Glossary

A

abstract
A written account provided by the land registry office relating to the history of the title to a parcel of land.

accelerated payments
Borrowers can pay off their mortgage sooner and save interest by making weekly or bi-weekly payments, resulting in payments equivalent to 13-months over a 12-month period.

acceleration
A lender has the right to demand full and immediate repayment of the mortgage balance by using the due-on-sale clause, or, if the borrower defaults on the loan.

acceptance
This is when the offer or counter-offer within the Contract of Purchase and Sale is accepted by the other party.

addendum
A document or item of clarification attached to an offer or Contract of Purchase and Sale.

adjustable rate mortgage
See variable interest rates below.

adjustments
Adjustments are credits that the buyer and seller settle at the time of closing and may include property taxes, utilities and strata fees.

adjustment interval
The time between interest rate adjustment and/or monthly payment on an adjustable rate mortgage.

agency
When a person agrees to have a sales agent represent them in a third party business transaction the relationship is called an agency.

agreement for sale
The contract between a buyer (purchaser) and seller.

amortization
The paying off of mortgage debt, including principal and interest, over a set period of time via regular installments.

amortization period
The actual time it will take to pay off a mortgage in full, usually 15 to 40 years.

annual payments
Many lenders allow borrowers to make annual lump sum payments against the principal of their loan. Check with your financial institution.

annual percentage rate (APR)
APR is an interest rate calculated to reflect the cost of a mortgage at a yearly rate,

appraisal
An appraisal is an exercise to determine the value of property (not necessarily the purchase price) and is usually for lending purposes.

appraisal value
The estimate of the market value of the property.

approved lender
In Canada, CMHC authorizes certain lenders to make loans under the National Housing Act. An approved lender is required if you need mortgage loan insurance.

asking price
The price the seller is asking for a property, also known as the “list price”.

assessed value
For the purposes of establishing annual property taxes, this is the value attached to a property within municipality.

assignment
An assignment is the re-selling of rights to purchase a property as a pre-sale, before it is complete and ready to be occupied.

assumption agreement
When a buyer assumes responsibility for the obligations of a mortgage by the original owner/builder a legally binding assumption agreement is drawn up.

assumption of mortgage
When an individual takes title to a property assuming liability for the existing mortgage.

B

balance on completion
The total amount, after adjustments that the buyer must provide to the seller to complete the purchase of property.

blended payments
The division between principal and interest within each mortgage payment which fluctuates during the amortization period (while the total remains constant).

borrower
A person who applies for and receives a mortgage (loan).

bridge financing
Bridge financing is common during real estate transaction and covers financial obligations should the closing date of the home being sold not match the date of the home being purchased.

British Columbia Real Estate Association (BCREA)
BCREA represents real estate professionals in the province.

broker
A person licensed to trade in real estate;ay also be a person who assists in arranging funding for a client in exchange for a fee or commission for services.

brokerage
The real estate company under which a real estate agent (representative) is licensed.

building envelope report
A report issued by an engineer that discusses the stability of the exterior of the building.

building permit
Before a building may be erected or added on to, a municipal building permit is usually required.

buyer’s agent
A person, firm or brokerage representing the buyer in a real estate transaction. Also called a buyer’s broker or purchaser’s agent

buyer brokerage agreement
A legally binding written agreement outlining the relationship and compensation structure between buyer and buyer’s agent.

C

Canadian Mortgage Housing Corporation (CMHC)
The federal corporation that administers the National Housing Act, also providing mortgage insurance to lenders.

Canadian Real Estate Association (CREA)
CREA is a national organization representing the real estate industry on federal and policy matters while providing member services and educational opportunities.

cash flow
The amount of cash expected to be generated by a revenue producing property. Ideally, cash flow will be enough to cover expenses such as mortgage payments, maintenance and repairs, utilities, etc.

caveat emptor
Means “buyer beware” or “at your own risk”, a reminder to evaluate any potential purchase carefully, prior to making an offer.

chattel
Personal property, as opposed to “real” property.

civic address
The number and street name which has been assigned to a residential, commercial, industrial or institutional building.

client
The person represented by a particular sales agent. A client is afforded the utmost care, professionalism and confidentiality. The client may be the buyer or the seller.

closing costs
In addition to the purchase price of real estate property, closing costs include the costs of legal fees, transfer fees, taxes and disbursements.

closing or completion date
On this date, the title of the property is transferred from the seller to the buyer by a notary public or lawyer, and the funds are transferred.

