower(s) to the lender. It’s calculated based on the size of the downpayment and loan amount.
There are different mortgage insurance plans with different combinations of up-front, monthly and annual premiums. The monthly and annual premiums are usually added to the principal amount of the loan and repaid over the same amortization period.

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

A party that helps a borrower to complete a real estate loan transaction. A mortgage originator can be either a person, like a mortgage broker, agent, and loan officer, or an institution. Mortgage originators work with underwriters and loan processors from the application date until closing to gather the necessary documentation and guide the file through the loan approval process. A mortgage originator does not make the final decision on a loan application which is the duty of the lender’s underwriting department.

A mortgage originator can also mean the institution responsible for funding the loan.

Mortgage Qualifying Interest Rate

A rate used by a lender to assess a borrower’s eligibility for a mortgage. In Canada, all insured mortgages with a fixed term of fewer than 5 years and all variable rate mortgages had to qualify at the benchmark rate or the contract rate plus 2% whichever is higher. The benchmark rate is the Chartered Bank Conventional Mortgage 5-year rate published by the Bank of Canada each Monday. It is used in ‘stress tests’ by lenders to assess a borrower’s affordability and whether the borrower can withstand rate increases and afford future mortgage payments.

Mortgage Qualification 

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

Mortgage Pool

A group of mortgages with similar characteristics held in trust as collateral for mortgage-backed securities. Mortgage payments of principal and interest into the pool are used to pay those who invest in the mortgage-backed securities.
A mortgage pool is a form of alternative investment that provides mortgages to those who may not be approved through usual methods.

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

Recommendation to someone by a third party on where to get a mortgage. It can be a referral of a client to a lender or a particular mortgage broker.

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 physical property as the security on a mortgage. The mortgage registration fee is paid when a mortgage is established against a property.

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 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 report prepared by a mortgage holder or lender and provided to the borrower. The mortgage statement outlines the current mortgage balance, current interest rate, the 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

The appropriateness of a mortgage product recommended to a borrower based on the borrower’s needs, personal and financial circumstances.
The suitability of mortgage or loan products is of critical importance to consumers. Various forms of suitability protection are advanced, like a fiduciary duty imposed on lenders and brokers, rigid underwriting tests, some degree of subjective evaluation by a lender or broker of whether the loan product being sold is best for the borrower.

Mortgage lenders and brokers are accountable and 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, the payment amount, and total interest paid over the life of the loan. Mortgages with short terms are historically proven to come with lower total mortgage interest paid than mortgages with long terms.

Mortgage Title Insurance 

A type of insurance that protects the buyers and lenders against losses in the event a sale is later invalidated because of a problem with a bad title. With title insurance, buyers and lenders are protected against any deficit in the title that might cause serious losses. Most mortgage title insurance policies protect a beneficiary against the common claims filed against a title, including outstanding liens, unpaid property taxes, conflicting wills, fraud, mistakes in the public records.

The insurance premium on title insurance is a one-time payment made at closing. The title insurance is valid as long the buyer owns the mortgage on the real estate property.

Mortgage Yield

A return generated from a set of mortgage-backed securities, such as mortgage-backed bond issues. Mortgage yield is calculated as a monthly compounded discount rate at which the net present value of all future cash flows from the bond will be equal to the present price of the bond. Also known as cash flow yield.


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


A person or a 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, a borrower buying a real estate property using a mortgage is known as the mortgagor.


A single building or home that has multiple separate dwelling units owned by one or more parties. Condo buildings and multiplexes with up to 4 (four) units are examples of multi-family residences, but with a multiplex, both the property and the land are recorded on one deed. With a condo, the owners own their 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. It’s a system for sharing information between Realtors on homes for sale. Each MLS database serves specific regions and access is available only to real estate agents and brokers who pay for the membership. The information, which used to be guarded, is now available on numerous websites to the general public.

Negative Amortization

A loan repayment structure in which the borrower does not pay enough to cover the interest owed each month. The portion of the interest that remains unpaid is added to the total amount owed to the lender, increasing the loan balance each month. The next interest payment is calculated based on the new principal balance. Negative amortization is the inverse of standard amortization because the principal amount on the loan increases. Negative amortization arises most frequently on ARMs.

Negative Amortization Cap

The maximum loan’s principal balance of negative amortization permitted on an ARM, usually determined as a percentage of the loan’s original balance. Reaching the cap triggers an automatic increase in the payment, usually to the fully amortizing payment level, overriding any payment increase cap. A negative amortization cap protects lenders from default risk.

Negative Equity

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

Net Effective Rent 

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

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 money a business generates, minus all expenses, depreciation and amortization, interest, and taxes for an accounting period. Net income is the “profit” of a business or its “earnings.”

Net Lease

A lease that provides that rent and other certain expenses of owning, operating, and/or maintaining the leased commercial real estate property are responsibilities of the tenant.

