Abandonment of Property – When a resident abandons a property with the intention of never returning.

Abstract of Title – Obtained from the Registry System of the corresponding province.  The abstract of Title gives a condensed history of the title to a piece of land.  The abstract records every instrument (mortgage charges, covenant, easement, etc.) affecting the title of that land shown in chronological order of recording.

Accelerated Weekly Payment – A repayment plan for mortgages where by the borrower makes four payments per month.  This causes the borrower to make 52 payments per year, rather than 48.  The extra four payments can significantly reduce the amount of interest paid over the term of the mortgage.

Acceleration Clause - A clause in a mortgage which allows the lender to demand payment of the outstanding loan balance for various reasons. The most common reasons for accelerating a loan are if the borrower defaults on the loan or transfers title to another individual without informing the lender. Other examples of the type of events are insolvency and failure to meet principal, interest or sinking fund payments.

Acceptance – When the borrower accepts the terms of the *commitment* sent by the lender.

Accredited Appraiser Canadian Institute:  AACI – The designation given by the Appraisal Institute of Canada.  It allows the person or company designated to conduct *appraisals* and/or consultations on various types of properties.

Accredited Mortgage Professional: AMP – Canada’s national designation for mortgage professionals.  The AMP sets out a national standard for mortgage professionals in Canada, and is issued by the Canadian Association of Accredited Mortgage Professionals (CAAMP).

Accrued Interest – Interest charges that have accrued over the time since the last interest payment date.

Action for Possession – A legal outlet available to a lender when a mortgage is in default.  It begins the process of the lender taking possession of a property under mortgage.

Action of Receiver – The legal process a lender takes when a mortgage is in default asking the courts to appoint a receiver who will take possession of the property under mortgage.

Action on the Covenant for Payment – A legal remedy available to a lender when a mortgage is in default.  It gives the lender the right to sue the borrower, regardless if the borrower has already sold the property.

Acquittance – The term used in Quebec for a discharge of mortgage.

Adjustable Rate Mortgage – See *variable rate mortgage*

Adjustment on Sale – Occurs when a property is sold.  An Adjustment on Sale is a pro-rated division and distribution of prepaid or accrued expenses relating to a property.  For example: prepaid/accrued taxes, prepaid insurance premiums, prepaid rents and more.

Adverse Possession – When someone occupying a piece of land attempts to acquire title against the real owner.  Adverse possession is possible if the occupant’s possession has been actual, continuous, hostile, visible, and distinct for a statutory period.  Adverse possession isn’t possible under *Land Titles* or when Crown property is involved.

Affidavit – A statement in writing and sworn to or affirmed before an officer who is authorized to administer an oath or affirmation.  For example, a notary public, or a commissioner of oaths.

Agency – An orginazation or company that employs agents.  An agency relationship is created when a principal authorizes an agent to act on their behalf.

Agent – An agent is authorized to represent and act on behalf of another person or company (the principal).  The agent acts as a third party working on behalf of the principal, unlike an employee who works directly for the principal.

Alberta Mortgage Brokers Association:  AMBA – Independent not-for-profit company serving the mortgage industry for Alberta.

Alienation Clause – an acceleration clause that demands payment of the entire debt amount upon the sale or transfer of the title of the property in question.

Amending Agreement – an agreement between lender and borrower where the lender changes the terms of a registered mortgage.  The amending agreement may or may not be registered on title.

Amortization – Refers to the process of paying off a mortgage in regular payments composed of interest and principal amounts.

Amortization Period – The time it takes for a mortgage to be completely repaid with equal payments.  Amortization periods vary from deal to deal, but the common period’s are 20 and 25 years.  In Canada the laws have recently been amended to allow for amortizations up to 35, 40, or even 50 year periods.

Amortization Schedule – A table outlining the amounts of principal and interest that each payment is comprised of.  Also shows the remaining principal outstanding for the loan after each payment is made.

Amortized Mortgage – A mortgage requiring regular payments which include both principal and interest sufficient to fully repay the loan by maturity.

Anniversary Date – One year from the first date that interest is adjusted on the loan and periodic repayments begin.  The same date each calendar year is the anniversary date.

Appointment of a Receiver – Legal remedy a lender can use when a mortgage is in default.  The receiver takes possession of the subject property, collects any rents owed, and pays any expenses as required.

Appraisal – A licensed third party that gives an unbiased report using various analysis techniques and market research to determine the realistic value of a property.  Appraisals are required by most lenders and the cost of approximately $300 is usually passed on to the borrower.

Appraisal Institute of Canada:  AIC – National organization that designates and represents professional real estate appraisers.  The AIC sets the standards, requirements, and testing necessary to earn the designation of Accredited Appraiser Canadian Institute (AACI) and Canadian Residential Appraiser (CRA).

Appraisal Report – An independent assessment of a property by an individual qualified and liscenced by the AIC.  The appraisal report lists relevant data on a property in question and gives an estimated value at a specific date.

Appraiser – A qualified professional who determines the market value of a house based on its condition and the selling price of comparable houses recently sold in the same area.  The licensing requirement for real estate appraisers varies from province to province.

Arm’s Length Transaction – A transaction between unrelated parties, hence at arm’s length.  An arm’s length transaction is freely arrived at in the open market and unaffected by abnormal pressures, which might be the case in a transaction between related parties.

Arbitration – The resolution of a dispute between two parties by a disinterested third party’s judgement.

Arrears – An overdue payment.  A “payment in arrears” can be referring to any payment that is over due, such as: a mortgage payment, a personal loan payment, income taxes due and more.

Assessment – A value placed upon property (land and buildings) for taxation purposes.

Assessment Roll - An annual list of the assessed values of all properties in a municipality. The assessment roll includes the name of the property owners or tenants and their addresses. Assessment rolls are usually delivered to a municipality before the end of the year. The term “roll” comes from ancient times and refers to the way information used to be stored - on paper or parchment, rolled up into cylinders.

Assets – Property and/or goods of value, either tangible or intangible, that a borrower (or business) owns.  (Also see Liabilities)

Assignee – A person (or legal entity) who takes the rights or title of another by assignment.

Assignment – The act of transferring rights from one party, the assignor, to another party, the assignee.

Assignment of Lease - The absolute or conditional transfer of the rights of either party to a lease.
Assignment of Mortgage - The transfer of ownership of a mortgage from one party to another.

Assignment of Rentals - A contract in which the borrower grants the lender the right to collect future rents on a given occurrence, normally default. This assignment is normally taken as additional security on rental loans.

Assignor - One who transfers or assigns the rights or title to another.

Association des courtiers et agents immobiliers du Québec (ACAIQ) - ACAIQ is responsible for administering the Real Estate Brokerage Act and regulations in Québec.

Assumable Mortgage - An existing mortgage that can be taken over (assumed) by the buyer of a property when the property is sold.

Assumption of Mortgage - The act of assuming liability for an existing mortgage on a property by the purchaser of that property. With builders’ loans, the assumption is usually evidenced by written agreement.

Attachment - The seizure of property by court order.

Attornment of Rents - A legal action available upon default of a mortgage. As a result, tenants are directed to pay their rents to the lender.

Automated Valuation Models (AVM) - Computer programs that provide real estate market analysis and estimates of value based on specific attributes of a property as well as sales information.

Balance Sheet – Sometimes referred to as a statement of an individual’s assets and liabilities.  More commonly known as a financial statement produced by companies that shows their assets, liabilities, and owner’s equity.

Balloon Payment – Any payment made that is above the regular payment amount.

Bank Act - The Canadian Bank Act regulates all Canadian banking activity conducted through a federally chartered institution. This includes banks, trust companies, loan companies, and insurance companies.

Bank Rate – This is the rate that the Bank of Canada charges on loans to the chartered banks.  The chartered banks and other lending institutions base their prime rate on the bank rate.

Basis Point – One, one-hundredth of a percent.  The term basis point is used to describe the change in percentages of various different kinds of debt instruments, including mortgages.  For example: “The customer needs 10 more basis points off the rate to be happy with the deal.”  This is saying that the customer is requesting 0.1% off of their mortgage rate.

Beacon Score- The name given to the credit score published by Equifax. Empirica Score is the name used by TransUnion.

Binder Insurance – A temporary form of insurance where the insurance company agrees to insure the party applying for insurance, while awaiting receipt and final action of the application for insurance.

Blanket Mortgage – A single mortgage that is registered against two or more individual parcels of real property.