closed mortgage
A closed mortgage cannot be prepaid or renegotiated before maturity except according to its terms.

collateral mortgage
Securing a mortgage loan via promissory note the funds of which may be used to purchase property, renovate or used for another purpose.

commission
The fees paid to a real estate agent by the seller upon completion of a sale, usually derived by calculating a percentage of the selling price.

commitment
A promise by a lender to loan to a builder or borrower based on specific terms and conditions.

comparative market analysis (CMA)
A CMA is a report showing homes that have recently sold, been on the market or been removed from the market of a comparable value.

condition
A condition, subject or clause is a stated situation that must be satisfied or completed prior within a certain time frame prior to closing a real estate transaction.

conditional offer
This offer to purchase is subject to conditions within a stipulated time frame which may relate to financing, the sale of existing homes, or other matters.

condominium
A stratified form of housing in which the owner has title to a dwelling but shares common ownership of areas such as grounds, elevators and lounges.

construction loan
Provides funds pertaining to the construction of buildings and homes, usually paid to the builder in installments relating to progression of construction.

content policy
The amount of household items that are covered by a home insurance policy.

contract
A legally binding agreement between two parties or people relating to a sale.

contract of purchase and sale
This is the legally binding contract between buyers, sellers and their agents which outlines the terms of the purchase or sale of any real estate.

cooperative
A cooperative is a legal entity that owns property which consists of one to four residential buildings.

covenant
An agreement within a deed stipulating an existing obligation or restriction pertaining to the property.

conventional mortgage
A mortgage that does not exceed 80% of the purchase price of the home. Mortgages that exceed this limit must be insured against default.

counter offer
An offer made in return by one who has rejected an unsatisfactory offer.

creditor
A person holding credit, to be paid back by the debtor.

D

date of completion
On this date, the title of the property is transferred from the seller to the buyer by a notary public or lawyer, and the funds are transferred.

debt services ratio
A calculation used to determine the gross annual income required to cover payments related to a debt or mortgage within the context of other living and housing expenses. Gross debt service should not usually exceed 30%.

deed
A document which authenticates title or an interest in real estate property.

deed tax
The fee paid for the transfer of a title or deed from seller to buyer.

default
Failure to abide by the terms of a legally binding agreement such as a mortgage (defaulting or failure to make good on a loan payment, for example), also known as delinquency.

deposit
The sum of money deposited in trust by the buyer when making an offer to be held in trust by the vendor's agent, broker, lawyer or notary until the closing of the transaction.

detached
When referring to real estate, “detached” simply means a free-standing residential property or home.

disbursements
These are standard fees paid on the buyer's behalf by a notary or lawyer to cover expenses such as registration of title, plans and certification.

discharge of mortgage
To pay off the full amount remaining of a mortgage.

down payment
The money that a buyer pays up front for a house, typically ranging from 10%-25% of the total value of the home.

dual agent
A broker is acting as a dual agent when both buyer and seller are the broker’s clients on the same transaction.

E

easement
A legal right obtained by another party for access over, through or via a person’s property and registered as such, usually pertaining to a driveway or utility.

encroachments
An intrusion of a building, improvement or an object from one piece of land onto another piece of land. Common encroachments can include trees, fences, walls, driveways and garages.

encumbrance
A registered claim against a property usually pertaining to a debt/mortgage.

equity
The financial difference between fair market value and the current debt owed on a property.

escrow
A third party who handles the documentation of a property settlement or closing of sale. May also refer to an account for payment of tax or insurance relating to a property purchase.

F

fee simple
The law recognizes this form of ownership in real estate as the highest form with full entitlement to enjoyment of the property, limited only by zoning laws, restrictions or covenants.

financial institutions
Institutions providing funding for real estate transactions include banks, credit unions, trust companies, etc.

firm offer
An offer that has no conditions attached to the offer to purchase.

fixed rate
A mortgage for which the rate of interest is fixed for a specific period of time, known as the term.

foreclosure
When a property is sold by the lender to pay a debt defaulted on by the borrower/owner.

form B
This Strata Management document is requested by the seller, for a fee and forwarded to the prospective buyer for review, prior to purchase.

freehold
Used to describe the full ownership of a property belonging to an owner, without limitation of time.