Net Operating Income (NOI)

The annual income is available after operating expenses to service the debt and provide the owner with a return on the investment. Net operating income (NOI) measures a commercial real estate property’s ability to generate a positive cash flow from operations. The NOI formula is: Net operating income = Gross operating income – Operating expenses.
The gross operating income includes rental income and other income commercial property generates less vacancy and credit losses.
The operating expenses include all the reasonably necessary costs of owning and managing a property, such as property taxes, maintenance and repair, insurance, utilities, licenses, supplies, and overhead costs, such as expenses for accounting, attorneys, and advertising.

Net Pay

An employee’s gross pay minus deductions and taxes.

Net Proceeds

The amount of money a seller is entitled to receive from selling an asset after related expenses have been paid. Net Proceeds are derived by summing up all the expenses (advertisement costs, realtor’s fees, closing cost, and other related fees) and deducting the same from the gross proceeds in a transaction arising from the sale of a property.

Net Worth 

The sum of all financial and non-financial 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 is a measure of wealth.
In business, net worth is the difference between the value of the total company’s assets and total liabilities, and also know as a book value or shareholders’ equity.
A person’s net worth difference the value between the current market value of total person’s assets such as checking and savings account balances, the value of securities such as stocks or bonds, real property value, an automobile, and liabilities, such as mortgage debt, personal or other loans. credit card balances, student loans, car loans, and any other outstanding obligations.

Net Worth Statement

A financial snapshot showing a list of the assets and liabilities of a person or company at one particular point in time. At any particular moment, the net worth statement shows how much money a person or company would have leftover if they sold all their assets and paid off all their debts. Also known as a balance sheet.

Net Yield

In the mortgage context, it is the interest rate return generated from a set of mortgage-backed securities, such as mortgage-backed bond issues, after deducting the percentage equivalent of mortgage servicing from the coupon rate of the mortgage.

In the real estate investment context, the net yield is the income on the property after deducting costs and expenses associated with owning the property. Yield is one of the key factors in deciding whether or not to invest in a commercial property.

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 who have recently immigrated or relocated to Canada obtain a mortgage to purchase a home.

Ninja Mortgage

Industry slang for a no-doc loan, which doesn’t require income, asset, or job verification.

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. It is the percentage increase in money a borrower pays the lender for the use of the borrowed money. A nominal interest rate is different from real or effective interest rates.
The nominal interest rate is often used in banks to describe interest on different loans and in the investment field. For example, if the nominal rate on a $1000 loan is 6%, a borrower can expect to pay $60 of interest for $1,000 borrowed, or a total of $1,050 at the year’s end.
For investors, the nominal interest rate is the stated percentage of their returns. For example, if an investor invests $1,000 in a saving account with 5% nominal interest, the investor will receive a return of $50 at the end of the year.

Nonrecourse Loan 

A type of mortgage loan secured by a pledge of collateral or the real estate property itself, but for which the borrower is not personally liable for any loss incurred by the lender if the collateral loses value. Also known as nonrecourse debt or nonrecourse plan.

Non-Conforming Loan

A loan that fails to meet the requirements criteria for funding set forth by Fannie Mae and Freddie Mac. 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 alternative or private mortgage lenders. The risk to the lender is offset through generally higher interest rates, more sizable down payment, and stricter underwriting requirements.

Non-conforming loans commonly include jumbo loans (those above Fannie Mae and Freddie Mac limits) and government-backed loans like VA loans, FHA loans, or USDA loans. 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 and convert into cash 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. The most common examples of non-liquid assets are equipment, real estate, vehicles, art, collectibles, precious metals, and inventory. For a non-liquid asset, it might take time to sell the asset and receive funds for it.

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.

Non-Resident Speculation Tax (NRST)

A 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.


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. Also known as a promissory note.
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 actual interest rate used to calculate a monthly payment paid by a borrower for the use of money usually expressed as an annual percentage rate (APR) 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 

An official notice issued by a lender indicating that the borrower has fallen behind on his payments or otherwise breached the terms of the mortgage loan. When the lender sends this notice, it’s generally considered to be the first step in the power of sale or foreclosure process. 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 property.


A conditional proposal made by a buyer or seller to buy or sell an asset which becomes legally binding if accepted. An offer and acceptance will officiate a contract between two parties.
Offers shall be 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 a borrower earns 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 real estate 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 or condo complexes when apartments or condos 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 listing agreement that allows multiple real estate brokers or agents to market and sell the property.

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 access the equity in their home and borrow additional funds on the same loan amount up to a limit established by the lender.

Open Mortgage 

A type of mortgage product that provides the flexibility to a borrower to prepay all or part of the principal amount at any time during the term without paying a prepayment charge. Open mortgage rates tend to be higher than closed mortgage rates.

Option ARM (Pay Option ARM)

A type of 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

Any type of earned income taxable at ordinary tax rates. This includes hourly wages, salaries, tips, commissions, income earned from the business, some rents and royalties, short-term capital gains that are held for no more than a year, and unqualified dividends. It excludes passive or unearned income, such as long-term capital gain, interest from savings accounts, bond interest, alimony, and dividends from stocks, which are taxed with lower, preferential rates.


