Glossary
A
B
C
D
E
F
G
H
I
J
K
L
M
N
O
P
Q
R
S
T
U
V
W
X
Y
Z
A
Adjustment Date
Date agreed to by both parties to a real
property transaction for the adjustment of property taxes, rent,
interest, and other items.
Affidavit
A written statement of facts, the contents
of which are sworn under oath to be true by
the person making the statement. An
affidavit is sometimes used in court
proceedings as evidence in place of oral
testimony.
Agreement
for Sale
A contract by which the owner of land
(vendor) agrees to sell land to another
(purchaser) who aggress to purchase it. The
purchaser's interest is registered in the
Land Title Office as a charge against the
vendor's certificate of title. The contract
provides that the purchase price will be
paid by installments.
Amortization
The number of years needed to fully repay a
loan. Most mortgages are amortized over 25
years. This means that by making set monthly
payments - each a blend of interest costs
and repayment of the original principal -
you'll have paid back the original amount
and all the interest in 25 years. You can
however choose different amortization
periods. A shorter amortization, 15 or 20
years for example, will mean higher monthly
payments, but a significantly lower interest
cost. Do not confuse amortization with term.
Appraisal
The estimation of the value of a legal
interest in land.
Arms
Length Transaction
Transaction in which the parties involved are not inclined
towards making voluntary concession to each
other.
Assessment
Appraisal, usually for real property
taxation purposes.
Asset
Items of value owned by a business. Contrast
to Liability.
Assumable
Mortgage
A Mortgage that allows a purchaser to assume or take over the
responsibility and liabilities under the
mortgage from a vender.
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B
Balance
Sheet
A financial statement listing Assets, Liabilities, and Owner's
Equity at a specific point in time. Also
known as a Statement of Financial Position
or Statement of Assets and Liabilities.
Borrowing
Incurring an obligation to repay a debt in
order to invest or consume more than one
currently owns.
Brokerage
Fee
Fee charged by a mortgage broker for arranging a loan.
Builders
Lien
A claim registered against the title to land by a contractor,
Supplier of materials or workman with
respect to work done or materials supplied
to improve that land.
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C
Caveat
A notice registered against the title to
land warning those looking at the title that
a claim has been made.
CCA
Abbreviation of Capital Cost Allowance.
Chattel
Mortgage
A document evidencing a debt owed by the borrower (mortgagor) to
the lender (mortgagee). The mortgage is
secured by the lender against personal
property owned by the borrower as collateral
to ensure the repayment of the debt. These
mortgages are governed by the Personal
Property Security Act.
Closed
Mortgages
A mortgage which cannot be fully paid out before expiry of its
term.
Completion
Date
Date on which the purchase's solicitor undertakes to the vender
that he will pay the balance owing to the
vender upon the transfer of title being
accepted for registration.
Compound
Interest
Interest which, during the life of the loan is charged or
calculated at regular intervals and if not
immediately paid will, in subsequent period,
earn interest itself.
Condition
A fundamental term of a contract, a breach
of which allows the injured party to
terminate the contract and/or sue for
damages or Specific Performance.
Condition
Precedent
Legal term for a "subject to" clause. In contract law, a
condition precedent calls for the happening
of some event or the performance of some act
the contract shall be binding upon the
parties.
Conditional
Sale
A contract for the sale of goods by which the seller reserves
ownership (but not possession) of the goods
until the price has been paid (usually by
installments) Such contracts are regulated
by the Personal Property Security Act.
Contract
An agreement between two or more persons
which create an obligation to do or not to
do a particular thing.
Conventional
Mortgage
A traditional mortgage for up to 75 per cent of the appraised
value of a property.
Convertible
Mortgage
A mortgage that gives the borrower the flexibility to change from
a short-term to a longer-term mortgage if it
seems advantageous to do so. For example,
when interest rates appear to have hit
bottom.
Conveyance
The process of transferring interest on land
from one person to another way of a transfer
document. Conveyancing usually refers to the
transfer of title to land but also includes
dealings such as assignments, leases, and
mortgages.
Co-Ownership
Syndicate: A real estate syndicate
organization in which two or more investors
are owner of an undivided interest in real
property.
Corporation
A business entity which is owned by
shareholders who decide on the general
policies of the company through their
elected board of directors. A corporation is
a separated legal entity and therefore has
the right and liabilities of an individual.
Shareholders do not share directly in the
income of a corporation, but they may
receive Dividends.
Credit
Analysis
An investigation of a loan applicant's ability to repay.
Creditor
A person to whom a debt is owed. Contrast to
Debtor.
Current
Assets
Those assets which will be converted into cash, sold, or consumed
within one year or the normal operating
cycle of a business, whichever is longer,
Current Assets may include Cash, Marketable
Securities, Accounts Receivable,
Investments, and prepaid expenses.
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D
Depreciation
The amount by which the value of improvement has decreased over time as
a result of wear and tear or change in taste. Depreciation can be
classified as physical or functional and curable or incurable.
