Glossary Of Mortgage Terms

AMORTIZATION
The gradual reduction of a debt by means of a regular payment. Repayments of principal and interest in "blended" amounts. The normal amortization period for a mortgage in Canada is 25 years, but can be as short as 5 years or as long as 25 years.

APPRAISAL
Lenders require an independent assessment of the value of the home you are buying before agreeing to finance the purchase.

ASSESSED VALUE
The value placed on land and buildings by a government agency for tax purposes.

ASSESSMENT
A tax or charge levied on property by a taxing authority to pay for improvements such as sidewalks, streets, and sewers.

ASSETS
What the borrower owns. This could include real estate, savings, vehicles, RRSPs, GICs, stocks, bonds, household goods, etc.

ASSUMPTION (of mortgage)
Buyer assuming responsibility of seller's existing mortgage at the interest rate and terms as laid out in the original mortgage documents.

ACCELERATION CLAUSE
A clause in the mortgage document which accelerates the maturity date and states that upon default, the principal sum of the mortgage and accrued interest falls due.

ACCRUED INTEREST
Interest which has accumulated unpaid since last payment date.

ADD-ON INTEREST
An interest amount added to the principal of a debt and made payable as part of the debt , usually in equal periodic installments (also called Pre-calculated interest).

AFFIDAVIT
A statement of declaration in writing and sworn or affirmed before an authorized individual, such as a notary public.

AGENCY
A relationship which arises out of a contract, where an agent is authorized by a principal to engage in certain acts, usually in dealing with one or more third party(s).

AGREEMENT OF PURCHASE AND SALE
A written contract to buy property in which the purchaser and vendor agree to sell upon terms and conditions as set forth in the agreement.

AMORTIZATION
The actual number of years it will take to repay a mortgage loan in full. Generally up to 25 years is available.

ANNIVERSARY DATE
The occasion of one year from an event pertaining to a mortgage. (Eg. Registration date or interest adjustment date).

APPRAISED VALUE
An estimate of the value of the property offered as security for a mortgage loan. Usually completed by an independent accredited appraisal firm.

APPURTENANCE
Something which is outside the property itself, but belongs to the land and is joined thereto; eg. a road over another's land providing an access (right-of-way) is an appurtenance.

APR (Annual Percentage Rate)
The yearly interest percentage of a mortgage as expressed by the actual rate of interest paid given the term, rate, amount and cost of arrangement.

ARM (Adjustable Rate Mortgage)
A mortgage for which the interest rate is adjusted periodically according to movements in a pre-selected index (i.e. Prime Rate).

ARREARS
To be in arrears is to be behind in the payments called for under a mortgage agreement.

ASSESSED VALUE
An amount assigned to taxable property, for the purpose of calculating property taxation.

ASSIGNEE
One who takes the rights or title of another by assignment.

ASSIGNMENT OF MORTGAGE
The assigning of a mortgagee's interest in the mortgage to a new mortgagee.

ASSIGNMENT OF RENT
The redirection of rental income to a Mortgagee, usually in the event of default.

ASSIGNOR
One who transfers or assigns the rights or title to another.

ASSUMPTION AGREEMENT
A document which binds someone other than the mortgagor, to perform mortgage obligations.

ASSUMPTION OF MORTGAGE
Assuming or taking over the existing mortgage on the property being purchased. Depending on the terms within the mortgage document this can be done either with or without a qualifying process.

AUTHORITY
The legal right given by a principal to an agent to act on the principal's behalf in performing specific acts or negotiations.


BLENDED MORTGAGE
A mortgage that combines the amount owing on an existing mortgage with additional funds being advanced. The interest rate would be a combination of the rate on the old loan and the rate in effect at the time of the new financing.

BRIDGE FINANCING
Interim financing to bridge the time gap between the closing date on the purchase of a new home and the closing date on the sale of the current home.

BUILDING CODES
Provincial or locally adopted regulations that control the design, construction, repair, quality of building materials, use, and occupancy of any structure under its jurisdiction.

BALANCE DUE ON COMPLETION
The amount of money a purchaser will be required to pay to the vendor to complete the purchase, after all adjustments have been made.

BALLOON PAYMENT
This is a final mortgage payment at the end of the term which pays off the outstanding loan in full. The amount of money (principal) required to discharge a mortgage at maturity.

BLENDED PAYMENT
Equal payments consisting of both principal and interest, paid regularly during the term of the mortgage.

BREACH OF CONTRACT
Failure to fulfill an obligation under a contract. Breach confers a right of action on the offended party.

BRIDGE FINANCING
A loan required by a builder to obtain funds during the period between a permanent take out commitment and a construction loan. The construction lender will usually require permanent mortgage commitment to the full amount of the construction loan plus a hold back provision that only the floor amount will be funded at the completion of construction.

BUILDING CODES
Regulations established by government providing for structural requirements.

BUYDOWN
A payment to the lender from the seller, buyer or third party causing the lender to reduce the interest rate during the term of the mortgage.


CAP
Refers to a maximum interest rate increase for a mortgage.

CAPITALIZATION RATE
The rate of return anticipated by an investor in property.

CAPITALIZED VALUE
The value of a property based on the net income.

CAVEAT EMPTOR
Let the buyer beware. A buyer must examine fully before the purchase is made.

CERTIFICATE OF CHARGE
A mortgage document in the Land Titles System.

CERTIFICATE OF TITLE
The sequence of conveyances and encumbrances affecting a title to land from the time that the original patent was granted or as far back as records are available.

CHARGE
The name given to a mortgage document when title is registered under the Land Titles Act.

CHARGE ON TITLE
Any encumbrance or claim that affects title to property.

CHATTEL MORTGAGE
An encumbrance against moveable possessions, or personal property that may be removed without damage to the property, (e.g. appliances).

CHATTEL
Articles of personal property such as household goods, furnishings, and fixtures that are not permanently affixed to the house.

CLOSED MORTGAGE
The restriction or denial of repayment rights until the end of the mortgage term.

CLOSING
The meeting (usually in a lawyer's office) at which the transfer of title of property passes from the seller to the buyer.

CLOSING COSTS
All the charges that are attached to the closing ceremony. These one-time fees include charges for title search and insurance, attorney's fee, lender and/or broker fee(s).