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

A fee charged by a lender to cover the lender’s costs to originate the loan. This fee may include an application processing fee, appraisal fee, underwriting and funding the loan, fees for all the follow-up work, and other costs associated with the loan. Also known as the mortgage application fee.


In the real estate context, it 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 and financial institutions charge each other when they borrow funds among themselves.
The overnight interest rate is set up by the nation’s central bank. This rate, also known as the federal funds rate, serves as the benchmark that banks and other financial institutions use to set interest rates for consumer loans, mortgages, and other forms of lending.


A credit limit granted by the lending institutions by which a borrower can exceed the borrower’s account balance. The overdraft allows the account holder to continue withdrawing money even when the account has no funds. The overdraft is often charged interest on the overdraft amount, and monthly overdraft fees 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 protect 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 type of mortgage used to finance the purchase of both, real property and personal property being sold with the real estate. Examples include a purchase of a new home that includes carpeting, window coverings, and major appliances, or a purchase of a furnished vacation home.


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

Pari Passu

A Latin phrase with the meaning “on an equal basis”. It is used to describe 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 fulfill 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 a situation when 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 type of mortgage wherein the lender is entitled to share in the rental, investment, 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 Cap

A limit on how much monthly loan payment can increase at any one time. Some adjustable-rate mortgages have payment caps in addition to annual (or semi-annual) interest rate caps and lifetime interest rate caps. Payment caps don’t limit the amount of interest charged and may cause negative amortization.

Payment Change Date

The date when a new monthly payment amount takes effect on an adjustable-rate mortgage (ARM). Generally, the payment change date occurs in the month immediately after the interest rate adjustment date.

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 favorable 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. Payroll taxes are automatically deducted from employees’ paychecks by the employer and send to the government agency on the behalf of the employees.

Pay Stub

A document received by an employee that details gross employment income, net income, employee’s contributions, deductions, and taxes withheld for a specific pay period. Also known as a paycheck stub or payslip.

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 of 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 a property 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 a person receives from all sources, including wages and salaries, dividends and interest, rents, profits, business ownership, pension, unemployment insurance, social security, and other government benefits.

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. Interest rates vary, depending on a person’s credit score and loan eligibility.

Personal Property 

A class of property that can include any asset a person or business owns 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 allows borrowers with a low down payment to borrow additional money in order to qualify for the main mortgage without paying for private mortgage insurance. The primary mortgage is for 80 percent of the property’s value and the second or piggyback 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 do not have enough for downpayment but wish to avoid paying private mortgage insurance (generally a requirement when a person makes a down payment of less than 20%). For example, piggyback transactions can be a mortgage split into 80-10-10% mortgages. 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.


An acronym used for the four elements of the monthly housing costs, including mortgage principal + interest, taxes, and heating expenses. This information is taken into consideration when calculating borrowers’ debt service ratios and determining the borrower’s maximum affordability.


An acronym for the four elements of a mortgage payment: principal, interest, taxes, and insurance. PITI represents the total monthly mortgage payment, and it is taken into consideration when determining the borrower’s maximum affordability.


A unit for measuring fees related to a loan. A point equals 1% of a mortgage loan. There are two types of points: discount points and origination points. Origination points are fees charged by some lenders to cover the overhead cost for the loan. Discount points are upfront fees paid by borrowers in exchange for a lower 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. 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 mortgage 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. Portable mortgages carry with them a slightly higher interest rate than the mortgage without the portability feature.


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 and transfer of deed are 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 pre-approval 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 unconscionable tactics to entice, induce, and assist a borrower in taking a loan that they otherwise are unable to pay back reasonably. Examples of predatory lending could include high late fees, penalty interest rates, or even seizure of loan collateral.

Predatory Loan

A secured or unsecured loan containing terms and conditions heavily favoring 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, unethical 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.


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

Prepayment Clause

A clause inserted in a mortgage or loan agreement, which gives the borrower the privilege of paying all or part of the loan 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 Credit

A credit score that is one level below super-prime credit scores. Consumers with prime credit have very good credit and pose little risk to lenders.

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 to the customers with the best credit histories.

Prime Mortgage

A conforming loan with interest rates lower than average, awarded to borrowers with a good credit history. Prime mortgage almost always requires down payments which may be as much as 20 percent of the property’s sale price.

Prime mortgages meet the standards set out by Fannie Mae and Freddie Mac, in the USA or, CHMC in Canada.

Primary Mortgage Market

The market in which primary lenders originate loans and make funds available directly to borrowers. Banks, mortgage brokers, mortgage bankers, and credit unions are all primary lenders and are part of the primary mortgage market. Even a seller of a property could participate in the primary mortgage market if they provide loan funding to the buyer of their property.
Mortgage brokers, although work in the primary market, do not make loans but act as an intermediary between borrowers and lenders.


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 residential property where a person lives the majority of the time during the year. A person shall only have one principal residence which may or may not be within the country the person is connected under the tax legislation.

Private Mortgage 

A loan that is offered by an investor rather than by 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 traditional or alternative mortgage lenders.