Blended Payments – Regular mortgage payments combining interest and principal in one constant payment

Book Value of a Mortgage – The mortgage amount owing at a specific point in time.  Book value is determined by subtracting the amount of principal repaid from the original principal amount.

Breach of Contract - Failure, without legal reason, to perform any promise that forms the whole or part of the agreed terms contained in the contract.

Bridge Financing – A loan provided to borrowers to provide financing for the purchase of a new property, pending closing of the sale of their existing property.

Bridge Loan – A short-term, high interest loan intended to offset financial hardship until a long-term loan is available.

Brokerage – A company concerned with bringing parties together for the transaction of business (such as investments, real estate, mortgage financing, etc.) and the execution of contracts.

Broker – A person who acts as an intermediary between two or more parties in a transaction.  A broker, for a fee, arranges a transaction between a seller and buyer.  In the case of mortgages, a mortgage broker finds a lender for the borrower and submits all relevant information on behalf of the borrower to the lender.

Broker Fee – A fee paid to a mortgage broker for finding a lender to advance a mortgage to the customer.  In the private market, broker fee’s are paid by the consumer, in the “A market” (Banks and Credit Unions) the broker fee is paid by the institution.

Builder’s Loan – A loan that is designed for borrowers who need financing for construction projects.  The funds borrowed for construction loans are received in stages (or draws) during the building stage to protect the lender from construction abandonment

Builder’s Risk Insurance - Fire and extended coverage insurance for a building under construction. The coverage increases automatically as the construction progresses and terminates at completion.

Building Code - Regulations respecting the safety of buildings with reference to public health, fire protection and structural sufficiency.  All buildings must meet the minimum requirements set by the building code.

Building Scheme - A group of restrictive covenants attached to two or more lots. These covenants are set by a vendor or landlord. They detail restrictions for use and are agreed to by the purchasers or tenants as part of the purchase or lease.

Bundle of Rights - Legal rights with respect to real estate ownership which include the right to use, sell, lease, enter, or to give away the property, plus the right to refuse to take any of these actions.

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.

Canada Mortgage and Housing Corporation (CMHC) - A Crown Corporation which was initially created to administer the National Housing Act and is Canada’s only public sector mortgage insurer. CMHC is charged with administering government housing initiatives and works with community organizations, the private sector, non-profit agencies and all levels of government to help create innovative solutions to today’s housing challenges.

Canada Mortgage Bonds - Canada Mortgage Bonds (CMBs) are similar to Mortgage Backed Securities (MBS) in that Canada Mortgage and Housing Corporation guarantees the timely payment of interest and principal. However, an MBS has a disadvantage to investors since borrowers of the underlying mortgages can make partial or full prepayments of their mortgage principal. While consumers (borrowers) like this flexibility, investors do not like this unpredictability. The Canada Mortgage Bond program eliminates this cash flow uncertainty to investors, as CMHC guarantees both semi-annual interest payments, and the repayment of principal on a specified maturity date.

Canadian and British Insurance Company Act - The federal statute that governs federally incorporated insurance companies.

Canadian Association of Accredited Mortgage Professionals (CAAMP) - CAAMP is the only national organization representing Canada’s mortgage industry and administers the Accredited Mortgage Professional (AMP) designation.

CAAMP’s Code of Ethics - A code of conduct for CAAMP members designed to increase professionalism and decrease the likelihood of fraud.

Caisses Populaires – The Quebec equivalent of a credit union.

Canadian Residential Appraiser (CRA) - A designation awarded by the Appraisal Institute of Canada that grants those with the designation the right to valuate individual, undeveloped residential sites.

Capital Reserve Requirements - Specified amount of capital that is required for lenders to hold to back up the loans they grant. The amount is determined by government regulations.

Capped Rate Variable Mortgage - A variable rate mortgage which has a set limit as to how much interest rates can increase or decrease.

Cash Back - A mortgage feature that provides the borrower with cash back, as a percentage of the mortgage principal. Usually a cash back feature is used to cover closing costs.

Caution - A notice registered on title by a person claiming to have a proprietary interest (i.e. a right to call for or receive a transfer of charge) in land or in a charge (mortgage) of which he or she is not the registered owner. Cautions are registered to protect their interests. As a result, the registered owner of the land or charge cannot deal with the land or charge without consent of the cautioner.

Caveat Emptor – The equivalent of “Buyer beware". Buyers must examine the goods or property they are buying since they buy at their own risk.

Central Bank - A body established by the federal government of the country to regulate currency and monetary policy on a national / international level. In Canada, it is the Bank of Canada; in the United States, the Federal Reserve Board; in the U.K., the Bank of England.

Certificate of Occupancy (Permit) – A certificate showing that a property has been constructed under the authority of the issued building permit, has met all requirements of the building code, and is now suitable to be occupied.  The Certificate of Occupancy is provided by the municipality that the property resides in.

Cessation of Charge - The discharge of a mortgage registered under the Land Titles Act.

Chain of Title – This refers to the history of land owners for a specific property.  It is uncovered through the lawyer’s title search. See extent of title.

Charge  - The name given to a mortgage document when title is registered under the Land Titles System. Also known as Certificate of Charge.

Chattels - Movable possessions or personal property that are within a real property. (generally items that may be removed without injury to the freehold estate).

Chattel Mortgage - A mortgage given on chattels (movable possessions). This type of mortgage is usually given as collateral security to a mortgage on real estate. For example, there could be a chattel mortgage on hydraulic lifts and tools in an auto repair shop.

 Closed Mortgage - A mortgage agreement that does not permit the borrower to repay, refinance or renegotiate until maturity, without paying a penalty, unless otherwise stated in its terms.

Closing Date - The date on which a sale becomes final, funds are transferred from the purchaser to the vendor, and the new owner takes possession of the property.

Closing Process - The procedure of finalizing the sale, once the lender receives an accepted commitment.
Co-Applicant - One of two or more people applying together for a loan.

Co-Insurance - A sharing of risk between insurer and insured which depends on the relationship of the amount of the insurance carried versus the amount of insurance required at the time of the loss.

Collateral Mortgage - The mortgage registered to document collateral security.

Collateral Security - Security given in addition to the direct security and subordinate to it.

Commercial Properties - Properties that are used for commerce or trade (e.g. stores, office buildings).

Commitment - A letter or document issued by a lender reciting the basic terms of a loan which, when accepted by the borrower, forms a binding contract. The commitment may have conditions attached to it which must be met before the contract can be finalized.

Common Law - A legal system of principles and rules of action based on customs and common usages. It forms a major part of the law in many countries, especially those in the commonwealth, such as Canada. Common law developed from rulings by judges based on tradition, custom and precedent, with the idea being that there was a legal framework common to all cultures throughout time.

Common Mistake - Both parties make the same mistake in a term of the loan contract.
Completion Loan - The single disbursement of the total loan following satisfactory completion of the property.

Comparable Properties - Properties that contain similar characteristics to the subject property in an appraisal. Appraisals typically require three comparable properties. Comparables should have sold recently, be from the same or similar neighbourhood, be of the same style/age/condition, be of similar size and on similar lots. See Comparative Method of Appraisal.

Comparative Method of Appraisal - A method of appraisal that determines the value of the property based on the value of comparable properties.

Compound Interest - Interest charged not only on the principal sum but also on additional interest.  Basically compound interest is interest charged on interest.

Condition - A clause in the contract, which must be met to fulfill an obligation in the agreement.

Condition Precedent – A clause in a contract that outlines factors and/or events that must occur for the agreement to be binding.

Condominium - A property where the owners hold negotiable title to their own unit. At the same time they share with fellow owners the title and cost of operation of the common areas of the property making up the condominium.

Consideration - Consideration is defined as: “some right, benefit or profit accruing to the promisor or some forbearance, detriment, loss or responsibility suffered by the promissee”. In English it means; when dealing with contracts, the party enforcing the contract must have provided some benefit in return for the promise to complete the contract.

Contract – A legally binding agreement between two or more capable (or able minded) parties for consideration or value, to do or not to do a lawful act.  Contracts agreeing to do any illegal act are null and void.

Contract of purchase and sale - A contract for the sale of a property that outlines the complete duties of the promisor and the promissee in the real estate transaction.  Contracts of Purchase and Sale can have subjects (clauses) in them outlining specific events that must take place before the contract is legally binding.  An example of a subject would be a “subject to financing” clause.

Conveyance - The transfer of title in a property from one person or party to another.