G

GE Capitol Mortgage Insurance Company
The only private sector provider of mortgage insurance to Canadian lenders.

gross debt service
The total amount of funds required to pay principal, interest, taxes and strata fees/expenses (if applicable)

goods and services tax (GST)
GST of 5% is Payable on newly constructed or substantially renovated homes. For new homes priced under $450,000 before GST, there are rebates to apply for.

guaranty
A promise by one party to pay a debt or fulfill an obligation on behalf of another party if that original party defaults.

H

high-ratio mortgage
When a buyer has less that 20% down payment they must apply for a high-ratio mortgage and carry mortgage insurance.

holdback
An amount of money held by the lender as insurance against construction quality. Usually 10% of the total cost of the building project is held back pending satisfactory inspection of construction.

home equity
The financial difference between fair market value and the current debt owed on a property.

I

increase to regular payments
Pertaining to a mortgage, allows for payments to be applied directly to the principal. Varies by institution and mortgage agreement.

interest
The cost of borrowing money, usually stipulated as a percentage (interest rate) of total borrowed over a set period of time and paid to the lender in installments.

interest rate
Expressed as a percentage, this is the value of a loan’s cost to the borrower, payable to the lender.

interest rate increase protection
Protects the interest rate a borrower was quoted even if the rate is higher upon closing, however, if the interest rate is lower, the borrower will pay the lower rate. Usually IRIP is valid for 60 – 90 days, depending on the lending institution.

interest rate differential amount (IRD)
IRD is a charge that may apply to compensate for paying off a mortgage principal prior to the maturity date or paying down the principal beyond an institution’s prepayment privilege amount.

interim loan or interim financing
Similar to a construction loan, provides funds required to construct a new building, usually be way of disbursements to the builder as the project progresses.

investor
An investor is a money source or provider with a vested interest in a project.

L

Land Title and Survey Authority of BC (LSTA)
LSTA is an independent corporation responsible for managing the land title and survey systems of BC.

land transfer tax
See property purchase transfer tax

lease
An agreement between a landlord and a tenant for the use of property for a specified time.

leasehold
The owner of a leasehold property has a right to occupy the land for a given period of time, often measured in decades or up to a 99-year lease.

leasehold mortgage
A mortgage or loan on a dwelling which is situated on leasehold property.

lending value
The market value or purchase price of a property, whichever is less.

lien
A right, given to a creditor over a property until such a time as a debt is discharged.

listing
A written agreement between an “Agent” and a “Home Owner” that allows the licensed sales person to market and arrange the sale of the owner’s home. The home for sale is also often referred to as a listing.

list price
The price the seller is asking for a property, also known as the “asking price”.

loan to value ratio (LTV)
A calculation used to describe the size of mortgage as a percentage of the property's value; a key risk factor used to qualify borrowers.

M

maturity date
The date at which a mortgage term ends. The mortgage must then be paid in full or a new term established through renewal.

market value
The value of a property within the current market, specifically the highest price a buyer would pay and/or the lowest price a seller would accept.

mortgage
A loan by a lender (mortgagee) to a property owner (mortgagor) where the property itself is provided as security (collateral).

mortgage broker
In addition to banks, mortgage brokers can arrange mortgage financing for a buyer for very competitive rates.

mortgage term
The number of years or months over which borrowers pay a specified interest rate. Terms usually range from six months to 10 years.

mortgage life insurance
Mortgage protection life insurance will pay off a borrower’s mortgage in case of death while the mortgage is not fully paid.

mortgage loan insurance
Mortgage loan insurance protects lenders from payment default and may be required if a borrower’s deposit is less than 20 percent.

mortgage payment
The interest rate, term and payment schedule will determine how frequently and how much borrower’s pay against a mortgage loan.

mortgagee
The lender or creditor in a mortgage agreement.

mortgagor
The borrower or debtor in a mortgage agreement.

Multiple Listing Service (MLS)
The Multiple Listing Service or MLS is a public Canadian database offering real estate listings and sales information.

N

National Housing Act (NHA) loan
A type of mortgage loan that is insured by CMHC.

net worth
A way of measuring real value that is usually the difference between an individual’s assets and liabilities. Net worth may be positive or negative.

O

offer to purchase
An offer to purchase is made by a potential buyer to a seller, usually in the form of a Contract of Purchase and Sale

open mortgage
This type of mortgage may be paid off prior to maturity without penalty.

option agreement
An agreement which gives a certain individual the first opportunity to purchase a property within a set period of time.