Private Mortgage Insurance (PMI)

A type of insurance often required for conventional mortgages with a down payment of less than 20% of the sale price, that protects the lender if the borrower defaults on the loan. The mortgage insurance premiums are paid by the borrowers.

Private Mortgage Lender

A person or organization who has the funds available to finance a real estate investment and make profits from private mortgage loans. Private mortgage lenders are equity-based as they lend money for property purchases secured by the property as 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 a real estate agent’s involvement. A property is advertised as being on the market and prospective buyers make their offers directly to either the seller or their representative.

Progress Advance Loan

A type of construction loan given on a progress advance basis.

Promissory Note

A written promise that one party will repay the loan to 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. The lender holds the promissory note while the loan is outstanding. When the loan is paid off, the note is marked as “paid in full” and returned to the borrower.

Property Insurance

A type of insurance policy that provides financial reimbursement to the owner or renter of a building structure and its contents in the event of damage or theft. Property insurance can include homeowners insurance, renters insurance, landlord insurance, condo/co-op insurance, flood insurance, and earthquake insurance. 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. In Canada, property taxes are levied by provincial and municipal governments. All provinces assess properties at some percentage of market value, sometimes referred to as actual, real, fair, or current value.

In Ontario, properties are assessed at their “current value” which is defined as the amount of money the fee simple, if unencumbered, would realize if sold at arm’s length by a willing seller to a willing buyer. 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 fair market value of a given piece of real estate property at any given time. 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.


The allocation or dividing of certain expenses or benefits between buyer and seller at the closing of a real estate transaction. Common prorations calculated in real estate transactions include property taxes, mortgage insurance, and utilities.

Public Record

Information that is available to any member of the public. In the mortgage context, the borrower’s name, property address, and amount owed are considered public records. That means anyone can conduct a search and obtain this information.
In the credit reporting context, public records like bankruptcy, tax lien, power of sale, foreclosure, court judgment, or overdue child support can be registered on someone’s credit and can harm the credit report and credit score significantly.

Purchase Agreement 

In real estate, it is a legally binding contract that governs the purchase and sale of a property. Real estate purchase contracts outline the details of a property sale transaction and contain information such as the purchase price, mortgage contingency provisions, the earnest money deposit, down payment requirements, closing date, 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 given to the property buyer from the seller as a part of the purchase agreement. The terms are usually similar to a loan offered by a bank or other financial institution. Also known as seller financing or vendor take-back mortgage.

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 to 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.


The process of determining whether a prospective borrower has the ability, meaning sufficient assets and income, to repay a loan. Qualification is sometimes referred to as “pre-qualification” because it is subject to verification of the information provided by the applicant. Qualification is short of approval because it does not take into account the credit history of the borrower. Qualified borrowers may ultimately be turned down because, while they have demonstrated the capacity to repay, a poor credit history suggests that they may be unwilling to pay.

Qualified Mortgage

A defined class of mortgages that meet certain borrower and lender standards outlined in the Dodd-Frank regulation. 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 the property is not a qualified syndicated mortgage.

Qualifying Rate

An interest rate used by lending institutions to assess a borrower’s loan affordability when applying for a mortgage with a variable rate, or fixed rate for a term less than 5 years.

Qualifying Ratio

A measure used by lending institutions in their loan underwriting process in determining how likely it would be for a borrower to repay a loan. Qualifying ratio is expressed as a percentage of gross monthly income spent on fixed monthly housing expenses and combined household expenses. Also known as debt-to-income ratio.
For example, most lenders require that the ratio of housing expense to borrower income, and housing expense plus other debt services to borrower income, cannot exceed specified maximums, e.g., 28% and 36%, for a borrower to qualify for a loan of a certain amount.


A percentage of the amount borrowed a borrower is charged for the use of money. The interest rate on a loan is typically noted on an annual basis known as the annual percentage rate (APR).

A rate can also apply to the amount earned at a bank or credit union from deposit accounts like a savings account or certificate of deposit (CD). It is expressed as a percentage of the amount deposited.

Rate Hold

A limited time during a lender will guarantee a loan’s interest rate for a borrower.

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.

Rate of Reduction Option

A provision in a fixed-rate mortgage that gives the borrower the option to reduce the interest rate at a later date without having to refinance or to requalify for the loan.


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

Rate Shopping

The process of inquiring or applying for a loan with several lenders to find the best interest rate for the 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 type of mortgage 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. Each readvanceable mortgage includes two components; a mortgage and a line of credit that a borrower can pay down and borrow against. The home equity line of credit (HELOC) is an example of a line of credit component of a readvanceable mortgage.


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 represents either seller or buyer and serves as a facilitator of real estate transactions.

Real Estate Bubble 

A type of economic bubble that occurs periodically in local or global real estate markets, when real estate demand outpaces supply, causing the average price of properties for sale to rise. Also referred to as a “housing bubble,” it is usually driven by an increase in demand, speculation, 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

An annual rate of return on the investment adjusted for the inflation rate.