C.M.H.C. INSURANCE
Canada Mortgage and Housing Corporation, a Crown Corporation which administers the National Housing Act. If your down payment is less than 25% , you must have mortgage insurance. It insures the lender against the possibility of you defaulting on your mortgage. Canada Mortgage and Housing Corporation is the principal source of mortgage insurance. G.E. Capital also provides mortgage insurance to many of Canada's financial institutions.

CLOSED MORTGAGE
A reference to the absence of the privilege to accelerate repayment during the term of a mortgage either by bulk payment(s) or increase to scheduled remittances.

COMMISSION
The payment given by the seller of a property to a Real Estate agent for his/her services. The amount is usually a percentage of the sale price and is usually paid at closing.

COMMITMENT LETTER
A letter outlining the amount, terms and conditions under which a lender is willing to offer a mortgage.

COMMON AREAS
Lands or improvements on land that are designated for common use and enjoyment by all occupants, tenants or owners. The lobby, a pool, tennis court or common hallways would all be Common Areas in a condominium or townhouse complex.

COMMON TENANCY
The ownership of property by two or more persons, where on the death of one, his share does not automatically go to the other(s) but is credited to his estate.

COMPOUND INTEREST
Interest charged on both the principal amount of a loan as well as on the interest charged in a preceding period.

CONTRACT OF PURCHASE AND SALE
A written statement by which a buyer agrees to purchase, and a seller agrees to sell a particular piece of property according to the terms set forth in that agreement.

CONVENTIONAL MORTGAGE
A first mortgage granted by an institutional lender such as a bank or trust company, where the amount of the loan does not exceed 75% of the lending value of the property.

CONVERTIBLE MORTGAGE
A short term mortgage, usually 6 months or 1 year, that allows a borrower to lock in to a longer term at any time without penalty.

CONVEYANCE
Transfer of ownership of real estate property from one individual to another.

COMMITMENT
A written notice from a lender who advises of approval to advance a specified amount of funds under certain conditions.

COMMON LAW
That part of the law formulated, developed and administered by the old common law courts, based originally on unwritten common customs.

COMPLETION LOAN
A mortgage loan disbursed following the satisfactory completion of construction.

COMPOUND INTEREST
Interest on both the principal and on interest that has accrued.

CONDITION PRECEDENT
An event or action necessary before an agreement becomes binding. (Subject Clause)

CONDITION SUBSEQUENT
A condition referring to a future event upon the happening of which the contract becomes no longer binding on the parties.

CONDOMINIUM
The ownership of a separate amount of space in a multiple dwelling or other multiple-ownership of common elements used jointly with other owners.

CONSIDERATION
Something of value given to make a promise of repayment enforceable.

CONSTRUCTION ADVANCE
Moneys advanced to the borrower under a construction loan.

CONSTRUCTION LIEN
A claim against property pursuant to labour, services, or materials supplied. (Builders Lien)

CONSTRUCTION LOAN
A short term loan made to a builder for construction of buildings, usually to be paid out by another mortgage upon final completion. Also, a description used in reference to a mortgage which is advanced in pre-determined stages, according to the amount of work completed.

CONSTRUCTION LOAN AGREEMENT
An agreement between a lender and a builder setting out terms of an agreement - loan amount, rate, method of drawing funds, conditions for advancing.

CONTRACT
An agreement between two or more parties given receipt of lawful consideration to do or refrain from doing some act.

CONVENTIONAL MORTGAGE
A mortgage loan which does not exceed 75% of the lending value of the property. Mortgages that exceed this limit must be insured by CMHC (or similar insurance provider).

CONVEYANCE
The transfer of property ownership. Also, the written instrument whereby such transfer is effected. Conveyance includes a mortgage, charge, and lease, etc.

CO-OPERATIVE
The ownership of a separate amount of space in a multiple dwelling or multiple-occupancy building with proportioned tenancy in common ownership of common elements. Used jointly with other owners, however, the owner does not have clear title to a specific unit, but becomes a shareholder of the corporation which owns all the property and occupies by way of a tenancy agreement subject to shareholders agreement administered by an elected board of directors.

COVENANT
An agreement contained in an instrument creating an obligation. It may be positive, stipulating the performance of some act. It may be negative or restrictive, forbidding the commission of some act.

CROSS-COLLATERALIZATION
A reference to security involving various liens held in support of one or more advances made by a lender to a borrower.

COMPLETION DATE
The date on which the purchase and sale of a property becomes final. Accordingly all documentation must be completed and payment of funds made by this date.

COMPOUND INTEREST
Interest charged not only on the principal sum but also on interest amounts charged in a previous period.

CONVENTIONAL MORTGAGE
A mortgage loan which does not exceed 75% of the purchase price or appraised value whichever the lesser.

CONVEYANCE
Transfer of title to the property at Land Titles Office from the vendors name to the purchasers name.

CREDIT BUREAU REPORT
A report by a credit reporting agency that maintains a history of timely, or untimely, repayment of debt. The lender's primary source of information regarding the credit history of a borrower.


DAMAGES
Compensation or indemnity for loss owing to breach of contract.

DATE OF COMPLETION
The date specified by an agreement of purchase and sale, when the purchaser is to deliver the balance of money due and the vendor to deliver a duly executed deed.

DEBT SERVICE
The amount of principal and interest payments made under a mortgage.

DEFERRED INCOME
An accounting method of dealing with income that is received but not included in a statement of earnings as normal earnings.

DEFICIENCY
An insufficient payment, often relating to an amount recovered under a power of sale or foreclosure action.

DEMAND NOTE
Payment is made on demand, usually within a few days notice to the borrower.

DEPOSIT
Payment of money or other valuable consideration as pledge for fulfillment of contract.

DEPRECIATED REPRODUCTION COST
Appraisal method by which the cost of replacing a structure, minus depreciation, gives the depreciation reproduction costs.

DEPRECIATION
A loss in value due to any cause.

DEFAULT
Failure to meet certain contractual obligations, such as mortgage payments. Default can lead to foreclosure.

DEPOSIT
A sum of money that is required to be paid with an offer to purchase as a symbol of the purchaser's commitment.