Conventional Mortgage
A loan based on the credit of the borrower and on the collateral for the mortgage. A conventional mortgage does not exceed 75% of the market value of the property. This means that the borrower must have 25% or more available for the down payment.  Canadian laws have recently been amended to allow conventional mortgages to go up to 80% of the value of the property without the need for creditor insurance.

Convertible Rate - A convertible rate feature allows borrowers to fix the rate of their variable rate mortgage at any time without penalty.

Co-Operative – A form of real estate ownership where the individual owns shares of a corporation which owns the entire property/building.  The individual unit holders have the exclusive right occupy their unit, but technically they do not own the unit, they own shares of the corporation.

Co-Ownership - Occurs when the ownership of the whole property is divided between two or more individuals. Usually there is a written agreement between different co-owners in which the rights of each co-owner is described. Each co-owner may sell his or her right of ownership or dispose of it as he or she wishes.

Corporation - A separate legal entity which that has the rights and liabilities of an individual.  The owner’s of a corporation, or shareholders, have limited liability.

Counter Offer – A response to an offer already received.  The counter offer effectively rejects the initial offer and places the new, or counter, offer on the table for consideration.

Covenant - An agreement in writing contained in a deed and creating an obligation.  It may be positive, stating the performance of some action, or it may be negative or restrictive, forbidding the commission of some act.

Credit Report - A detailed description of an individual’s credit history.  The credit repot includes information provided by lenders concerning revolving accounts (credit cards, line of credit, etc.) and installment loans (car loans, personal loans, etc.)  The two major credit reporting companies in Canada are; Equifax and Transunion.

Credit Score – A number that represents the information found in an individual’s credit history.  The higher the number, the better the person’s credit score.  The credit score is determined by a person’s repayment history, late payment history, amount of debt extended, balance on revolving accounts, and much more.  Equifax’s credit score is referred to as the Beacon Score, and TransUnion’s is known as the Empirica Score.

Credit Unions – A credit union is a lending institution that is owned by its members or clients.  Membership usually comes about by the initial deposit the member/client makes, a portion of the deposit is held as the person’s ownership stake in the Credit Union.

Creditor - One to whom a debt is owed.  Visa is an example of a creditor.

Cross Default Clause - Mutual clauses in two or more mortgages, which state that a default under one mortgage constitutes a default under the other(s).

Damages - A financial remedy determined by a court to compensate one party for injury by another party. Damages are intended to restore the parties to the state that would have existed if the contract had been performed.  An example of damages would be; if the buyer of a property reneges on the purchase and sale agreement, the seller may be awarded damages by the court because they could have sold the property while they were waiting for the buyer to close the deal.

Debt Service Ratios- The ratios that are used to compare borrowers’ debts to their incomes to determine if they can afford loans.  Debt service ratios consider how much in monthly payments a borrower makes versus how much monthly income they have.  The Schedule 1 banks usually look for a Total Debt Servicing Ratio of 40% and a Gross Debt Servicing Ratio of 20%-30%.

Debtor - One who owes a debt.  For example, people with Visa card’s are debtor’s.

Dedication - The assignment of land by the owner for some public use and its acceptance for said use by authorized public officials.

Deed - A legal document in writing, duly executed and delivered, that expresses title or an interest in real property.

Default - Failure to fulfill contractual obligations.  A loan or mortgage is said to be in default when the borrower fails to make their payment(s).

Deficiency Judgement - A court order to pay the balance owed on a loan or mortgage if the proceeds from the sale of the security (collateral property) are insufficient to pay off the loan.

Deficiency Settlement - A monetary settlement by a mortgage lender (creditor) when the net proceeds under a Power of Sale or Judicial Sale is less than the lender’s total claim.

Demand Letter - A letter sent by the lender (creditor) to the borrower (debtor) demanding immediate payment of all arrears, together with all additional costs.

Demographic - A socioeconomic or similar factor that defines a certain group or area.  For example, a population divided into age groups would be characterizing the population based on age demographics.

Depreciation - The loss of value of an asset over time.  Usually depreciation is referring to a company’s land and/or equipment, but it can also be used for any type of asset.

Direct Comparison – A type of property appraisal, also referred to as the market data approach.  The Direct Comparison approach bases property value on the current selling prices of other properties with similar characteristics.

Discharge Document - Once the receipt (acknowledging the completion of payment) has been administered and registered to the title, it becomes the discharge document.

Discharge of Mortgage / Charge - A legal document executed by the lender, and delivered to the borrower when a mortgage loan has been repaid in full, releasing the borrower from all obligations and covenants contained in the mortgage agreement.

Disclose Defects - To make known current or past imperfections. Failure to disclose defects will not affect consent, but will have the same effect as a misrepresentation.  The selling real estate agent is usually the party responsible for disclosing any defects.

Disclosure Statement - A statement in writing, disclosing information about a specific loan and any potential conflicts of interest required under various consumer protection acts.

Doctrine of Estates - It is the legal concept that identifies the various rights to land ownership in common law countries.

Doctrine of Privity - The doctrine of privity states that only parties to a contract are entitled to enforce a contract; meaning that third party beneficiaries do not have the right to take legal action.  Also known as the “third party rule”.

Dollar Adjustments - These are estimates of the dollar amount allocated to each factor being compared to the subject property in an appraisal. For example a dollar adjustment would reveal how much extra a buyer would pay for a home with a finished basement compared to one with an unfinished basement. See percentage adjustment.

Dominant Tenement – The property which derives benefit from an easement over a servient tenement, as in a Right-of-way.

Double Up Option - A clause in an open mortgage contract, giving the borrower the option to double the amount (or frequency) of scheduled principal and interest payments.

Draft Mortgage Document - The purpose of this document is to specify all terms and conditions of the agreement. A lawyer must ensure its contents accurately list loan amounts, interest rates, proper legal descriptions, repayment contract and any other factors that affect the loan agreement. The draft mortgage document is a last check on the mortgage required by some lenders.

Draws - The stages in which the borrower receives a partial loan disbursement in a builder’s loan.  Usually, builder’s loans have a maximum of five draws or stages.  Also known as a construction loan.

Duress – Any threat that is used against an individual causing them to enter or not to enter into a contract that is contrary to their wishes or interests.  If duress is used to enter a contract, courts may find the agreement void and null.

Easement (Servitude) - An easement is granted by the owner of the property for the convenience, or ease, of the person using the property. Common easements include the right to pass across the property, the right to construct and maintain a roadway across the property, the right to construct a pipeline under the land, or a power line over the land. ...

Economic Life - The amount of time over which it is projected that a property or asset may profitably be used.

Economic Obsolescence - Loss of useful life and desirability of a property through economic forces, such as change in zoning, changes in traffic flow, etc., rather than deterioration.

Effective Gross Income (Income Property) - The annual income derived from a fully leased property, less an annual allowance for vacancies and bad debts (usually 75% of the Gross Income).

Effective Interest Rate (for Mortgages) - The actual rate that the borrower must pay on a loan after the effects of compounding are considered.  It is different from the nominal interest rate.

Egress - To go out, exit, or leave. It is used with the word "ingress" (to go in, enter) to describe the right of access to real property.

Electronic Funds Transfer (EFT) - The automatic transfer of funds from one account to another, completed electronically via computer. Mortgage repayments can be made electronically directly to the lender.

Emili by CMHC – automated mortgage loan insurance approval system. Emili has reduced the time it takes for Approved Lenders to have insured mortgages approved from days to seconds.

Empirica Score - The name of the credit score published by TransUnion.

Encroachment - An improvement or addition to a property, such as a wall, fence, or building that intrudes illegally upon a neighboring property.

Encumbrance – An outstanding lien or claim recorded against a property.  Also, any legal right to the use of the property by a person who is not the owner.

Equity (for Mortgages) – The dollar amount of a property that the owner does not have a mortgage on.  Calculated by subtracting the mortgage amount from the property value.  For example; if a person owns a $500,000 property and has a mortgage of $300,000, they have $200,000 worth of equity in the property.   

Equity Financing (Lending) - Investment in the equity in leveraged or unleveraged real estate by investors. These investors are usually institutional and may or may not have provided the mortgage financing.

Equity of Redemption - The borrower’s right to repay a loan that is in default and retain possession of the property.

Error and Omissions Insurance - Insurance for professionals to cover them in the event that they make mistakes and/or absences while acting on behalf of a consumer.

