Glossary

We know that buying a home can be stressful, but it's even more stressful when you don't understand the real estate lingo. No need to stress, we're here to help! Here you'll find a list of terms that will help you better understand both the buying and selling process and everything in between.

A

Accelerated Payments

A mortgage payment option where the payments are either paid every two weeks (bi-weekly) or every week (weekly).

Amortization

The gradual retirement of a debt by means of installment payments which often includes principal and interest.

Amortization Period

The length of time required to repay a mortgage by equal installments of periodic constant payments based on a set interest rate. The payments are typically a combination of principal and interest in blended amounts.

Appraisal

A formal, impartial estimate or opinion of value, usually written, of a specific and adequately described property, as of a specific date and supported by the presentation and analysis of relevant data pertinent to a property.

Assessed Value

The value assigned to a real estate property that is used to determine its property tax rate.

B

Balanced Market

A real estate market where demand from buyers is equal to the supply of properties.

Buyer's Agent

A real estate agent or broker that operates on behalf of a client buyer to help them find and purchase a property.

Buyer's Market

A real estate market where property supply is strong and buyer demand is weak.

C

Closing Costs

The total costs for the respective parties associated with a real estate or mortgage transaction. Closing costs are typically due on the closing date, which is the date at which the real estate or mortgage transaction is finalized.

Conditional Offer

A conditional offer sets out the terms of the sale such as the purchase price, the date of closing, the names of the parties, and the amount of any required deposit, but it also includes conditions that must be met within a specified period of time in order for the contract to be binding on the parties. These conditions could include a satisfactory home inspection or financing acceptable to the buyer.

Condo Fees

The monthly fee set by the Board of Directors and paid by a unit owner to the condominium corporation.

Contingency

A condition that must be met in order for a real estate contract to be finalized.

D

Debt Ratio

A comparison of the total monthly payments of a borrower’s debt to his or her income. It is used to determine whether the borrower can afford the debt obligation.

Down Payment

The part of the purchase price of real property the buyer pays in cash and does not finance with a mortgage.

Dual Agency

A situation where a real estate agent or broker represents the buyer and seller.

E

Equity

A measure calculated by taking the market value of a property and deducting the amount that is still owed on the mortgage, if any.

F

Fixed Mortgage Rate

A mortgage with an interest rate that is fixed for a certain amount of time.

Foreclosure

The legal process by which a lender takes possession and ownership of a property due to the borrower’s failure to comply with the terms and conditions of the mortgage agreement.

G

Gross Debt Service Ratio

A measure used by lenders to assess a borrower’s ability to carry the debt load for a mortgage. It is calculated as the percentage of the individual’s gross annual income relative to his or her annual mortgage payments, property taxes, condo fees (if applicable) and allowance for heat.

Guarantor

A person bound by a promise to pay a debt or perform the obligations of another individual.

H

Home Appraisal

The process during which a licensed appraiser evaluates different elements of a property to determine its fair market value. An appraisal is ordered by a mortgage lender.

Homeowners Association

An association with mandatory membership based on residence in a specific area or community.

Home Inspection

A visual examination of readily accessible interior and exterior aspects of a property in order to provide an opinion on the property’s condition as of the date of the inspection. The purpose of a property inspection is to look for signs that there may be problems with the property and to suggest any areas that should be looked at further by an expert.

i

Interest

A charge for a debt that is owed, usually calculated as a percentage of the amount that was loaned.

Interest Rate

The amount charged by a lender to a borrower for the use of borrowed funds and is calculated as a percentage of the principal

l

Landlord

A person or company who leases rights of real estate use to a tenant.

Lease Agreement

A written agreement between an owner (landlord) and a tenant under which the owner allows the tenant the right of exclusive use of the property for a specified time, rent and terms.

Lender

An individual or institution responsible for underwriting, funding and administering a mortgage loan and to whom real estate is pledged as security for the loan. This may include institutional lenders, non-institutional lenders, government lenders and private lenders.

Listing

A property for which the seller has entered into a written service agreement with a real estate brokerage to market his or her property for sale.

Listing Price

The amount of money that a property that is under contract with a brokerage may be advertised to the public and marketed through various listing databases by the brokerage.

m

Market Bubble

A temporary situation in the economy characterized by prices for a product becoming grossly inflated beyond its realistic value due primarily to excessive consumer confidence.