A real estate broker or agent who represents sellers or buyers of real estate or real property. The Realtor is also someone who is affiliated with the National Association of Realtors (NAR).

Real Property

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

Recast Payment

An increased or decreased mortgage payment as a result of mortgage re-amortization due to a large, lump-sum payment toward the principal balance by a borrower. Periodic payment-increase recasts are sometimes used on ARMs in lieu of or in addition to negative amortization caps.


The transfer of a property’s title from a mortgage lender to the borrower after a mortgage has been fully paid.

Recourse Loan 

A type of loan that allows lenders to seek financial damages if the borrower defaults in his loan payments even after they have taken collateral. 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. Lenders have the right to garnish wages or levy accounts in order to collect what is owed.


The return of an investor’s principal on 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 and buying back the property.


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

Referral Fee

A commission paid by service providers to other parties that facilitated a transaction by linking up a potential customer with an opportunity. In exchange for introducing the parties, the facilitator or finder takes a commission from the brokered deal. Also known as finder’s fee.


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 mortgage amount than allowing borrowers to cash out 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 the real property.

Rent Control

A government program that limits the maximum amount of rent a landlord is allowed to charge for a rental residential property. Rent controls are intended to regulate the housing market and 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 the 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 a 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 mechanism used to limit the number or percentage of units that may be rented in a condo building or development at any one time. Also known as owner-occupancy rates.
The rental cap may affect the financing of a property in a community with a rental cap 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 length of the time when a borrower is required to make payments on the loan.

Repayment Schedule

Loan payments laid out over the life of the loan. Also known as Amortization Schedule.

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 of a county.

Residential Real Estate 

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

Residential Mortgage-Backed Security (RMBS)

The 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 modified usually to make the mortgage payments more favorable to the borrower.

Retirement Home

A private multi-residence housing facility intended to accommodate individuals in their senior years.


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)

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. Also known as return on common equity (ROCE).

Return on Investment (ROI)

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. For example, a $100,000 property that generates $8,000 per year would produce an 8% ROI. It is a measure of the performance and efficiency of an investment. Also called rate of return or yield.


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. The reverse mortgage provides that instead of making payments to a lender, the lender makes payments to the homeowners. Homeowners don’t qualify based on income but the value of his or her home. There is no requirement for repayment of the loan until the end of the loan term or the death of the borrower. Also known as the home equity conversion mortgage.

Right of First Refusal

A provision in an agreement that requires the owner of a property to give another party the first opportunity to purchase or lease the property before he or she offers it for sale or lease to others.

Right of Survivorship

The distinguishing feature of several types of joint ownership of property, mostly joint tenancy and tenancy in common, which provides that the surviving owner automatically absorbs a dying owner’s share of the property.


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.


A level of uncertainty about deviation from expected earnings or expected outcome. Risk measures the uncertainty that an investor is willing to take to realize a gain from an 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 possibility of a loss resulting from a borrower’s failure to repay a loan or meet contractual obligations. 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

A calculated number that predicts how likely a consumer is to repay a loan and make payments when they are due. Also known as a credit score.

Risk Tolerance 

The maximum degree of uncertainty someone is willing to accept when making a financial decision that entails the possibility of a loss.

In a mortgage context, risk tolerance refers to the capacity of a borrower to comfortably afford mortgage payments, even if their rate increases over the term of their mortgage.

Roll In

The process when the closing costs of a loan are added to the principal balance. Lender fees, such as origination fees, mortgage fees, lawyer fees, and administrative fees are frequently rolled in the mortgage. Rolling the closing costs into the mortgage means the borrower is paying interest on the closing costs over the life of the loan.

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. Also known as a renegotiable rate mortgage.


A fixed regular monetary compensation 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 portion of the contract payment withheld to ensure the performance of the contract in accordance with its terms and conditions. Holdbacks are very common in purchase and sale agreements. In the real estate context, it is a portion of the purchase price that is not paid at the closing date.
In a mortgage context, it is 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.
The holdback amount is usually held in a third-party escrow account to secure a future obligation, or until a certain condition is achieved.

Sales Leaseback

A transaction 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. The seller that sells the property becomes the lessee, and the buyer that purchases the property becomes the lessor.


A 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 land ownership documents, title, and deed searches to ensure 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

A property occupied by the property owner for part of the year in addition to a primary residence.

Second Home Mortgage

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

Second Mortgage

A mortgage registered second on the title after the first mortgage. 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 or lenders create mortgage loans and then sell the servicing rights to loan aggregators on the secondary mortgage market. Loan aggregators bundle large groups of mortgages into mortgage-backed securities (MBS) and sell them to investors such as banks, pension funds, hedge funds, or insurance companies.

Secured Loan

A loan that requires a piece of property, such as a house or car, to be used as collateral. The 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. Also known as Secured Debt.


The process by which 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 sold on the open market to investors. Any type of asset that is backed up by a loan such as mortgages, credit card debts, student loans can be securitized. Securities backed up by consumer debt are known as Asset-Backed Securities (ABS), while securities backed by mortgages are known as Mortgage-Backed Securities (MBS). Securitization offers opportunities for investors and frees up capital for originators.