Disclosure Statement
A schedule showing the face value of the loan, all costs associated with
issuing the loan to the borrower, and the effective annual rate as
required by the B.C. Mortgage Brokers Act.
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E
Easement
A limited right of use of another's land by
a landowner for the benefit of his land. The
land receiving the benefit is called the
dominant tenement and the land granting the
benefit is called the servient tenement.
Economic Life
The time span over which a property is employed in
its highest and best use.
Effective Annual
An annual interest rate that is compounded once a year.
This is
the rate used for disclosure purposes under the B.C. Mortgage Brokers
Act.
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F
Fee Simple
The legal term for the maximum interest in land available
to a
person, or the maximum of legal ownership.
Equivalent in many ways, for practical
purposes to absolute ownership.
Fiduciary
A person who holds a position of trust with
respect to someone else and is obliged, by
virtue of the relationship of trust, to act
solely in the other persons benefit.
Fixed-Rate Mortgages
With this type of mortgage, the interest rate is set at a
specific
level for a certain term, ranging from six
months to five years or more.
Foreclosure
A legal action taken by a mortgagee to
obtain possession of a property, by reason
of the mortgagor's default in payment of the
principal and or interest of the mortgage
debt.
Fully Amortized Mortgage
Loan which is repaid completely by a series of payments
over the full duration of the amortization period.
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G
Gross Debt
The percentage of gross income which is the
maximum a mortgagor
is allowed to pay annually in principal,
interest, and property taxes. For example a
mortgagor may pay $270 out of $1000.00 gross
income as P.I.T. payments. This ratio is
usually expressed as a percentage ex. P.I.T.
payment can be 27% of gross income. Compare to Loan to Value Ratio.
Gross Income
The amount earned through employment or investment before taking taxes
or other deductions into consideration. This amount may or may not be
the same as gross income for purpose of mortgage lending.
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H
High Ratio Mortgage
If you don't have 20% of the lesser of the purchase price or appraised
value of the property, your mortgage must be insured against payment
default by a Mortgage Insurer, such as CMHC.
Hold Back
A dollar amount that is withheld by the lender during construction of a
home to ensure construction is satisfactory completed at every stage.
Home Equity
The difference between the fair market value of the home and the total
debts registered against it.
Home Equity Line of Credit (HELOC)
An open-ended loan, paid as revolving debt that is backed by the
security of the property.
Household Income
The total combined income of all members within a household.
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I
Income Tax
That part of taxable income which a person or corporation is required to
forward to Revenue Canada Periodically.
Interest Adjustment
The process of calculating compound interest payable on the amount
borrowed between the day the monies are advanced and the day
amortization period starts.
Interest Only Loan
A loan which is serviced by interest-only payments. At the end of the
term the full principal plus interest
for the last payment period of the loan is still owing.
Interest Rate
The percentage rate that represents the cost of borrowing or the benefit
of lending money.
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J
Joint Tenancy
Where two or more persons acquire an equal undivided interest on a
property. When one person dies, that person's share automatically goes
to the survivor or survivors.
Judgment
An award granted to a successful party to litigation by the court. The
award may include a specific amount of money to be paid to the
successful party by the unsuccessful party to the litigation.
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K
Key Lot
A property that must be acquired because it is essential to the
development of land, either because of its
strategic location or the timing of the acquisition.
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L
Lender Value
The estimated value of a property for lending purposes. It is a
long-term conservative estimate of the value of the security as
determined by the lender and therefore, does not necessarily equal
Market Value or Sale Price.
Liability
Monies owed by business. Contrast to Asset .
License
With respect to real property, a privilege to enter onto premises for a
certain purpose. However, this privilege does not confer upon the
licensee any title interest or estate in such property (e.g. exclusive
right to possession of the property). Example of a license include a
hotel suite where monthly rates may be available but the innkeeper has
the right to enter the suite at his pleasure.
Lien
A claim or charge on real personal property for payment of some debt,
lien obligation or duty.
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M
Maturity
The date on which the balance owing on a mortgage becomes due; the final
day of the term of a mortgage.
Mortgage
A document evidencing a debt owed by the borrower (mortgagor) to the
lender (mortgagee). Registration of the mortgage in the Land Title
Office transfers the mortgagor's interest in land to the mortgagee as
security for the repayment of the debt.
Mortgagee
The lender.
Mortgagor
The Borrower.
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N
Negligent Misrepresentation
A legal principle which provides that if in the ordinary course of
business, a person seeks information or
advice from a another who possesses special skills in circumstances in
which a reasonable man would know that his special skills were being
relied upon, and the person asked chooses to give the advice without
clearly qualifying his answer so as to show that he does not accepts
responsibility is it is incorrect then he accepts a legal duty to
exercise such care as the circumstances require. If he is incorrect he
may be liable for his negligent misrepresentation.
Net Income
The amount which revenues exceed expenses in any given time period.
Contrast to Net Loss.