DISCHARGE OF MORTGAGE
A document executed by the mortgagee, and given to the mortgagor when a mortgage loan has been repaid in full before, at, or after the maturity date.

DISCLOSURE STATEMENT
A statement contained in a consumer credit transaction in order to disclose complete credit terms and interest rates.

DISCOUNT
Reduction in product price or cost of a service. A discount if the difference between the nominal face value of a loan and actual cash received by the borrower because interest is paid at the beginning of a loan based on the sum to be repaid at maturity.

DISCOUNTED CASHFLOW ANALYSIS
This is a method of analysis that calculates the true value of an investment in terms of the present value, i.e. what the investment ifs worth now, although it is spread over a number of years. To compensate for future earnings a discount factor is added in so that a real comparison can be made between an investment with quick return and one that is placed over a number of years.

DISCOUNTED LOAN
The face value of the loan minus the interest or discount charged by the lender is the amount actually advanced to a borrower.

DOMINANT TENEMENT
The estate which derives benefit from an easement over a subservient estate, as in a Right-of-Way.

DOWER INTEREST
A wife's interest in the lands of her husband accruing to her by virtue of the marriage.

DOWNSIDE LEVERAGE
Occurs where the debt service on a mortgage exceeds the yield on an investors' property, thereby reducing cash flow.

DOUBLE-UP
The option to make twice the normal regular payment at a regular payment due date.

DOWNPAYMENT
The amount of cash put forward by the buyer toward the purchase price of real estate.

DRAWEE
The person, bank, or corporation on whom a bill, note or cheque is drawn from and from whom payment is expected by the payee or his assignee.

DRAWER
The person or corporation who writes a cheque or note for payment to a third party. In the case of a bill of exchange, the drawer is the creditor and is usually the payee.


EASEMENT
The right acquired for access over another person's land for a specific purpose, such as for a driveway or public utilities.

ECONOMIC DEPRECIATION
Loss in value of property due to eternal influences related to the property or not controlled by the owner.

EFFECTIVE GROSS INCOME
The estimated gross income less allowances for vacancies and rent losses.

EFFECTIVE INTEREST RATE
The actual interest rate on investment where a debt or loan was bought at discount or at a premium.

ENCROACHMENT
A fixture, such as a wall or fence, which illegally intrudes into or invades on public or private property diminishing the size and value of the invaded property.

ENCUMBRANCE
Outstanding claim or lien recorded against property, or any legal right to the use of the property by another person who is not the owner. END LOAN
The mortgage loan to the final customer, such as a purchaser of a condominium unit.

EQUITABLE MORTGAGE
The transfer of equity in property as security for a debt. Any mortgage registered after the first mortgage.

EQUITY
The difference between the value of a property and the amount of financing on that property.

EQUITY OF REDEMPTION
The right of the mortgagor to reclaim clear title to the real property upon full repayment of the debt.

ESCHEAT
The reversion of property to the state in event the owner thereof dies leaving no will and having no legally qualified heir to whom the property may pass by lawful descent.

ESTATE
The degree, quantity, nature and extent of interest which a person has in real property.

ESTOPPEL CERTIFICATE
A written statement or certificate which states certain facts upon which the receiver of the statement or a third party may rely, eg. Lender's estoppel statement as to a purchaser or property. The lender cannot later deny the truth of these statements because a third party has relied and acted upon them.

EXACT DAY INTEREST
Interest calculated on the basis of 365 days per year or 366 days in a leap year.

EXCULPATORY CLAUSE
A clause which excuses one party from personal liability in the event of a default.

EXPROPRIATION
The act of forcefully taking private property for public use.

EXTENSION AGREEMENT
The lengthening of a term on a contract to extent the maturity date; or to permit more time for the performance of an obligation or condition; or the extension of the coverage of a lien to include more property.


FEASIBILITY ANALYSIS
An analysis to determine the feasibility of a project. Details of construction costs, projected income from the project plus location and economic factors affecting the project will be required. Similar to a feasibility study by a developer conducted to decide whether to proceed with plans and required by the lender to decide whether to provide funds.

FEE SIMPLE
The highest estate or absolute right in real property.

FINANCING STATEMENT
A statement filed by a creditor in a public records office identifying the parties, giving their addresses, and describing the collateral.

FIRST MORTGAGE
The mortgage agreement which has first claim on the property in the event of default.

FIRST MORTGAGE BOND
Bonds issued by a corporation secured upon the property and earnings of the issuing corporation.

FIXTURES
Permanent improvements to property that may not be removed at the expiration of the term of lease or tenure.

FIXED RATE MORTGAGE
This is the usual form of mortgage where interest rate remains the same during the entire life of the loan.

FLOATING RATE OF INTEREST
Rate of interest which fluctuates according to prime lending rates, eg. 2% above prime rate usually chargeable on short term loans such as construction loans.

FLOOR TO CEILING LOAN
A permanent loan or advance made in two stages, (a) on completion of construction according to agreed upon terms and conditions, and (b) the balance advanced upon occupancy or upon cash flow requirements.

FORECLOSURE
Remedial court action taken by a mortgagee when default occurs on a mortgage, to cause forfeiture of the equity of redemption of the mortgagor.

FREEHOLD
The ownership of a tract of land on which the building(s) are located. The oldest and most common typed of ownership of real estate.

FULLY AMORTIZED LOAN
A mortgage loan wherein the stipulated repayments repay the loan in full by its maturity date.

FURTHER CHARGE
A second or subsequent loan of money to a mortgagor by a mortgagee, either on the same or on an additional security.


G/E CAPITOL
The General Electric Capitol Corporation insures high ratio mortgages for lenders.

GRADUATED AMORTIZATION MORTGAGE
A special method of repayment on a mortgage whereby repayments in the initial period are low and are gradually later stepped up at a higher rate. Graduated payments mortgages were devised to enable lower income families to become home owners.

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 an interest in real property is conveyed (the buyer).

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

GROSS DEBT SERVICE RATIO (GDSR)
This is the total cost of housing payments (this includes principal, interest, taxes, and sometimes heat and maintenance) divided by the family's total gross income Generally this ratio should not exceed 32%.