An asset that guarantees the lender all or part of the borrower’s loan until the loan is repaid in full. It is usually the property the borrower has borrowed to buy which is the security for the loan. The assets in a secured loan are referred to as collateral. Under the loan agreement, the lender could have the right to take ownership of the security in place of the loan repayment.

Security Freeze 

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. Also known as a credit freeze.

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. It could include income from a business, profession, commission sales, farming, or fishing activities. Self-Employed Income is calculated by taking the gross income and deducting allowable expenses.

Self Employed Mortgage

A type of mortgages designed specifically for borrowers who rely on self-employment income or business income instead of employment income. 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. Since the lenders for self-employed mortgages are taking a greater risk by working with a borrower who has less consistent income, the interest rates on self-employed mortgages may be higher.


A form of financing in which the seller of a property accepts a down payment and extends the mortgage to the buyer until the property is paid for. Also known as owner-provided financing.

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.

A semi-monthly payment plan is different than a bi-weekly payment plan. 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.

Shared-Appreciation Mortgage

A home loan in which the lender offers a below-market interest rate in exchange for sharing in the profit from the home appreciation value when the home is sold. This type of financing can make purchasing a home and the associated monthly payments more affordable. Usually done only with private funds and lenders.

Short Refinance

A refinance transaction where the lender agrees to refinance mortgage with a lower interest rate and/or changed mortgage terms and to forgive mortgage difference, despite the mortgage balance exceeding the property value as in situations of declining real estate markets. The benefits of short refinancing are for the borrower to avoid foreclosure and for the lender to take a smaller loss than they would with a foreclosure.

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. Also known as 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. 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 residential unit or house designed for and occupied by a single-family.

Skip 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 skip periods will instead be added to the principal, and monthly payments will then be recalculated once they resume. With a skip payment option, it will take longer to pay down the mortgage balance, plus the interest is still charged and added to the mortgage balance.

Soft Inquiry

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. Also known as a soft pull or soft credit check.

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.

Special Warranty Deed

A deed that guarantees the title only for the time the property was owned by the seller. It does not offer any protection against any claims before the grantor receives the title. This type of deed is not typically used for home purchases, but rather for the purchase of commercial property.


A written document that outlines all the conditions, installations, 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. Investors in the speculative home market usually seek to take advantage of changes in markets rather than relying on longer-term market behavior 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

A type of mortgage interest rate charged on a lender’s most feature-packed loans and allows a borrower’s interest rate to be cut when official rates fall, but also exposes the borrower to interest rate rises. In exchange for this movability is the flexibility of loan features such as redraw, portability, transaction account, and an 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 to fund 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 type of interest-only mortgage that requires the borrower to make only interest payments over the life of the loan, paying the principal as a lump sum at the end of the loan term.

Stated Income Mortgage

A type of mortgage for which the lender does not verify the borrower’s income, and instead, relies on the borrower to declare or state their income.

Statement of Adjustment

A document prepared by the real estate lawyer that outlines the purchase price credits the deposit, and prorates any pre-paid items such as property taxes and utilities 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 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 sub-prime 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 mortgage lenders, and investment bankers that deliver sub-prime loans to high-risk borrowers.

Sub-Prime Mortgage

A loan offered to high-risk or sub-prime borrowers. The interest rate associated with a subprime mortgage is usually high to compensate lenders for taking the risk that the borrower will default on the loan.

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. While the credit score categorizations of different types of borrowers can vary between creditors, in the general, anyone with FICO score above 720 is considered to have super-prime credit.


A drawing of a property showing the dimension and location of the lot, property’s boundary lines, legal description, restrictions or easements included in the property, the building, and any other structures on the property, as well as any improvements on the property.

Sweat Equity

The monetary value of the property owner’s time, effort, and expertise that was invested in the property improvements and extension.

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.


An investment vehicle in which a group of investors becomes direct or indirect owners in one or multiple properties.

Syndicated Mortgage

A mortgage or loan offered by a group of lenders (co-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.
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 difference between the gross income less all deductions. Deductions include federal, provincial, and local income tax, employment insurance premium, retirement account contributions, voluntary contributions for union duties, charitable deductions, and garnishments. 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 which construction was financed with an interim or construction loan. The take-out loan is used to repay and replace interim financing, such as replacing a construction loan with a fixed-term mortgage.

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

A type of adjustable-rate mortgage (ARM), that offers low introductory interest rates, or what lenders call teaser rates, offered to attract new variable-rate consumer loans. Teaser loans offer extremely low-interest rates for a short period before adjusting to the normal ARM rate, but few guarantees on what loan rates will be in the future. When the introductory rate expires, the rates adjust, and customers begin to see high-interest rates applied to their balances and reflected in their monthly loan payments.
Other examples of teaser loans are HELOCs and credit cards with low introductory offers.

Teaser Rate

A below-market interest rate offered for a limited period on loans like adjustable-rate mortgages, HELOCs, and credit cards. Also known as an introductory rate.