Net Proceeds
The face value of a loan less all brokerage fees, appraisal costs and
other charges.
Nominal Rate
An interest rate quoted as a rate per annum; it is equal to the interest
Of Interest rate per compounding period multiplied by the number of
compounding periods. (For example, j2 = 10%; j4=12%; j12=11.5%).
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O
Offer
A proposal to so or refrain from doing some specified thing usually
followed by an expected acceptance, counter-offer, return promise or
act. The person who makes the offer is called the offeror. The recipient
of the offer is called the offeree.
Operating Expenses
Those costs which have to be incurred to keep any business going
including the business of renting real
property.
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P
Possession Date
Date on which the purchaser is entitled to possession of the
property.
Power of Attorney
A document conferring authority to one person to act as another's agent
on his behalf.
Prepayment
The act of fully or partially paying off the outstanding balance of a
loan at any point during the term of the loan at a time earlier than set
out in the contract.
Principal
That portion of the original amount borrowed which still has to be paid
back to the lender.
Purchaser's Statement
A closing statement in a real property transaction which indicates the
balance of cash required from the
purchaser to complete the transaction.
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Q
Qualifying Ratios
These are used to qualify an individual and determine the maximum
affordable payment. The first qualifying ratio is called the gross debt
service (GDS) is up a maximum of 32% of your gross income. The second
qualifying ratio is the total debt service (TDS) is up to a maximum 40%
of gross income.
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R
Restrictive Covenant
A covenant restriction the use of the land of the covenantor (the
Servient Tenement) for the benefit of land belonging to the covenantee
(the Dominant tenement). An example would be a restriction
on the height of a building on one piece of land so that adjacent or
adjoining lands are not put in shadow.
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S
Statement of Adjustment
A closing statement in a real property transaction whose format is
structured by debits and credits.
Sub-Mortgage Broker
A defined term in the Mortgage Broker Act. Basically, An individual
employed by the mortgage broker who satisfies any one of the following
requirements:
-
Carries on a business of lending money secured in whole or in part
of mortgages, whether the money is
his own or that of another person.
-
Holds himself out as, or by an advertisement, notice or sign
indicates that he is, a mortgage broker
-
Carries on a business of buying and selling mortgages or agreements
of sale.
-
In any one year, receives an amount of $1000.00 or more in fees or
other consideration, excluding legal
fees for arranging mortgages for other persons.
-
During any one year, lends money on the security of 10 or more
mortgages.
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T
Tax Rate
The number of dollars pre $1000.00 worth of actual value which is
payable in property taxes.
Tenants Agreement
Contract between the landlord and the tenant, pertaining to the letting
of residential premises.
Tenants in Common
Where two or more persons acquire interests in a single property. Each
may sell or bequeath their interest and in the event of death, their
interest becomes a part of their estate.
Term
With respect to mortgages, a time period at the end of which the
outstanding balance of a mortgage is due and payable.
Total Debt Service Ratio
The percentage of gross income which is the maximum amount that a
mortgagor is allowed to pay annually in principal, interest and property
taxes all other debts.
Transaction Record Sheet
A form, prescribed by the Superintendent of Real Estate, which contains
certain required information on
each transaction, including every transaction where a Deposit is
received and paid into the real estate agent's trust account.
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U
Underwriting
In real estate, underwriting refers to the analysis of the risk involved
for a lender to provide a mortgage loan and whether or not the risk is
acceptable. Underwriting involves a property evaluation and an
evaluation of the borrower's ability and willingness to repay the loan.
Unsecured Debt
Debt that is not guaranteed by collateral is considered unsecured. A
mortgage is considered a secured debt because the property is backing
the debt. Credit cards are unsecured debt because there is no
collateral. Interest rates are always higher on unsecured debt products.
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V
Variable Rate Mortgage
A loan being repaid by payments change as the market interest rate
changes.
Vendor's Statement Of Adjustment
Closing Statement which shows the net amount of proceeds to be paid to
Vendor upon completion of the transaction.
Vendor Take-Back Mortgage
A mortgage taken back by the vendor from the purchaser to to facilitate
a sale whereby the vendor becomes the mortgagee and the purchaser
becomes mortgagor.
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W
Walk-through
The buyer's final inspection of a property which is being purchased is
called a walk-through. This final inspection generally takes place on
the day of closing or one day prior to ensure all the conditions of the
sale have been met.
Witness
An individual who signs his or her name to a document for the purpose of
attesting to its authenticity.
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X
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Y
Yield
The income and/or value appreciation of an investment expressed in terms
of the purchase price of that investment. For example, if a property
that has sold for $100,000 is worth $2000.00 more one year later and has
generated an income of $5000.00 during the year, the yield to the
investor is ($2000 + $5000.00) $100,000 = .07 or 7%
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Z
Zero Down Mortgage
This type of mortgage provides 100% financing for the purchase of a home
Zoning
An area or region that is distinguished from adjacent areas by a
distinctive feature or characteristic.
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