GROSS INCOME
The scheduled income from the operation of the business of the management of the property, customarily stated on an annual basis. Income before deductions for tax or expenses.

GROSS RENT MULTIPLIER
Method of appraising the fair market value of property by multiplying the gross rents by a factor which varies according to the type of property, and the location of the property.

GUARANTEED INCOME MORTGAGE
A guarantee included in a purchase money mortgage by a seller-mortgagee that there will be a minimum cash-flow or net operating income to the purchaser mortgagee. The guarantee is limited to a short period and may be combined with a management contract whereby the seller as manager will operate the property.

GUARANTOR
A third party without interest in the property who agrees to assume responsibility for a debt in the event of default by the mortgagor.


HIGH RATIO MORTGAGE
A mortgage loan that exceeds the normal limit of 75% LTV (loan to value) of a conventional mortgage. Typically made possible by a mortgage insurance plan, e.g. CMHC or GE Capital.

HOLD BACK
An amount of money retained by a construction lender or owner until satisfactory completion of the work performed by a contractor.


IMMEDIATE PARTICIPATION LOAN
A loan in which all of the partners contribute their share immediately.

INTER ALIA MORTGAGE
"Inter Alia" is Latin for "Amongst other things". An Inter Alia Mortgage is a mortgage that is secured by more than one property. A single mortgage document is executed and registered against each property that is used as security.

INTEREST
The price paid to rent money. The rate of interest over a period of time for a specific amount of money, usually expressed as a percentage.

INTEREST ADJUSTMENT DATE
The date on which the mortgage really begins, usually the first of the month. The interest owed for the number of days between the closing date and the last day of the month is paid on the closing date by cheque or by deduction from the mortgage advance and covers.

INCOME PROPERTY LOAN
A loan which is secured on property which already has a source of income, eg. Rents which will cover the debt service payments on the loan.

INCOME/EXPENSE RATIO
Ratio of operation expenses to gross income and expressed as a percentage (also known as operating ratio).

INDENTURE
A document of deed, usually in duplicate, expressing certain objects between the parties.

INJUNCTION
A judicial process or order requiring the person to whom it is directed to do or refrain from doing a particular thing.

INSTRUMENT
A form of written legal document.

INSURABLE VALUE
The term is used conventionally to designate the amount of insurance which may be carried on destructible portions of a property to indemnify the owner in the event of loss.

INTER-ALIA MORTGAGE
A single registered document which encumbers more than one property.

INTEREST (Rate)
The profit of a loan as expressed on a percentage basis.

INTEREST ADJUSTMENT
A date from which interest on the mortgage advanced is calculated for your regular payments. This date is usually one payment period before regular mortgage payments begin, as interest payable is due from the date your mortgage is advanced.

INTEREST ESCALATION
Rate of interest on a loan is raised periodically during the term of the loan so as to encourage early repayment.

INTEREST ONLY LOAN
Borrower pays back interest only on the loan and there is no amortization until later or until the end of the term. This may occur when a purchaser wishes to resell property after a short period or if he wishes to build up enough income from the property before amortization.

INTERIM FINANCING
Interim loans are used to bridge the gap between the construction loan and the permanent loan (hence bridge loans) lasting form one to three years.

INTESTATE
A person who dies without a will, or leaves one which is defective in form, in which case the estate descends by operation of law to the next of kin.

IRREVOCABLE
Incapable of being recalled or revoked; unchangeable, unalterable.

INTEREST ADJUSTMENT DATE
A date usually one month prior to the first regularly scheduled mortgage payment date from which interest is calculated for monies advanced previous to that date.


JOINT TENANCY
Property held by two or more persons with an undivided interest. If one owner dies, the property passes automatically to the other(s).

JOINT AND SEVERAL NOTE
Promissory note on which there are two or more promisors who are jointly and severally liable.

KICKER
An extra bonus or additional payment over and above the fixed interest already paid to an investor eg. A percentage of gross profits or cash flow.

LAND ACQUISITION LOAN
Loan advanced to acquire land as opposed to improving land or buildings.

LAND CONTRACT
A contract drawn between a buyer and seller for the sale of property.

LAND DEVELOPMENT LOAN
Loan advanced for the purpose of developing raw land for residential and related uses.

LEASE TO PURCHASE OPTION
Buying a piece of property by renting for a specified period, usually one year, with the provision that you will purchase the property at the end of that period for a predetermined sale price.

LEASEHOLD
A type of interest in a property that is certain only for a specified period of tie granted by contract.

LEASEHOLD APPRAISAL
A method of estimating the value of leasehold property.

LEASEHOLD MORTGAGE
A mortgage given by a lessee on the security of the leasehold interest in the land.

LEGAL DESCRIPTION
A written description by which property can be definitely located, and which is acceptable for registration in a land registry system.

LEGAL MORTGAGE
A transfer of a legal estate or interest in property for the purpose of securing the repayment of a debt.

LENDING VALUE
An independent appraiser's value interpreted by the lender as to the worth of a property in the current market given a reasonable time period to sell the property.

LESSEE
Tenant under a lease.

LESSEE & INTEREST
The market value of property less the value of the leasor's interest. The present wortof o the annual advantage, if any, accruing to the lessee by reason of the contract rent being less than the economic rent.

LESSOR
The person who grants us of the property under lease to a tenant.

LETTER OF COMMITMENT
Letter written by the lender containing the amount of the loan, specified interest rate, term of loan, and specific conditions.

LETTER OF CREDIT
Letter issued by a bank or other lending institution promising payment to a third party in accordance with the terms of the agreement. Letters of credit may be used in situations where a deposit is required or a security, eg. Where a builder is about to sign a contract and has to put up security that the job will be finished; or a security deposit under a long term lease.

LEVERAGE
Upside leverage in real estate occurs when the yield or net return on property exceeds debt service for a loan. Downside or reverse leverage occurs when the debt service is greater than he net return on investment.

LIABILITIES
Outstanding debts of an individual. Mortgages, loans, credit card balances.

LIEN
A legal claim against a property for money owed.

LIEN HOLD BACK
A percentage of the contract price or estimated cost of work to be done which is held back from the mortgage advance.