Escrow - A written agreement between two or more parties providing that certain instruments or property be placed with a third party to be delivered to a designated person upon the fulfillment or performance of some act or condition.

Estoppel Certificate – A legal certificate commonly issued by a condominium corporation. It indicates details of the project and is given to the purchaser or tenant. Delivery of the estoppel certificate prevents anyone from claiming a different set of facts at a later date.

Excel by Genworth Financial Canada - The automated mortgage insurance evaluation system of Genworth Financial Canada.  Similar to CMHC’s Emili.

Existing Mortgage - A mortgage that is already in-place when the subject property is being sold. The buyer may have the option of assuming the mortgage or taking out a new one, depending on whether or not the mortgage is assumable.

Expandability - This is a feature available in some mortgages depending on the institution.  It allows the borrower to increase the principal on a first mortgage at the lender’s agreed upon interest rate.  Some banks refer to this as an “umbrella mortgage”, meaning the bank places a charge on the property for higher than the mortgage amount, which gives them the option to lend additional funds that are secured under one charge on the property.

Expert Software – The dominating electronic mortgage delivery system software for the Canadian market.  Offered by Filogix.

Expropriation – When the government or local authority takes private property for public use, with fair compensation to the owner, through the exercise of the right of eminent domain.

Extended Coverage Endorsement - An endorsement that may be attached to fire insurance policies. It usually includes coverage against the risk of windstorm, hail, smoke, explosion, riot, civil commotion, damage by aircraft or vehicles and.

Extension Agreement - An agreement that extends a loan past the original maturity date.

Extent of Title- The quantitative factors that determine and affect ownership of land. The factors include boundaries, improvements, area of land, and more.

Exculpatory Clause - A clause in a contract that gives one party zero liability in the event of some default.

Face Rate - The interest rate stated in a mortgage document or other financial instrument, such as a personal loan or line of credit etc. Also referred to as the nominal rate.

Face Value - The face value of a loan is the amount of money the borrower promises to repay (at the specified rate of interest).

Fair Market Value - Fair market value, also referred to as market value, is the price reasonably expected to be paid for land when sold by a willing seller to a willing buyer after an adequate amount of time and exposure to the market.

Fee - The right of ownership of a property. In real estate, this is an interest in land capable of being inherited.

Fee Simple - The highest estate or absolute right in real property. In common practice, fee simple is thought of as absolute ownership.

Fellow of the Real Estate Institute (Appraisal Specialist) - Designation by the Real Estate Institute, the FRI(A) acknowledges quality and experience in appraisals and the valuation of properties up to triplexes.

Fiduciary - An individual or trust institution charged with the duty of acting for the benefit of another party as to matters coming within the scope of the relationship between them. The relationship between a trustee and a beneficiary is an example of a fiduciary relationship. The implication in this type of relationship is that the fiduciary must act solely for the other person’s benefit, because of the trust placed in him or her.

Final Order of Foreclosure - A judgement which relinquishes the borrower’s (defendant’s) equity of redemption and beneficial title goes over to the lender.

Financial Institutions Commission of British Columbia (FICOM) - An agency of the British Columbia provincial government that administers the Real Estate and Mortgage Brokers Department, the Credit Unions and Trust Companies Department, the Insurance Department and the Pensions Department.

Financial Services Commission of Ontario (FSCO) - FSCO regulates insurance, pensions, credit unions, caisses populaires, cooperatives, mortgage brokers and loan & trust companies in Ontario.

Finder’s Fee - A fee or commission paid by a lender to a mortgage professional for referring a mortgage loan.

First Mortgage - A mortgage that is registered before all others on title.  In the event of a default, the first mortgagee has first right to all funds generated from a power of sale or foreclosure.

Fiscal Year - A business’ operating year. Some companies do not use the calendar year for their bookkeeping but run over a 12 month cycle, beginning and ending at another point in the year.

Five Cs of Credit - The ability and willingness of a borrower to repay a loan is determined by five criteria:

Fixed Assets - Fixed assets are a long term asset. The value of fixed assets to a company lies in their use in producing goods and services, rather than in their sale value. Fixed assets wear out over time or otherwise lose their usefulness due to advances in technology; this is accounted for by using depreciation to account for their loss in value.  Examples of fixed assets are: land, building, and equipment.

Fixed Rate Mortgage - In a fixed rate mortgage the interest is determined at signing and is set for the term of the mortgage. Fixed rate mortgages are most desirable when current interest rates are low and they are expected to rise.

Fixtures - Chattels that have been attached to the land or building so as to lose their definition as chattels.

Forbearance - The waiving of a covenant in a mortgage document.

Foreclosure - A legal remedy for lender’s when there is default under any of the covenants in the mortgage. It removes the borrower’s equitable right to redeem.

Foreigners - In law, a foreigner refers to an individual who cannot read or speak the language used in the contract. Foreigners are bound to agreements if they understand the nature of them. However, if an agreement is fraudulently interpreted by another party for the foreigner, then the contract is void.

Freehold Estate - An estate, or interest in land or real property of uncertain duration, which is either of inheritance or for the life of the tenant. There are three (3) freehold estates, or interests: fee simple, fee tail and life estate.

Frustration - When unexpected events occur that render the contract impossible to be performed, the frustrated party is permitted to retract the contract without penalty.

Full Review - The most comprehensive type of appraisal, it includes a review of both the internal and external features of the property as well as an assessment of the neighbourhood and any factors that would affect the value of the property.

Fully Amortized Mortgages – A mortgage that is fully paid off at the end of the original amortization period.  This doesn’t usually happen as interest rates change from term to term, and unless mortgage payments are changed accordingly, the time it takes to pay off the mortgage changes with the different rates.

Fully Open Mortgage - An open mortgage that permits principal payments to be made in any amount, at any time, in addition to regular mortgage payment, with no penalties.

Functional Obsolescence (in Real Estate) - A loss of value over time due to some characteristic(s) of a building becoming less valuable as styles and/or technologies change. For example, a building with no central air conditioning will suffer from functional obsolescence as air conditioning becomes standard for new buildings.

Gale Date (for Mortgages) - The date that interest is charged and/or compounded on the loan.

Garnishment - The legal seizure of a debtor’s wages, cash flow or assets by creditors. The party served with notice must comply with the Garnishee Order and forward funds to the creditor(s).

Genuine Consent - For genuine consent both parties must have a clear understanding of the details of the contract in question. If there is no genuine consent an agreement may be deemed to be void.

Good Title - A proof of ownership that is free of any legal holds or claims.

Grant – A technical term used in deeds of conveyance to indicate a transfer of an interest or estate in land.

Grantee - The party to whom the interest in real property is conveyed (the buyer).

Grantor - The person who conveys an interest in real estate by deed (the seller).

Gross Area - The total floor area of a building.  Gross area is measured from the outside of the exterior walls.

Gross Debt Service Ratio (GDS) - The percentage of the borrower’s income that is needed to make all payments for costs associated with housing or property.  GDS includes property taxes and mortgage payments.  There is a maximum amount associated with this ratio to ensure that borrowers can afford to carry the debt, the banks guidelines usually require a GDS of 30% or less.

Gross Income (Single Family) - The total personal income for the year before deductions used in the calculation of an applicant’s debt service ratios.

Gross Leaseable Area - The total floor area designated for tenant occupancy and exclusive use and the area for which tenants pay rent. Does not include common areas.

Ground Lease - Contract for the rental of land, usually on a long-term basis.

Group Insurance - A type of insurance plan in which premiums are set for a large group as a whole, instead of individual premiums set on personal characteristics. All mortgage creditor insurance plans are group insurance plans.

Guarantor - One who promises to repay a debt or perform an obligation contracted by the original borrower in the event the original borrower fails to pay or to perform as contracted.

High Ratio Mortgage - A mortgage is considered high ratio when the loan-to-value is over 80%.  In other words, when the borrower’s down payment is less than 20% of the value of the property.

Highest and Best Use - The most probable, legal, and financially feasible use for the property in question. The appraiser includes an opinion on this as part of the appraisal report.

Holdback - The portion of loan proceeds that are not disbursed to the borrower at closing. The holdback will usually be disbursed to the borrower upon satisfaction of certain conditions relating to the holdback in the loan documents.

Home Equity Financing - A mortgage refinancing where the mortgage amount is increased to take advantage of the increased equity in a home, due to increased real estate value or the paydown of the mortgage, or both.