P

parcel identifier numbers
A unique sequence of numbers used to locate and identify a property; also called PID

permanent loan
Also known as an end loan, this is an extra long-term mortgage, with a term of 10 years or more.

PIT
Relating to mortgage payments, this includes: principal, interest and taxes.

PITH
Relating to mortgage payments, this includes: principal, interest and taxes and heating.

PITI
Relating to mortgage payments, this includes: principal, interest and taxes and insurance

portability
An option on mortgages that lets the borrower transfer their current mortgage to another property without penalty.

possession date
The date after closing on which keys are officially given to the buyer.

power of attorney
A person that has delegated legal authority to act on another’s behalf.

pre-approval or pre-qualifying mortgage
The process of going to a lender, before finding a home, to determine the size of mortgage available to a borrower, based on income, credit history, net worth and other factors.

prepayment
Making payments on a mortgage or loan in advance of their due date.

prepayment penalty
A fee applied for early repayment of a mortgage or loan debt.

presale
A property that is sold prior to construction.

principal
The amount of money borrowed via a mortgage before calculating interest.

property disclosure statement
Seller’s document disclosing all information pertaining to the sale of the property.

property taxes
Taxes that are paid yearly on real property, based on the assessed value of the real property

property purchase transfer tax
A sales tax paid by the buyer to the Province of British Columbia on the purchase of real estate. If the fair market value is $200,000 or less, the tax is 1% of the fair market value. If the fair market value is greater than $200,000, the tax is 1% of the fair market value up to $200,000, plus 2% on the portion of the fair market value that is greater than $200,000.

purchaser’s agent
The sales agent or broker representing the buyer or purchaser. The purchaser’s agent is in primary allegiance with the buyer.

R

real estate board
A locally based non-profit organization representing real estate agents, brokers and sales professionals.

real estate broker
An individual who represents an owner in a real estate transaction.

realtor
A title often used interchangeably with licensee, real estate agent, or salesperson. In BC, a realtor must be licensed under “The Real Estate Act.”

refinance
To obtain new financing/mortgage on an owned property used to replace existing loans or financing.

registered strata plan
The official plan of a building that shows measurements of the each suite within the building.

renewal
The process by which a mortgage is extended for a subsequent term. Rates, length of term and conditions may or may not be adjusted during renewal.

S

salesperson
A professional who is employed by a broker and authorized to make real estate transactions.

second mortgage
A mortgage loan placed subsequent to an existing one and subordinate to it.

security
In most cases, property is used as security and collateral against a mortgage loan.

seller’s agent
The broker or agent representing the seller usually as the listing agent or cooperative sub-agent.

showing
The examination of a listing (home for sale) to a prospective buyer by the seller’s or buyer’s agent.

statement of adjustment
A balance sheet pertaining to a real estate transaction which lists balance due upon completion, credits to the vendor including purchase price, prepaid taxes; plus credits to the buyer such as deposits.

strata corporation
Condominium and some housing developments are run by a “strata corporation”, responsible for providing and paying for all equipment and services in the common areas. Each owner of a strata lot or unit has a vote in the corporation.

strata fee
A share of maintenance fees charged to owners by strata corporations to cover ongoing cost of maintenance and expenses.

strata title
In legal terms, the owner of a condominium unit owns a strata title property.

subjects
Written conditions included in a contract that must be satisfied in order for the contract to be fulfilled.

subject removal
The removal in writing, of a subject (or condition clause) within the Contract of Purchase and Sale, by the party that it was intended to satisfy.

survey
A survey is an official measurement of land, conducted by a registered land surveyor.

T

total debt ratio
A percentage of gross monthly income required to cover all monthly debt payments including mortgage, car payments, etc.

term
see mortgage term above.

title
The combination of elements that constitute a legal right to own, possess, use, control, enjoy and dispose of real estate.

title insurance
Insured statement of the condition of title or ownership of real property.

title search
A review of all recorded documents affecting a specific parcel of land to determine the present condition of title by an experienced title officer or attorney.

V

variable interest rate
A common approach to mortgages with an interest rate that fluctuates with the current cost of money and is subject to adjustment if the prevailing rate moves up or down.

vendor-take-back mortgage
A seller may choose to provide all or a portion of financing to the buyer as a condition of sale.

verification of deposit
A document provided by a debtor’s financial institution to verify their financial status relating to accounts.

verification of employment
A document provided by a debtor’s employer to verify status, length of employment and salary, often used to determine credibility for mortgage loans.