LINE OF CREDIT
A maximum credit limit allowed by a bank to a borrower, as long as the borrower maintains an acceptable balance on account or has a good credit rating. The credit line will vary from time to time according to the changing circumstances of the borrower or the bank.

LIS PENDENS
A legal document giving notice that an action or proceeding is pending in the courts which affects the title to the designated property.

LTV (Loan to value)
The ratio between the mortgage loan amount and the value of the property usually expressed as a percentage, i.e. 75% LTV. The value of the property for lending purposes is the purchase price or appraised value, whichever is lower.

LOAN COVERAGE
The ratio of net operating income to debt service - in general loan coverage of 1.3 to considered adequate for a loan to value ratio of 75%.

LOAN FEE
A charge for making a loan in addition to the interest charged to the borrower.

LOAN LOSS RESERVE
A reserve shown on a balance sheet of a real estate company as provision for any future losses in assets.

LOAN ORIGINATION
Analysis of loan applications from prospective purchasers to determine if they meet with requirements and if so, the lender will issue a commitment letter.

LOAN PORTFOLIO TURNOVER
The average length of time required for the turnover of mortgage loans, ie. until maturity.

LOAN PROCESSING
Upon application and approval of a loan, the lender has to go through a fairly standard procedure to finalize and disburse the loan such as the setting up of files, ordering of credit reports, verification of employment, bank accounts, etc.

LOAN RATIO
The ratio of the principal amount of the loan to the lending value of the property.

LOCK-IN CLAUSE
A clause which restricts prepayment of a loan during a specified period of the whole term of the mortgage. This ensures that the lender receives a stipulated return on his investment and discourages shopping around for another loan.


MARKET VALUE
The value of a property based on what the market will bear. Determined by a comparison of the subject property to others in a similar area that have sold recently.

MARGIN OF SAFETY
A measure of the extent to which a loan is protected by property values of operating income. In the case of a mortgage, the margin of safety is the excess of equity (at fair market value) above the outstanding amount of the loan.

MARKETABLE TITLE
A title which a court of equity considers to be so free from defect that it will enforce acceptance by a purchaser.

MATRIMONIAL HOME
Any property in which a person has an interest and that is or has been occupied by the person and his or her spouse as their family residence. Condominiums, co-operatives, and leasehold interests can be matrimonial homes.

MATURITY DATE
The last day of the term of the mortgage agreement. A mortgage loan must then be paid in full or the agreement renewed.

MORTGAGE
A conveyance of property to a creditor, as security for payment of a debt, redeemable on the payment or discharge of the debt at a specified date.

MORTGAGE BROKER
Trained professionals with a wealth of knowledge and experience to find the mortgage that best suits your needs, at the best rate available, from a large selection of lenders that include most major banks, trust companies, credit unions. A mortgage broker works for you, not for the lender. Many financial institutions pay finders fees to mortgage brokers who refer business to them making it possible for you to get the best mortgage product at no cost to you.

MORTGAGEE
The lender of mortgage funds.

MORTGAGOR
The borrower of mortgage funds.

MORATORIUM
Legislation enacted to assist debtors by postponing or suspending their contractual payments.

MORE OR LESS
Term often found in a property description intended to cover slight, unimportant or insubstantial inaccuracies to which both parties are willing to assume risk.

MORTGAGE
The legal pledge of real estate as security for a loan.

MORTGAGE BANKER
More prominent in the USA as principals of mortgage funds.

MORTGAGE BOND
A bond issued by corporations and secured by a mortgage on their property.

MORTGAGE COMMITMENT
A formal indication by a lending institution that it will grant a mortgage loan on property, in a certain specified amount and on certain specified terms.

MORTGAGE DEBENTURE
Synonymous with mortgage bond.

MORTGAGE LOAN
An agreement by which sum of money is borrowed and a promise to repay is given, wherein as a further security the borrower gives to the lender a conveyance or charge on property which he owns.

MORTGAGE NOTE
A promissory note executed in favor of the lender giving him an encumbrance or lien on the borrower's property. A mortgagor is usually personally liable on the note.

MORTGAGE PORTFOLIO
Several mortgages held by a mortgagee, lender or broker en bloc.

MORTGAGE POSTPONEMENT
The process whereby a mortgagee may permit the borrower to renew or replace an existing mortgage that falls due prior to the maturity date of the subject mortgage.

MORTGAGEE IN POSSESSION
A mortgagee goes into possession by entering into actual occupation of, or by obtaining the receipt of the rents of the mortgaged premises.

MORTGAGING OUT
Term applied to a mortgage which exceeds the current value of the property on which it is secured. This type of mortgage may be obtained on improvable property where the security is based on future value and future earnings which are expected to exceed construction costs.

MORTGAGE INSURANCE PREMIUM
A premium which is added to the mortgage and paid by the borrower over the life of the mortgage. The mortgage insurance insures the lender against loss in case of default by the borrower.

MORTGAGE LIFE INSURANCE
A form of reducing term insurance recommended for the borrower. In the event of the death of the owner or one of the owners, the insurance pays the balance owing on the mortgage. The intent is to protect survivors from losing their home.


NATIONAL HOUSING ACT MORTGAGE
A first mortgage, originated by an approved lender, granted under the terms of, and insured under, the National Housing Act 1954.

NEGATIVE CASH-FLOW
Where operating costs exceed gross rental income or debts.

NET OPERATING INCOME (NOI)
The balance remaining after deduction of operating expenses from gross receipts and gross rental, but not including the deducting of debt service on mortgages. Free and clear return on property is calculated by the ratio of NOI to total investment including mortgages and equity. This gives a direct means of comparing the return on different properties.

NET RATE OF INTEREST
The interest rate received by a mortgage lender net of the servicing fee deducted by a loan correspondent, etc.

NET WORTH
The value of ones assets minus their liabilities.

NOMINAL INTEREST RATE
Interest rate stated on the face on a loan document. However, if the loan amount is discounted or sold at premium, the effective rate of interest will either be higher or lower.

NON-RECOURSE LOAN
A clause in a loan which waives personal liability of the borrower on the loan.

NOTICE D.O.R.
Notice filed in court by mortgagor under foreclosure proceedings that s/he desires an opportunity to redeem.