Market Value

The expected value of a property assuming that it has been exposed to an open real estate market for a reasonable period of time and the resulting real estate trade involves informed and willing buyers and sellers.

Mortgage

A legal agreement specifying the pledging of real property to a lender as security for a debt.

Mortgage Default

A borrower’s failure to fulfill his or her obligations contained in a mortgage agreement.

Mortgage Insurance

A credit risk management tool protecting the lender from losses due to default on the mortgage by the borrower. It is typically required when the loan to value ratio for the property is 80% or greater.

n

Negotiation

A form of dispute resolution that attempts to seek a satisfactory solution for all parties to a dispute that is based on the interest of each party as opposed to their specific position on the matter. Negotiations only involve those parties to the dispute.

o

Offer

The contract a property buyer will write for submission to a property seller. It contains the date of the offer, the description of the property being offered on, the amount of the deposit, the purchase price being offered, down payment and financing details, as well as the buyer’s name and address, and the name and address of the seller, subject-to clauses, conditions, closing dates, and any special requirements you want to impose on sellers.

Open Mortgage

A mortgage that can be paid off early without any penalties or fees attached.

P

Pre-Approval

An approval for a mortgage based on a borrower’s qualifications made in advance of a real estate purchase. A written pre-approval protects the borrower by specifying the mortgage term, interest rate and maximum amount of the loan. If mortgage rates rise, the borrower receives the pre-approved rate. If rates drop, the borrower receives the lower rate. However, the borrower must take possession of a property before the pre-approval expires. They typically are 60 or 90 days, but may be as long as 120 days for new construction.

Prime Rate

The interest rate charged by lenders to its most credit-worthy borrowers.

Property Insurance

A legal agreement which provides financial protection against most risks to property due to damage or destruction caused by specified perils such as fire, theft, vandalism.

Property Taxes

The annual amount charged each property owner by the municipality where the property is located. The amount is based on the assessed value of the property in relation to the municipal tax rate for that classification of property, as determined annually by the municipality. Property taxes fund the operations and services of the municipality.

q

Qualifying

The process of determining a prospective borrower’s eligibility for mortgage financing related to a potential real estate purchase.

r

Real Estate Appraisal

Realtor®

A registered trademark of The Canadian Real Estate Association (CREA). Real estate professionals are not required to be members of their local board, however only real estate professionals who are members of their local real estate board are authorized to use the REALTOR® term.

Refinance

The process by which a borrower seeks to discharge an existing mortgage in order to establish a new one. The new mortgage maybe with the same lender or a different lender. Some reasons that a borrower may consider refinancing a mortgage include obtaining a better rate, benefitting from different mortgage privileges, or experiencing better service or greater convenience.

Rental Agreement

A written agreement between an owner (landlord) and a tenant under which the owner allows the tenant the right of exclusive use of the property for a specified time, rent and terms.

Residential Property

A type of property that a municipality has designated for use as single family detached homes, townhouses, apartments, condominiums, and cooperatives that is or was used as a residence

Reverse Mortgage

A mortgage on a principal residence taken out by the owner who must be 60 years of age or older and that allows for a portion of the property’s equity to be converted into cash. No payments are made and the payments and interest accumulate against the equity in the property. The owner must continue to reside in the property for the reverse mortgage to stay in place.

s

Seller's Market

A real estate market condition where buyer demand is strong and property supply is weak.

Showing

A scheduled appointment for a real estate professional to view a property that is for sale to a prospective buyer.

Staging

The process of organizing the interior of a home to be more attractive to prospective buyers.

t

Tenant

A person or organization that contracts with a landlord to occupy a specific space for a defined period of time according to the terms of a lease

Title

A document that records the information about the land, such as the legal land description, municipal jurisdiction, ownership and registered interests.

Title Insurance

A type of insurance that protects the buyer and lender in case the seller does not have full lawful ownership of the property.

Total Debt Service Ratio

A measure used by lenders to assess a borrower’s ability to carry the debt load for a mortgage. The TDS ratio is calculated as a percentage of the borrower’s gross annual income relative to his or her total debt payments.

v w

Valuation

The process whereby the value of property is estimated or determined through various means.

Variable Mortgage Rate

A mortgage where the interest rate is periodically adjusted based on the prime lending rate typically set by the lender. When an interest rate change occurs payments may be increased or decreased.

x y z

Zoning

General rules applicable to all land use classifications in a municipality.