Household Formation – The overall assembly of a household.  A household can be made up of an individual, a couple, or either one of these with children. Generally mirrors growth, aging, and other demographic patterns of the general population.

Hypothec - The French version of the civil law term that corresponds to the common law concept of ‘mortgage’.

ICI Properties - Investment, commercial, and industrial properties.

Illegal Contract - A contract that involves criminal acts and is thus null and void. The parties involved have no standing in court.

Illiterates - In law, an illiterate refers to an individual who cannot read or speak English. Illiterate individuals are bound to an agreement only if they understand its nature.  If the agreement is fraudulently interpreted by another party, then the contract is void. See foreigner.

Immigration/Immigrant - To enter and settle in a country or area in which one is not native.

Immovable Property – In civil law, the term used for real property (as opposed to personal property).

Incapacity - The inability of people to engage in certain binding dispositions of their rights, such as entering into contracts.

Income Property - Real property that is used, or is capable of being used, for the production of annual income through leasing/renting of the property.  Also see Investment Property.

Incorporated Companies
A form of business ownership in which the business is set up as a separate legal entity under the laws of the jurisdiction it operates in (provincial and/or federal). When an incorporated company is a party to a contract it is important to determine if the company exists, and if it has the capacity to become a party to the contract.  One of the major benefits of an incorporated company is that the owner’s have limited liability.

Indefeasible - incapable of being annulled or rendered void, such as an indefeasible title to property.

Independent Mortgage Brokers Association of Ontario (IMBA) - A volunteer-based organization serving independent mortgage professionals in Ontario.

Industrial Property – A property that contains units or chattels that are designed for manufacturing, production and warehousing.

Infant - A person younger than the age of majority (varies among provinces and territories).

Inflation - A general increase in the price level of goods and services.  The Consumer Price Index (CPI) measures the level of inflation.

Ingress – Going in; right of entrance.  Also see Egress.

Injunction - An order of a court of equity prohibiting an act or compelling an act to be done.

Insanity - Categorized as a form of Incapacity which states that these individuals cannot engage in contractual agreements. If insanity occurs after entering a binding agreement, contracts can be cancelled or, if sanity is regained, a reasonable time is allowed to rescind a contract.

Instrument - A formal written legal document.

Insurable Interest – A financial interest of such a nature that the occurrence of the event insured against would cause financial loss to the insured. Such interests, for example, may be that of an owner, a lender, a lessee or a trustee.

Insurable Value - The term is used conventionally to designate the amount of insurance that may be carried on destructible portions of a property to cover the owner in the event of loss.

Intangible Assets – An intangible asset is something that does not have a physical form, but is useful and/or valuable to the business.  The most common intangible assets are goodwill and legal rights to a product.

Interest – An amount, usually as a percentage, which the borrower agrees to pay the lender for the use of borrowed money.  Interest can be paid in different frequencies, escalating percentages, and many other variations, depending on the agreement between debtor and creditor.

Interest Accruing Loan - This type of loan requires no payments on interest or principal until the end of the term. Once when the mortgage contract has expired all of the payments due.

Interest Adjustment - The process of calculating compound interest owed on the amount borrowed between the day the loan funds are disbursed and the day the amortization period starts.

Interest Adjustment Date - The date on which interest is calculated at the rate and compounded at the frequency stated in the mortgage contract. It is usually the first day of the month following the closing of the mortgage transaction.

Interest Factor - The decimal equivalent for an interest rate on an amount for a certain period of time.  The interest factor is calculated as the interest rate divided by the number of days in a year, times the number of days accrued.

Interest Only Loan – A loan where the borrower only pays the lender interest.  The principal remains the same during the life of the loan.  When the loan term is over, the borrower must repay the full amount of principal borrowed.

Interests Less than Estates, or Interests Less than Full Ownership - These describe the situation when a fee simple owner divides ownership according to the kind of use permitted or restricted upon the land.

Interest Plus Specified Principal Loan - This type of loan repays an equal amount of principal at every interest compounding period in addition to the interest that must be paid for that period.  Also referred to as a straight-line principal reduction loan.

Interest Rate – The interest rate is the percentage charged on outstanding loan balances.  Interest is essentially the fee the borrower must pay the lender for use of the borrowed funds.

Interest (Unities) - All joint tenants must have the same interest (extent, nature, duration) in the land.

Interim Financing (Construction Financing) - Interim loans are used to provide construction financing until the permanent loan can be funded.  This type of loan is usually extended in several phases, as the construction of the project progresses.

Intoxication - This is another form of incapacity in contract law.  See Insanity.

Investment Property – A property which is rented out to individuals who do not own the property, and pay rent to the owner of that property.  The owner of the property has an investment in that property, ideally they are making money on the rent income, building equity, and making a paper profit on the increase in the value of the real estate. The opposite of an owner occupied property.

Invitation to treat - An action or invitation from one party  to another to make an offer. It is not a contract. An invitation to treat may be seen as a request for expressions of interest.
Joint Tenancy – A form of co-ownership giving each tenant equal interest and equal rights in the property, including the right of survivorship

Joint Venture - An arrangement or agreement where two or more people or businesses go into a single venture as partners.
Judgement - The official and final decision/ruling of a court of justice upon the respective rights and claims of the parties to an action or suit being litigated and submitted to its determination.
Judicial Sale - A legal remedy available to a lender when a mortgage is in default.  A judical sale allows the lender to sell the property in default, and any excess money from the sale of the property over and above the mortgage debt is distributed to the borrower.

Junior Mortgage - A mortgage that is subsequent (junior) to the claims of the holder of a prior (senior) mortgage.

Known Defects - Problems associated with the title (property) that are known before the policy is taken out.  Known defects are required by law to be disclosed before purchase.

Land - Includes the ground and everything that is attached to the earth, whether by course of nature, such as trees and herbage, or by the hand of man, such as houses and other buildings. It includes not only the surface of the earth but everything under it and above it. Condominium Acts divide land horizontally thereby limiting the vertical ownership.

Land Titles System - This is a system of land registration under which the registrar, or master of titles, passes on the validity of the mortgage instrument, determines its legal effect, and the Government guarantees title.

Land-use Regulations - Municipal regulations that restrict and standardize the types of buildings and uses allowed on a property.

Late Charge - An additional charge a borrower is required to pay as penalty for failure to pay a regular installment.
Latent Defects - Present or potential imperfections or defects that are not readily evident or visible.

Lawyer’s Report (or Opinion) on Title - The Lawyer’s Report outlines the mortgage details, including the results of the title search, tax details, fire insurance and any other related insurance coverage details, verification that title insurance has been obtained (if applicable), and any other relevant facts (i.e. easements, restrictions, liens).

Lead Lender (Mortgages) - A financial institution that heads up a financial syndicate or group of two or more lenders to provide the funds to loan for a mortgage.

Lease – A contract between the landlord and the tenant, for the occupation and/or use of the landlord’s property by the tenant for a specified period of time and for a specified amount (rent).

Lease Guarantee Insurance - Insurance that protects the owner of commercial and industrial real estate that is being leased out from loss of rental income through the failure of a tenant to make payments.

Leasehold - An estate, or interest in an estate, in real property held by virtue of a lease for a term of a specified number of years. A leasehold is considered personal property.

Leasehold Mortgage - A mortgage given by lessees on the security of their leasehold interests in the land.

Legal Description - The written geographical description of a property (metes and bounds) as described in the land register.
Legal Intent – In order for an individual to be bound by a contract, that person must have intended, or had legal intent, to create a commitment.

Lending Value – Usually the lending value is the lesser of the purchase price or appraisal value.  The lending value is the property value for mortgage purposes.

Lessee – The party that has agreed to rent specified property from the Lessor.  In other words the Lessee is the tenant.
Letter of Instruction – A letter of instruction is a document instructing a lawyer to act on behalf of the lender and administer the distribution of funds for a mortgage loan.

Liabilities - A business’ or a borrower’s debts and legal obligations.

Lien - A claim on real or personal property for the payment of some undischarged debt or duty.  Lien’s are registered with the appropriate provincial or federal registrar.
Life Estate or Interest – An interest in real property that gives exclusive possession and/or use of the land to the individual holding the estate for the extent of their lifetime, after which title reverts back to the grantor or to a named third party.

 Limited-Restricted Appraisal - A type of appraisal that provides only an exterior inspection for transactions that are somewhat riskier than standard, e.g., in a new or unknown market, or in mixed use neighbourhoods but not high risk. Also known as a drive-by appraisal.