OBLATORY ADVANCE
An advance made according to terms of a pre-existing construction loan agreement or mortgage.

OPEN MORTGAGE
A mortgage which allows for extra payments, principal reductions or full payment at anytime without penalty.

OPEN END MORTGAGE
A mortgage under which the lender has the option of advancing more funds where, for example, the value of the property is anticipated to increase.

OPEN OR CLOSED
The restriction or denial of repayment rights until the maturity of the mortgage is a closed mortgage. If specified on document as open, then mortgagor can pay extra payments of principal sums at any time or at specified times, with or without repayment penalty.

OPERATING EXPENSES
Generally speaking, all expenses, occurring periodically, which are necessary to produce net income before depreciation. Under some conditions these expenses are placed in two categories, namely, operating expenses and fixed charges.

OPTION
A right give by the owner of property to another (for valuable consideration) to buy certain property within a limited time at an agreed price.

ORDER ABSOLUTE
Judgement taken against a mortgagor, extinguishing the equity of redemption.

OWNER
The lawful possessor of the title to real property.

OFFER TO PURCHASE
A formal legal document which offers a specific price for a specified real property. The offer may be firm (with no conditions) or conditional (certain conditions yet to be fulfilled.)


PACKAGE LOAN
Combination of two types of loan, eg., construction loan and permanent financing. The borrower benefits by only having to negotiate with a single lender and only having to pay a single set of closing costs.

PARTIAL DISCHARGE
A discharge of a definite portion of the mortgage lands usually given after the mortgagor has prepaid a specific portion of the mortgage debt.

PARTICIPATION LOAN
An agreement whereby two or more lenders share in advancing a portion of a loan made by the originating or lead bank. Terms of the agreement set out a method of apportionment and interest rates. The lead lender generally services the loan for which it receives a fee.

PARTNERSHIP
1) An arrangement whereby individuals join together to lose money and/or 2) An arrangement whereby in the beginning a general partner has the experience and the limited partners have the money and in the end, the general partner has the money and the limited partners have had the experience.

PERCENT PAID OFF
The percent of principal which is paid off at a given time under an amortization schedule, i.e. equity build up.

PERCENTAGE RENT PLUS MINIMUM
A percentage rental which must be paid in addition to the minimum, i.e. minimum rent is not credited against percentage rent payable.

PERCENTAGE RENTAL AGAINST MINIMUM
A rental paid under a percentage lease whereby rent paid by a tenant varies according to volume of business, eg., a percentage of gross receipts, sales or revenue, and paid to the extent that it exceeds a minimum rental.

PERMANENT FINANCING
A long-term mortgage usually intended to finance both land and improvements after completion of construction and used to pay off a construction loan.

PERSONAL LIABILITY
A person liable on a debt to the full extent of his entire assets, as opposed to limited liability where a maximum or a ceiling is fixed on the amount of assets that can be drawn upon to satisfy a debt. Joint and several liability fixes the liability of each individual borrower for the total debt; joint liability binds all the borrowers together in one action; and several liability fixes the liability of each borrower to the extent of his share of the debt.

PERSONAL PROPERTY
All property except land and the improvements thereon.

POLARIS
The Province of Ontario Land Registration Improvement System's new simplified method of registration of transfer, charge, discharge, etc.

PORTABILITY
The ability to transfer your mortgage including rate and terms, from your existing property to a new property.

POSTPONEMENT CLAUSE
A junior mortgage may contain a postponement clause, by which the mortgagee permits the borrower to renew or release an existing first mortgage that falls due prior to the maturity date of the junior mortgage.

POWER OF SALE
The right of a mortgagee to force sale of the property without judicial proceedings should default occur.

PREPAYMENT CLAUSE
A clause inserted in a mortgage, which gives the mortgagor the privilege of paying off all or part of the mortgage debt in advance of the maturity date.

PREPAYMENT PENALTY
A fee charged by a lender when the borrower prepays all or a part of a mortgage in excess of the regular payments allowed by the mortgage terms.

PRINCIPAL
The money borrowed, not including any accrued interest.

PRE-QUALIFICATION
An interview with a client (usually) prior to the writing of an offer to purchase real estate in order to determine the applicants qualifications for mortgage purposes.

PRIME RATE
The rate charged by banks to their most credit-worthy borrowers. Sometimes also referred to as the rate of interest paid on government bonds.

PRIOR CHARGE
An encumbrance ranking in priority to the mortgage in question.

PRIOR ENCUMBRANCE
A claim on the property, ranking in priority to the mortgage in question.

PRO FORMA (Statement)
A financial statement of the gross income, operating costs and net operating costs and net operating income for a specified financial period, e.g. one year, using specified assumptions.

PROGRESS ADVANCES
Loan advances made on a property under construction whereby the lender makes advances on the basis of the retention at all times of an amount of the loan which in his/her opinion will be sufficient to complete the building should the borrower fail to complete it.

PROJECTED INCOME
Estimated income from property.

PROMISSORY NOTE
A written document acknowledging a debt and promising payment.

PROPERTY
Refers to the rights which an individual enjoys by virtue of his/her ownership.

PURCHASE-MONEY MORTGAGE
A mortgage loan taken back by the vendor of property in lieu of purchase money in order to help finance the purchaser.

Penalty
A sum of money paid to a lender for the privilege of prepaying a mortgage in part or in full.

P.I. (Principal & Interest)
Principal and interest due on a mortgage.

P.l.T. (Principal, Interest, & Taxes)
Principal, interest and taxes due on a mortgage.

PREPAYMENT OPTION
The right to prepay specified amounts of the principal balance. Penalty interest may be incurred on prepayment options.

PRINCIPAL
The amount you still owe the lender at any time.


QUANTUM MERIT
The amount that should be paid as merited by the service performed.

QUIT CLAIM DEED
A general release of all claims or rights to a parcel of land.


RATE (interest)
The return the lender receives for loaning you the money for the mortgage.

RATE COMMITMENT
A lenders commitment to offer to hold a specific rate for a certain length of time. Rate commitments can vary from 30 to 180 days.

REALTOR
A real estate broker holding active membership in a local real estate board.

REDEMPTION
The buying back of a mortgage estate by payment of the sum due on the mortgage.