A right of a tenant to temporarily occupy or possess a real estate that belongs to a landlord. The tenancy can be established for a specific duration under a lease agreement or can be without a predetermined duration.

Tenants in Common

A form of ownership of a real property where two or more people share the ownership of a property. Co-owners may have an equal or unequal share, however, when one owner dies, their share of the property forms part of the estate and does not pass onto the other co-owners. While similar to joint tenancy ownership, in that tenants in common each owns the property, they may own different proportions of interest.


The arrangements under which the household occupies all or part of a housing unit. It refers to the process, duration, or right to occupy the real estate property or hold the title of real property and conditions by which the property is occupied or held.

Tenure Annuity

A type of reverse mortgage monthly payment plan. The payment option allows seniors under a Reverse Mortgage to draw a fixed amount monthly for as long as they remain in their house.


A period of time until a loan or any type of deposit or fixed-income security achieves maturity. In the case of a mortgage, it is the length of time a borrower is committed to a mortgage rate, lender, and conditions set out in the mortgage agreement.
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. This lump sum payment due at maturity is known as the balloon payment. Also known as a straight loan.

Terraced House

A house in a row of similar houses attached to each other by their sidewalls.

Thin File

A term used in the credit scoring context to describe the credit report of someone with little or no credit history. New consumers like young adults and immigrants, may have a thin file if they do not have enough information in their credit history for a credit bureau to determine their credit score.


A conceptual term describing a bundle of rights in a piece of personal or real property in which a party may own either a legal or equitable interest. 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. The title is a term defining ownership rights over something, whereas deed is the official legal document.

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 the property, details the ownership of the property, and denotes the seller/grantor and the buyer/grantee.

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 fees are part of the closing costs a borrower pays when getting a mortgage.

Title Insurance

A form of indemnity insurance that protects buyers of real estate and issuers of mortgage loans from financial loss arising from covered defects in the title to real property. Title insurance protects new property buyers and existing property owners against losses as a result of title defects and claims against a property not uncovered in a title search. It also protects against encumbrances such as unpaid liens, encroachment issues, construction liens, defects in title, costs arising from building code violations, and real estate title fraud.

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 buyer, mortgagee, or otherwise. There are two types of title insurance: lender’s title insurance, known as a loan policy, and owner’s title insurance.
A lender’s title insurance policy protects the financial interests of the company that issues the mortgage. An owner’s title insurance policy protects the property buyer.

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 prepared prior to issuing a policy of title insurance that reveals any competing claims, liens, or other encumbrances relating to a property. The report describes the property that is for sale and outlines exclusions that would not be covered under the title insurance policy once it’s instated. 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. A clean title is required for any real estate transaction to be completed.

Total Debt Service Ratio (TDS)

The ratio of an amount equal to the annual debts, loans, the cost of servicing the property, and the mortgage 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. The total debt service ratio is a lending metric used by mortgage lenders to assess a borrower’s capacity to take on a loan. A TDS ratio below 40% is typically necessary to obtain a mortgage.


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 another real estate.

Transfer Tax

The tax paid when the title to the 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. An example of a transfer tax is the estate tax which entails the right to transfer property from the estate to an individual or entity after death. The capital gains tax and land transfer tax are other examples of transfer tax involving title transfers. Transfer taxes are also applied to legal deeds and certificates of title.


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 equitable ownership or management of certain property, and another person, the beneficiary, owning the legal title to that property. The trustee is the one who holds title to the trust property, and the beneficiary is the person who receives the benefits of the trust. A trust can be used to determine how a person’s money should be managed and distributed while that person is alive, or after their death.

Trust Account

A written instrument duly executed, sealed, and delivered, through which a legal entity, called a ‘trust’, is created to hold property or assets for the benefit of certain persons or entities. The owner, called the settlor, transfers the trust property to an intermediary, the trustee, to hold it for the beneficiaries.

Trust Agreement

A written instrument duly executed, sealed, and delivered, through which a legal entity, called a ‘trust’, is created to hold property or assets for the benefit of certain persons or entities. The owner, called the settlor, transfers the trust property to an intermediary, the trustee, to hold it for the beneficiaries.

Trust Deed 

An agreement in writing conveying property from the owner to a trustee for the accomplishment of the objectives outlined in the agreement. Trust deeds transfer the legal title of a property to a third party, such as a bank, escrow company, or title company to hold until the borrower repays their debt to the lender. A trust deed involves three parties: a borrower (or trustor), a lender (or beneficiary), and the trustee.


A person or institution that supervises property and assets in a trust. A trustee takes legal ownership of the assets held by a trust and assumes fiduciary responsibility for managing those assets and carrying out the purposes of the trust. . 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.
Trustees oversee several different types of financial situations, including trusts, bankruptcies, and certain types of pensions or retirement plans.


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

A mortgage product that allows several different credit facilities, such as a first mortgage, a line of credit, a car loan, and a credit card, to be secured under one “umbrella” charge. The umbrella mortgage allows the lender to maintain a right in the property not only for the borrowed amount of purchase but also for other current or future debts contracted with the same lender.