Liquidity - The ease with which an asset can be turned into cash.

Listing Agreement – When a house is being sold the listing agreement is the contract between the owner and real estate agent.  It sets out the conditions of the sale, including; the listing period, the desired sale price, and the commission percentage.

Loan Companies Act - A federal act that regulates all loan companies in Canada.

Loan Qualification - Also known as qualifying the borrower.  Loan qualification is the process of the lender verifying all of the borrower’s qualifications to ensure their eligibility for a loan.  Some examples the required information are: credit checks, income confirmation, and net worth statements.

Loan-to-Value Ratio (LTV) - The amount of the mortgage loan compared to the value of the property. This ratio is calculated by the lender prior to providing the loan. The results of this calculation help to determine whether or not the applicant will qualify for a loan and whether the application, if approved, will be for a conventional loan (LTV of 80% or less)or a high ratio loan (LTV of 81% or more).  Loan-to-Value is calculated because in the event of default, lender’s want to be able to realize their investment back, if they only loan 80% of a property they are more likely regain their principal through foreclosure or power of sale.  It is for this reason that the higher the LTV, the higher the risk for the lender, and subsequently, the higher the interest rate.

Long Term Liabilities - Debts and obligations (usually used for a company’s financial statements) that must be repaid over a long period of time, e.g. mortgages.

Lump Sum Payment Option – A clause in an open mortgage that gives the borrower the option to prepay a portion (usually a percentage of the original mortgage amount) of the principal.
Marketable Title - A title that may not be entirely clear but only has minor objections that a well-informed and prudent buyer of real estate would accept.

Market Data Approach – A method of appraisal. See direct comparison and methods of appraisal.

Market Value Appraiser (MVA) - This designation is awarded by the Canadian Real Estate Association to practicing realtors who meet specific experience and education requirements.  The MVA demonstrates an acute sense of local markets and values that enables them to provide realistic residential appraisals to lenders.
Maturity – When referring to a mortgage, Maturity is the end of the mortgage’s term.

Maturity Date - The final day in the term of the mortgage.  On the maturity date the balance of the mortgage owing becomes due.

Maximum Loan Amount - The maximum amount that a lender is willing to fund. It is expressed as a percentage of the value of the property to be purchased when using the loan to value ratio.
Metes and Bounds - A method of land description where all boundary lines are set out using terminating points and angles.  ‘Metes’ refers to a limit/limiting mark and ‘bounds’ refers to the boundary lines.
Methods of Appraisal
There are three appraisal methods:

Minor - A person younger than the age of majority (varies among provinces and territories).

Misrepresentation - A false statement of facts, generally occurring during negotiations prior to contract creation. Misrepresentation usually persuades the other party to enter into an agreement.

Moratorium – A period in a mortgage where a borrower has the right to delay fulfillment of an obligation.

Mortgage - A legal method which allows a borrower to pledge property to a lender as security for a debt.  In Quebec, a mortgage is known as a hypothec.

Mortgage Agent – A person authorized to deal with mortgages on behalf of a mortgage broker.

Mortgage Averaging – Mortgage averaging is used when calculating an “average” rate for a first and second mortgage, each of which has a different mortgage rate.

Mortgage Banker – A company (or individual) who originates a mortgage with the intent to sell the mortgage to a permanent investor.  The mortgage banker does this with the understanding that it will service these loans on behalf of the investor.

Mortgage-Backed Securities (MBS) - An MBS represents an undivided interest in a pool of insured residential first mortgages. As mortgages, these financial instruments are secured by the value of the underlying real estate. NHA MBS are insured by the CMHC Timely Payment Guarantee and represent an obligation of the Government of Canada.

Mortgage Broker – A person who searches for a mortgage loan for their clients.  A mortgage broker works on behalf of the customer, not the lender.

Mortgage Brokers Act - A piece of legislation that regulates the activities of mortgage brokers across Canada. In Ontario, for example, the Mortgage Brokers Act regulates the activities of mortgage brokers in that province.

Mortgage Brokers Association of British Columbia (MBABC) - A non-profit association of mortgage brokers serving British Columbia.

Mortgage Consultant - See mortgage agent.
Mortgage Creditor Insurance - This type of insurance protects the borrower (as well as the lender), by relieving the borrower of the need to make mortgage payments should unforeseen circumstances make it impossible for them to do so (e.g. serious illness or death).  Mortgage creditor insurance is technically Term Life Insurance with the lender named as the beneficiary.  In the event of a payout, the funds go to the lender and pay off the balance of the mortgage, hence the borrower doesn’t need to make any more payments.

Mortgage Fraud - Any material misstatement, misrepresentation or omission relied upon by a lender or insurer to underwrite, approve, fund or insure a mortgage loan.

Mortgage Originator - A mortgage professional engaged in the acceptance, completion and/or submission of the mortgage applications to an underwriting lender.

Mortgage Portfolio – The entire package of mortgage loans held by an investor.

Mortgage Refinancing - The replacement of current mortgage financing with new financing, usually to take advantage of different interest rate or financial conditions or the existing equity in the property.

Mortgage Representative - Employees of a financial institution which originates mortgages. Mortgage originators operating outside of lending institutions are regulated provincially, whereas institutional originators, if working for federally incorporated lenders, are governed under the Office of the Superintendant of Financial Institutions (OSFI).

Mortgage Servicing - The process of managing the administrative duties of a mortgage contract.

Mortgage Specialist
See mortgage agent.  The mortgage specialist term is frequently given as a title for “brokers” who work for a lending institution.  For example, a professional who seeks out mortgage borrowers for Royal Bank (and is employed by Royal Bank) is quite often called a mortgage specialist.

Mortgage Term - The length of time the interest rate is guaranteed for a mortgage. Mortgage terms normally range from 6 months to 5 years or more, after which time the borrower can either repay the balance of the principal owing or re-negotiate (re-finance) the mortgage at current rates.

Mortgaged Out - The situation existing when the total mortgage debt equals or exceeds the market value or cost of the property.  This usually occurs in some high ratio mortgages, although it is uncommon in Canada.  Due to the recent mortgage difficulties in the U.S. (where lender’s loan up to 125% of the value of a property) it is unlikely that this will become a more regular occasion in Canada.

Mortgagee - The lender or creditor.

Mortgagor  - The borrower or debtor.

Movable Property – This is the term used for personal property (as opposed to real property) in civil law.

National Housing Act (NHA) - A federal act, administered by CMHC, which was implemented to assist the private market in producing affordable housing to meet the needs of most Canadians.

No Cost Switching of Payment Option - This option or clause, allows the borrower to change the payment schedule (to either monthly/semi-monthly/bi-weekly/weekly) in an open mortgage at no charge.  Increasing the payment frequency of a mortgage is a great way to save money in interest charges and pay off the mortgage more quickly.

No-Doc - Meaning ‘no document necessary’ when a lender is confirming past income earnings of the borrower.

No-Fault - Title insurance claims are paid on a no-fault basis.  This means that the insurer cannot argue negligence in order to deny coverage.

Nominal Interest Rate - Also referred to as the stated rate. This is the rate used to calculate interest payments. It differs from the effective interest rate.

Non-Conforming Use - A property that is being used in breach of current zoning by-laws, but is permitted to remain used in that way,  because it pre-dates the enactment of these zoning by-laws.

Non-Disturbance Agreement - An agreement that allows the tenant under a lease to remain in possession regardless of any action by the lender.

Non Est Factum - Latin for “it is not my deed”.  Non Est Factum is a claim saying that the signature on a contract was signed without knowledge of its meaning or by mistake.

Offer to Purchase - A written contract outlining the terms under which the buyer agrees to purchase the property. There may be conditions or subjects attached to the offer, for example, the offer may be conditional or subject to the buyer arranging mortgage financing or selling a current home.  This is also known as a Purchase and Sale Agreement.

Offeree - The individual (or group) who receives an offer to enter into a contract.

Offeror - The individual (or group) who presents something a contract or offer to another party.

Open Mortgage – An open mortgage allows a borrower to repay any amount of the principal at any time without notice or penalty.  Mortgages may be partially open, having clauses that allow partial pre-payment at specified times, or in specified ways. For example:

Option Agreement - An agreement in which the seller has the right (option), but not the obligation, to agree to an action.  This act allows the offer to be kept open for a period of time under a separate contract.

Owner Occupied – When the owner of the land also lives on that property. The opposite of an investment property.