REDEMPTION PERIOD
A period of time allowed by law during which a mortgagor may redeem his property by paying off the entire debt in arrears.

REFINANCE
To pay off (discharge) a mortgage and other registered encumbrances and arrange a new mortgage.

REGISTRATION AND DISCHARGE DATES
Dates of registration by number and date in the local Registry Office and/or Land Titles, then given to the mortgagee. When the loan has been paid in full at or after maturity date, then the mortgagee executes the discharge or cessation of charge and registers same to liquidate the mortgage and allow the mortgagor to redeem the mortgage.

RELEASE OF CHARGE
A discharge of a mortgage in the Land Titles System.

RELEASE OF COVENANT
A release given to the mortgagor of a property that has been sold to a new purchaser who is acceptable to the mortgagee. This release is usually given after the new mortgagor has signed an assumption agreement.

RENEWAL AGREEMENT
An agreement whereby the lender may agree to extend the loan, but possibly on revised terms as to principal repayments and interest rate.

RENT CONTRACT
Rental received by the real estate owner under any lease contract.

RENT ECONOMIC
Is the income that real estate can command in the open market at any given time for its highest and best use.

RENTAL HOLD BACK STANDBY LOAN
A hold back is an amount withheld from the borrower under permanent financing until a certain occupancy rate is achieved. As this deprives the construction lender of full takeout protection, the developer may obtain a standby loan commitment to supplement the hold back.

RENTAL REQUIREMENTS
This is the ceiling portion of a permanent loan commitment that is advanced upon reaching a minimum rental or occupancy rate.

RENTAL VALUE
The monetary amount reasonably expectable for the right to the agreed use of real estate. It may be expressed as an amount per month or other period of time, or per room, per front foot, or other unit of property.

REPRODUCTION COST
The cost of reproducing a new replica property on the basis of current prices with the same or closely similar materials.

RESTRICTION
A limitation placed upon the use of property contained in the deed or other written instrument in the chain of title.

RESTRICTIVE COVENANT
A restriction in a title to limit or govern the use of the land.

RESTS
The periodical balancing of an account made for the purpose of converting interest into principal, and charging the party liable thereon with compound interest.

RETURN ON INVESTMENT
(a) Free and clear return is calculated as the percentage of net operating income to total investment in the property (b) Cash flow return is the ratio of cash flow to equity investment (also know as return on equity and cash-on-cash return) (c) Total return is cash flow including loan amortization as a percentage of the total invested.

REVERSION
The right to repossess and resume the full and sole use and proprietorship of real property which temporarily has been alienated by lease, easement or o otherwise. According to the terms of the controlling instrument, the reversionary right becomes effective at a stated time or under certain conditions such as the termination of a leasehold, abandonment of a right-of-way, or at the end of the stimulated economic life of the improvements. The present or discounted value of something to be collected at some future date.

RIGHT
The interest one has in a piece of property. A claim or title enforceable by law.

RIGHT OF SURVIVORSHIP
The distinguishing feature of joint tenancies which provides that, where land is held in undivided portions by co-owners, upon the death of any joint owner, his/her interest in the land will pass to the surviving co-owner, rather than his/her estate.

RIGHT OF WAY
The right to pass over another's land, more or less frequently, according to the nature of an easement.

RIPARIAN RIGHTS
The rights of the owners of land on the banks of watercourses, to take advantageous use of the water on, under, or adjacent to his/her land, including the right to acquire decretions, wharf slips, and fish therefrom.

ROLL-OVER MORTGAGE
A mortgage loan where the interest rate is established for a specific term. At the end of this term the mortgage is said to "roll over" and the borrower and lender may agree to extend to loan. If satisfactory terms cannot be agreed upon, the lender is entitled to be repaid in full. In this case, the borrower may seek alternative financing.

RUNNING WITH THE LAND
A covenant is said to run with the land when it extends beyond the original parties to the agreement and binds all subsequent owners to either liability to perform it or the right to take advantage of it.


SALE AND LEASEBACK
A method of financing where a property is sold to a purchaser who simultaneously enters into a long-term lease of the property with the vendor. The vendor (now lessee) remains in possession for the specified term of the lease and covenants to pay the rental to this purchaser (now lessor) as well as all operation expenses. This enables the user to free his cash investment in the real property for some other use.

SALES CLAUSE
This is a clause that enables the mortgagee to demand payment of the outstanding balance including interest upon sale or transfer of title. (also known as a due on sale clause)

SALES HOLD BACK
A percentage of the principal amount of the mortgage held back by the mortgagee until the property in question has been sold to a party satisfactory to the mortgagee.

SANDWICH LEASE
A lease in which the sandwich party is the lessee to one party and the lessor to another. Usually, the owner of the sandwich lease is neither the fee owner nor the user of the property.

SEALED AND DELIVERED
A term indicating that a conveyor has received adequate consideration a evidenced by his/her voluntary delivery. The word sealed adds more strength, since under old conveyancing law an official seal was used as a substitute for consideration.

SECOND MORTGAGE
A mortgage loan granted, (and registered) when there is already a first mortgage registered against the property.

SERVIENT TENEMENT
An estate or land over which an easement or some other service exists in favor of the dominant tenement.

SET BACK
The distance from the curb or other established line within which no buildings may be erected.

SHORT FORM MORTGAGE
Mortgage document which follows the exact language of the long form prescribed by law but is abbreviated, using shortened terminology, at the same time having the identical legal effect.

SINGLE FAMILY DWELLING
A residential property designed for occupancy by one family and situated on land zoned specifically for that purpose.

SPECIFIC PERFORMANCE
A remedy in a court of equity compelling a defendant to carry out the terms of an agreement or contract. It is available only where the remedy of damages cannot afford adequate relief to the plaintiff.

SPECULATIVE BUILDER OR DEVELOPER
One who builds without having a commitment to buy or lease from a purchaser or tenant.

SPLIT FINANCING
A device by which lending is split into separate parts and treated individually.

STANDBY COMMITMENT
A commitment from a lender to make a loan in a specified period of time on specified terms with the understanding that the borrower will not likely draw down the funds.

STATEMENT OF ADJUSTMENTS
A statement prepared by lawyer setting out the details of a mortgage transaction.