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.


A financial expert that evaluates and assumes another party’s risk for payment. Underwriters assess how much risk lenders will take on if they decide to approve a loan. The underwriter evaluates the loan application, including a borrower’s income, credit, asset information, and the appraisal of the home, and decides whether to approve or decline the application based on the risk presented by the loan. Underwriters are critical to the mortgage industry, insurance industry, equity markets, and common types of debt security trading because of their ability to ascertain risk.


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, unemployment compensation, rent, pensions, gifted money, 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 down-payment or earnest money, the inspection fee, legal 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 lender mortgage insurance 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 borrowing 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 fluctuates over time based on a specific benchmark or index rate changes.

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. This impacts the amount of principal a borrower pays off each month. 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. However, variable interest rate mortgage offers predictability, as the monthly mortgage payments remain the same during the mortgage term.

Variable Terms Mortgage

A mortgage that provides a variety 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 entity who is selling something.

Vendor’s Liens

A notice registered on a title by the vendor, protecting the vendor, for the unpaid balance of the purchase price. An unpaid vendor’s lien operates as a type of equitable charge giving the vendor full security in equity for payment of the agreed purchase price. It applies to freehold and leasehold property.

Vendor Take-Back Mortgage 

A type of mortgage in which the buyer of property obtains a loan from the buyer to secure the sale of the property. The vendor take-back mortgage enables the seller of the property to become the lender for the buyer. In a vendor take-back mortgage, the seller retains the equity or ownership portion of the property.

Warehouse Lending

A type of commercial asset-based lending. A mortgage lender receives a line of credit from a warehouse lender to fund mortgage loans to a borrower. With warehouse lending, the collateral is the loan documentation of a new mortgage loan from a mortgage lender who has committed the loan to resale or securitization in the secondary market. The warehouse lender advances a percentage of the mortgage to the mortgage lender so it can fund the loan at closing and then the advance is repaid when the mortgage is sold. The line of credit is set up as a revolving account that can be used perpetually as new mortgage loans are originated. The warehouse lender generates its profits through the fees and interest charged to the mortgage lender who earns its profits through loan origination loan and loan interest.

Warranty Deed

A document stating ownership of the property and disclosing encumbrances, liens, easement, and judgments. By a warranty dead in real estate, the seller warrants that they are the rightful owner of the real estate to be sold has a legal right to transfer the title, that the title 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 single loan issued by a financial institution to a borrower.  For example, a mortgage loan secured by real estate issued to a single borrower and serviced by the issuing lending institution. The lender can resell whole loans to investors in which case all of the contractual rights and responsibilities of the original lender pass to the investor. Whole loans are an alternative to securitization.

With Full Recourse

A loan contract provision meaning that a borrower or its guarantors guarantee to repay the loan. ‘With full recourse’ clause in loan contracts means that the lender can seize and sell any borrower’s asset to recoup its money in cases of default. A recourse loan allows the lender to pursue additional assets of the borrower who defaults if the balance of the debt surpasses the value of the collateral.

With full recourse loans, the borrower is 100% personally liable for the loan amount.

With Partial Recourse

A loan contract provision meaning a creditor has limited claims on the loan if a borrower defaults. The limited recourse clause in loan contracts allows a lender to enforce the charge on the assets but can recover only a limited amount of any shortfall directly from the borrower.

Without Recourse

A term meaning that one party has no legal claim against another party. ‘Without recourse’ clause in loan contracts means that a lender can seize and sell only the borrower’s assets (collateral) specified in the loan contract, to recoup its money in cases of default, but the lender cannot go after other borrower’s assets.

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. Working capital is a measure of the operational efficiency, liquidity, and overall health of a company. Also known as net working capital (NWC).

Wrap-Around Mortgage

A type of mortgage where the lender assumes responsibility for a borrower’s existing mortgage. It is a form of secondary financing for the purchase of a real property. Also known as “all-inclusive mortgage” allows a buyer to increase borrowing amount through either a second lender or from the home seller. The new lender assumes the payment of the buyer’s existing mortgage on the condition that they provide the buyer with a new, larger mortgage loan.


A formal legal command issued by a legal authority with administrative or judicial powers to a person or entity to perform or to cease performing a specific action or deed.


The return generated and realized on an investment over a particular period of time. In real estate, a yield is an estimate of future income on an investment. Expressed in percentages, it is 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 the 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.

Yield Spread Premium

The money compensation or commission paid by the mortgage lender to the mortgage broker or agent for selling an interest rate that is above the lender’s par rate for which the borrower qualifies. Yield-spread premiums are a percentage of the principal.

Zero Down Mortgage 

A type of home loan that does not require a down payment on the property purchase. The borrower obtains a mortgage for 100 percent of the purchase price. The borrower only requires funds to cover the transaction costs such as legal fees and any statutory charges.


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

A deviation from the set of rules a municipality applies to land use and land development, typically a zoning ordinance, building code, or municipal code.