Par - An expression used when a mortgage is sold or purchased for the outstanding balance without premium or discount.  Selling or buying something at par indicates that you are paying the exact fiscal value.

Pari Passu – Means: “On an equal basis”.  When used in a contract, Pari Passu is referring to the equal rights of everyone involved.

Partial Discharge – When a specified portion of mortgaged lands are released from the mortgage.  A partial discharge may be given after the borrower has prepaid a specific portion of the mortgage debt.

Income Participation - The lender’s right to share in the annual income produced by a property over the term of the mortgage, in addition to receiving debt repayments on the mortgage.  This is a clause built into some mortgages.

Equity Participation – This is partial ownership of an income or investment property given by the owner to the lender as part of the consideration for making the loan.  It need not involve any equity investment by the lender beyond the amount of the mortgage loan.

Performance - The actions or clauses required by a contract or agreement to fulfill one’s obligations. Following the last act of performance, the contract is considered completed.

Percentage Adjustments – These are guesses at how large of a percentage change a different selling point of a property will make in the subject property value of an appraisal.  For example, a buyer might pay 10% more (calculated as a percentage of the selling price) for a home with a finished basement compared to one with an unfinished basement. See dollar adjustment.

Perfecting Title - The removal of any claims against a title.

Permanent Loan - An amortizing loan on completed property, which is intended to remain on that property over the full amortization period of the loan.  The terms and conditions of the loan usually change during that period.

Personal Property - Alternatively referred to as ‘chattels’.  Personal property is different  than real property.

PITH – Principal, Interest, Taxes, and Heat.  These are the four costs included in the calculation of the gross debt service ratio.

Plot Plan – This is a layout of improvements for a site, including location, dimension, and landscape.  It is usually part of the architectural plans.

Portable Mortgage - A mortgage with an option that allows a buyer to transfer their current mortgage to a new property (typically subject to credit approval and a property appraisal).
Possession (unities) - Each interest is an undivided interest in the whole of the property.

Postponement - The deferment of a prior charge on title to another.

Power of Attorney - A written document, duly signed and executed by an individual, that authorizes someone to act on his or her behalf, to the extent indicated in the document.

Power of Sale - A clause inserted in most mortgages giving the lender the right and authority, in the event of default by the borrower, to sell the mortgaged property by public auction, private contract or tender.

Premium - The amount paid in addition to the face value of a mortgage when a mortgage is being purchased.  The premium of fee is usually stated as a percentage.

Prepayment Clause - A clause inserted in a mortgage that gives the borrower the privilege of paying all or part of the mortgage debt in advance of its maturity date.

Prepayment Penalty - The sum of money (usually three months interest) a lender may require from a borrower to repay all or part of any outstanding principal in advance.

Prime Rate - The interest rate that financial institutions use when lending to their best customers.

Principal - The original amount of the loan.  Interest is paid on the principal amount.

Principal Risk – A risk to the lender, associated with interest only loans.  The risk here is that the market value of a property will fall, resulting in the principal amount of the loan which is due at the end of the term, being less than the value of the property.  In this case the risk is that if the borrower defaults, the lender will not be able to realize back the principal amount of the loan with power of sale or foreclosure.

Prior Charge - An encumbrance ranking above other, subsequent charges.

Private Mortgages - Mortgages that are provided by private corporations and individuals.
Promissee - The person who can enforce the promise in a contract is called the promissee.  Also called the lender.
Promisor - The person who makes the promise in a contract is called the promisor.  Also called the borrower.

Public Costs (Fraud) - These are costs that affect the consumer and industry, such as new authentication methods and protection procedures. See reputational costs and operational costs

Purchase and Sale Agreement - A written agreement between seller and purchaser in which the purchaser agrees to buy certain real property and the vendor agrees to sell subject property.  Purchase and Sale Agreements often have clauses/subjects, which are terms and conditions that must be fulfilled before the contract is binding.  For example; the most common subject in an agreement is “Subject to financing”, meaning the buyer agrees to purchase the property as long as they are able to obtain a mortgage.

Pur Autre Vie - A life estate, or interest, which is measured by the life of a third person rather than that of the person making use of the property.

Qualifying the Borrower - Also known as loan qualification. This is the process of determining what type of loan the buyer is eligible for.  Qualifying the borrower is also used to describe the process of obtaining necessary documents from borrowers, such as income proof, credit reports and more.

Quiet Enjoyment - The right of a tenant to use the leased property without interference from the landlord.

Quiet Possession - The right granted by a lender to the borrower to use the property without interference from the lender until there is default.

Real Estate - The physical land and any rights previously agreed to on that land including structures affixed on it.

Real Estate Act - In Alberta, an amalgamation of the Mortgage Broker’s Regulation Act and the Real Estate Licensing Act. It is administered by the Real Estate Council of Alberta (RECA).

Real Estate Automated Valuation System - A system that provides an estimation of the value of a residential property based on sales data and the nature of the property.

Real Estate Investment Trust (REIT) - An investment trust that specializes in investing in real estate related investments, including mortgages, construction loans and real property.

Real Property – Also known as “property”, “real estate”, or “land”.  Real property is defined as the interests, benefits, and rights inherent in the ownership of physical real estate.  It does not include personal property.

Reassessment - The process of creating a new base for property taxation by updating assessments to reflect more current values.

Receipt - A document acknowledging the completion of the repayment agreement under the terms of the contract and most importantly the release of the lender’s interest or charge in the property.

Receiver (Mortgages) - An appointee of the court, requested by a lender when the borrower is in default, to receive and account for the rents and profits from the mortgaged property.

Redemption - The duty of the lender, on being paid the principal, interest and costs due by the borrower, to hand to the borrower the title deeds together with an executed reconveyance of the mortgage property.

Registry System - The system of land registration where all interests in land are recorded in chronological order. The registrar assumes no responsibility for the legal effect of the document.

Release of Covenant - An agreement by a lender to terminate the personal obligation of a borrower, usually upon sale of a property to a new purchaser who is acceptable to the lender, and who has signed an assumption agreement or other appropriate legal documents releasing a guarantor whose covenant is no longer required.

Renewal Agreement - An agreement with which the lender may agree to extend the mortgage, often on revised terms for principal repayments and interest rate.

Rent - Periodic payments made by the tenant to the landlord in exchange for the use of their property.

Replacement Cost (Real Estate) - The cost of replacing a subject property with one having exactly the same utility.

Reputational Costs (Fraud) – The costs associated with potential damage to the reputations of the mortgage broker, lending organization, and mortgage industry. See operational costs and public costs

Rescission - The act of rescinding; in mortgages it is the cancellation of a contract and the return of the parties to the state in which they would have been if the contract had not been made.
Restrictive Covenant - A contract between two or more neighboring landowners restricting the use of one of the properties. It must be negative in nature.

Reverse Mortgage - This type of mortgage allows older consumers to convert their home equity into monthly cash payment(s), usually for living expenses. A homeowner’s equity is gradually drawn down by a series of monthly payments from the lender to the homeowner - the borrower. At the end of the loan period, or upon the death of the borrower, the loan balance is due, which is usually settled by the heirs who sell the property to meet the outstanding obligation.

Right of Survivorship (Real Estate) - The right of survivorship comes into effect when land is held in undivided portions by co-owners and one of them dies. In this instance, the deceased’s interest in the land passes to the surviving co-owner, rather than to the deceased’s heirs.

Right-of-way - The right to pass over another’s land according to the the easement.

Schedule I, II and III Banks – As defined by the Bank Act; Schedule I banks have shares that are widely held. Schedule II banks are more closely held. Schedule III banks are foreign bank branches of foreign institutions.

Seasonal Deficiencies - Work necessary to finish a property that cannot currently be completed because of seasonal or climatic circumstances.

Seal - A device used to produce an official stamp as a symbol of authority.  Also serves as evidence that a document has not been opened or tampered with.

Secondary Financing - Financing real estate with a loan(s), subordinate/junior to a first mortgage.

Secondary Mortgage Market - A market where existing mortgages are bought and sold between private investors.
Second Mortgage - A mortgage placed on real property that is already charged with one mortgage. The rand of charge of a first, second, third mortgage, etc. is determined by priority of registration (time and date).

Servient Tenement - The piece of land over/through which an easement runs.

Servitude - The term for easement in Quebec.

Severance (Real Estate) - The subdivision of a piece of land.

Sheriff’s Certificate - A signed document from the sheriff’s office certifying that there are no outstanding judgements against a specific piece of land.