STATUTE
A law established by an act of the legislature.

STATUTE OF FRAUDS
A law which provides that certain contracts must be in writing in order to be enforceable at law. It includes real estate contracts.

STATUTE OF LIMITATIONS
That period of time specified by statute within which an action at law must be brought or else be forfeited.

STEP DOWN LEASE
A lease providing for decreases in rental payment at specified dates.

STEP UP LEASE
Opposite to step-down lease.

STRATA FEE
A charge (usually monthly) by a Strata Corporation to cover the costs of maintenance, repair, cleaning etc. of common areas. This fee will usually include a reserve to cover major repairs such as reroofing and heating system replacement.

SURVEY
A document that illustrates the property boundaries and measurements, the position of major structures on that property, any registered or viable easements.

SURVIVORSHIP
The right of a person to secure ownership by reason of his/her outliving someone witwhomms/he shared undivided interest in the land.


TAKEOUT MORTGAGE LOAN
A long term mortgage loan that is advanced to borrower on completion of construction or in compliance with any other conditions in the loan commitment. The funds are normally used to pay off or take out the construction lender.

TAX LIEN
A lien imposed by a taxing authority on real estate for failure to pay taxes within the time required by law.

TAX HOLD BACK
When your property taxes are included with your mortgage payments, your lender will withhold funds from your disbursement to cover interim or final taxes payable to the municipality. The amount depends on the month that the mortgage was funded and the dates when interim and final taxes are due. Tax hold backs are used to pay for the current year's taxes while your monthly tax installments are accumulated in an account to pay the tax bills for the following year.

TENANCY IN COMMON
Ownership of ad by two or more persons: unlike joint tenancy in that interesif f deceased does not pass to the survivor, but is treated as an asseto o the deceased's estate.

TENURE
A system of land holdings for a temporary time period.

TERM
The length of time which a mortgage agreement covers. Payments made may not repay the outstanding principal by the end of the term because of a longer amortization period.

TIME IS OF THE ESSENCE
Requires punctual performance of a contract on closing date and is indicated by so stating as in an Agreement of Purchase and Sale.

TITLE
The means of evidence by which the owner of land has lawful ownership thereof.

TITLE INSURANCE
A policy which insures the lender against loss due to a flaw in the title of property held as collateral for a mortgage.

TITLE SEARCH
An examination of the chain of title to real property as indicated in the public records in order to determine the ownership of the subject property and the existence of any encumbrances or defects.

TORRENS SYSTEM
System of title recordation provided by provincial law, it is a system for the registration of land title, indicating the state of the title, including ownership and encumbrances without the necessity of an additional search of the public records. Also known as the Land Titles System.

TOTAL DEBT SERVICE RATIO (TDSR)
This is the total cost of housing payments plus all other installment payments (property taxes, hydro and other debts such as loans, credit card payments, child support and leases) divided by the family's total gross income. Generally this ratio should not exceed 42%.

TRANSFER
To convey from one person to another.

TRANSFER OF CHARGE
Assignment of a mortgage under the Land Titles System.

TRANSFER OF TITLE
A document signed by the seller and purchaser transferring ownership. This document is then registered against the property.

TRUST ACCOUNT
An account held by an agent on behalf of his principal for the payment of money due to a third party on the event of specified incidents, e.g. a vendor's solicitor will hold funds on his behalf until title deeds to property have been delivered and property registered and the keys delivered to the purchaser; or an account maintained by a mortgagee for the payment of property taxes or life insurance premiums.


UMBRELLA MORTGAGE
Also referred to as a wraparound, a special arrangement whereby one document encompasses one or more already existing mortgages registered on the same property. The mortgagee is responsible for remission of payment(s), to lender(s), while the mortgagor makes one payment to the mortgagee.

UNDERWRITING
The assessment of loan applications based on: the value of real property, a borrowers credit worthiness and ability to pay and the lending guidelines of the lender.

UNDERWRITER (mortgage)
A person employed by a mortgage lender or mortgage broker who approves or turns down loan applications based upon the quality of the real property, credit-worthiness and ability to pay of the applicant and guidelines of the lender with regard to ratio of mortgage loan to value of property.

UNDERWRITING FEES
A sum of money collected by some lenders to offset expenses incurred in the lending transaction.


VALID
Having force or binding force, legally sufficient ad authorized by law.

VALUABLE CONSIDERATION
The granting of some beneficial right, interest, profit, or suffering of some detrimental forbearance, loss or default by one party in exchange for the performance of another.

VARIABLE INTEREST MORTGAGE
A loan where the interest rate may vary during the term of the mortgage. The variance is usually tied to some specific factor such as prime bank rate or the guaranteed investment certificate rate for a designated lender.

VENDOR
A seller of real property.

VENDOR TAKE BACK MORTGAGE
A mortgage which a vendor of real property takes from the purchaser usually as part payment of the purchase price for that property.

VENDOR FINANCING (Balance of Sale)
The seller sometimes takes the mortgage at a rate lower than market rates. Most of these arrangements are not renewable nor transferable to the next owner.

VOID
Of no legal effect. A nullity.

VOIDABLE
Where one party to a contract is entitled rescind the contract at his/her option.


WAIVER
An international relinquishment of some right or interest, the renunciation, abandonment, or surrender of some claim.

WEEKLY AND BI-WEEKLY PAYMENTS
You can usually choose to make your mortgage payments once a week or once every two weeks. This accelerates the reduction of your mortgage because you are making the equivalent of one extra monthly payment per year.

WITNESS
To subscribe one's name to a deed, will or other document for the purpose of attesting its authenticity and proving its execution by testifying, if required.

WRAP-AROUND MORTGAGE
(Sometimes erroneously called a blanket mortgage)-a new mortgage, which is registered on title, which includes a prior existing mortgage ad the new mortgagee undertakes the responsibility as mortgagor under the original mortgage.


YIELD
The return on an investment expressed as a percentage per annum of the amount invested.


ZONING
The public regulation of the character and intensity of the use of real estate through the employment of the police power. This is accomplished by the establishment of districts in each of which uniform holding restrictions related to use, height, are, bulk, and density of population are imposed upon the private property.