Simple Interest - The cost of borrowing money, calculated by applying the interest rate to the original principal amount only. In contrast to compound interest, interest is not charged on interest.  For example, if one were to borrow $100 for one year at 10% simple interest, they would owe $10 in interest.

Skip Payment Option - This is an example of a mortgage clause that may be added to an open mortgage.  With this clause, the borrower has the option to skip a monthly payment without the mortgage going into default.

Specific Performance - An equitable remedy to compel performance of a real estate or mortgage contract according to the specific terms of the contract.

Standby Commitment - An agreement by a lender to provide a certain amount of takeout mortgage financing on specific terms in the future.  This commitment enables the borrower to arrange construction financing from other sources.  The commitment is issued for a fee and the lender is willing to disburse the committed funds in the event that a permanent loan on more favourable terms is not obtained.

Standby Fee - A sum of money given by the borrower to the lender to hold a mortgage commitment for a certain period of time. The fee is normally non-refundable.
Standing Mortgage - A mortgage that provides for equal, regular lump-sum payments of principal, usually quarterly, plus accrued interest.

Starter Home - A small, inexpensive home generally bought by singles or newlyweds, with the intent to sell in a few years and move into a larger more expensive home.
Statute Law – A law that has been passed by an Act of Parliament or by a provincial legislature.

Statutory Right of Way - A special type of easement granted by provincial legislation that permits a land owner, crown corporations or municipalities, to use another’s land.  An example of a statutory right of way is the right of a water authority to lay water pipe under an individual’s land.

Step Mortgage - A mortgage product that places a mortgage loan and a line of credit in one package, usually under one larger collateral charge.

Subject Property - The property that is being appraised.  Also can be the property that is being discussed or referred to in various legal documents.

Subordinate - Junior to, something behind another.

Subordination - The act of one party acknowledging by written recorded instrument that a debt due is inferior to the interest of another in the same property. Subordination may apply not only to mortgages but also to leases, real estate rights, and any other type of debt instrument.

Subprime Transactions – Terminology used to classify loans with a higher risk.  Subprime deals (also known as B and C deals) face a higher risk that the amount of money lent will not be repaid, compared to prime deals (also known as A deals).  Although the term “subprime” has received a lot of negative press lately, due to the mortgage crisis in the U.S., it is not as dangerous of a market (in Canada) as many people fear.  The key problems in the U.S. subprime market have arisen when lender’s loan up to 125% of the value of a property.  In Canada 125% loan to value is unheard of.

Subrogation - Replacing one person with another in regard to a legal right, interest, or obligation.  For example, when a mortgage holder’s sells his rights and interest to another, he is subrogating the mortgage.

Surety - The guarantee given for the performance of someone else.

Survey - A survey sets out the legal description of a mortgaged property, allowing confirmation that any building sits within the described boundaries of the land. Land boundaries, areas and improvements are determined and plotted on the survey. Surveys are also used for identifying easements.

Surveyor’s Certificate - A formal statement signed, certified, and dated by a surveyor giving the pertinent facts about a particular property and any easements or encroachments affecting it.

Syndication - A group of lenders that share in the principal disbursement of a large loan to spread risk or to comply with statutory restrictions on loan size.

Take-out Loan - A first mortgage loan that is committed and expected to be made upon completion of a property with the loan proceeds to be used to repay an interim or construction loan.

Tax Account – A bank account created by a lender to hold property taxes collected as part of the mortgage payments on behalf of the homeowner.  The lender will then remit the taxes to the municipality from this dedicated account.  Sometimes lender’s make it mandatory in their mortgages for the borrower to prepay property taxes with their mortgage, this way the lender cannot get stuck with property taxes in arrears, should the borrower default.

Tax Certificate - A certificate from the appropriate taxing authority giving the status of real estate taxes or other assessments affecting the property.

Tenants in Common - Ownership of a property by two or more people, each of whom has an interest in the property.  Tenants in common may have different shares in the property.  Unlike the case in joint tenancy, a tenancy in common does not end because one party chooses to sell his or her interest.  Instead, the purchaser simply becomes the new tenant in common.

Term - In a mortgage, term is the actual length of time for which the money is loaned.  The term is usually shorter than the amortization period.  At the end of the term the outstanding balance must either be refinanced at current market rates or paid off in full.

Term Mortgage - A non-amortizing mortgage under which the principal is paid in its entirety at the maturity date.  Also known as a straight loan.

Third Mortgage - A mortgage placed on real property which is already encumbered with a first and second mortgage. Determination of first, second, and third or subsequent mortgage is by priority of registration (time and date).

Time (Unities) - All joint tenants must receive their interests at the same time.

Title - The legal evidence that shows the rightful owner of land.

Title Fraud - A range of fraudulent activity regarding the ownership of property. One example of title fraud involves taking out a mortgage against a home that the fraudster does not own.  The fraudster assumes the homeowner’s name and credit history, but leaves with the loan proceeds.

Title Insurance Policy - A contract by which the insurer agrees to pay the insured a specific amount for any loss caused by insured defects to title of a property, for which the insured has an interest as purchaser, lender or otherwise.

Title Search - An search of public records to determine the state of title.

Total Debt Service Ratio (TDS) - One of the ratios used to determine whether or not a borrower is able to carry the debt load for a mortgage.  The ratio is calculated as the percentage of annual income required to cover housing costs (GDS) plus any other loans that an individual has, such as those resulting in credit card and car payments.  Lending institutions have a maximum amount associated with this ratio to ensure that borrowers can afford to carry the debt.

Trading Down – When someone moves into a smaller, less expensive home.  Typically, ‘empty nesters’ or aging people sell their existing homes and buy smaller homes with the aim of reducing the cost of home ownership and to help fund retirement.

Transfer of Charge - Assignment of a mortgage.

Trust Company - A commercial bank or other corporation that manages, holds, or invests assets for the benefit of others (its investors).

Trust Companies Act - A federal act regulating trust companies.  This was changed recently resulting in the closing of tax loopholes for trust companies.

Trust Deed - A written instrument duly executed, sealed, and delivered, conveying or transferring property to a trustee.  A trust deed usually covers real property.

Trustee - An individual who is given legal responsibility to hold property in the best interest of or “for the benefit of” another.
 
Underwriting - This is the process undertaken by lenders and insurers to verify the mortgage application information and supporting documentation submitted, make an assessment of risk on both the applicant(s) and the property, and approve or decline the mortgage loan.

Unenforceable Contract - Similar to void contracts, unenforceable contracts cannot be acted upon. Typically oral contracts are unenforceable.

Unilateral Mistake – When one party is mistaken while the other party is aware of it and makes no attempt to correct it.

Unities – Time, Title, Interest, and Possession.  In common law unities are the four conditions needed to create and maintain joint tenancy.

Title: All joint tenants must obtain their interest from the same document.

Time: All joint tenants must receive their interests at the same time.

Possession: Each interest is an undivided interest in the whole of the property.

Interest: All joint tenants must have the same interest (extent, nature, duration) in the land.

Usury Rate - The maximum legal rate of interest, discounts, or other fees that may be charged for the use of money.  Usually it is 60% of the principal of the loan.

Valuation Date - The date used for establishing the assessed value for all properties in a jurisdiction.

Variable Rate Mortgage - a type of mortgage where the interest rate varies with the prime rate.  It is the opposite of a fixed rate mortgage.  For example, a variable rate mortgage would have an interest rate of “prime plus 2%”.  If the prime rate was initially 6% and changes to 7% the interest rate for this mortgage would go from 8% to 9%.

Vendor Take-Back Mortgage (or Seller Take-Back Mortgage) - A mortgage in which the vendor uses his or her own equity to provide some or all of the mortgage financing in order to sell the property.

Vendor’s Lien - A notice registered on title by the vendor, protecting the vendor for the unpaid balance of the purchase price. It is usually collaterally secured by a mortgage.

Vendor’s Warranty - A guarantee that implies a home will be built in the appropriate way so that it is suitable for human habitation. If this guarantee is not met, the purchaser is entitled to damages for warranty violation.

Void Contract - A contract or agreement that has no legal force or validity.

Voidable Contract - A contract that has the capability of being made void by one of the parties involved but is valid until rescinded.

Writ - A form of written command in the name of sovereign, state, court, etc. issued to an official or other person and directing him or her to act or abstain from acting in some way.

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.

Zoning - The uses to which property may be put in specific areas, as specified by municipal authorities