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A
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Q
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Request a mortgage term
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area below
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%).
NOI: A company's operating income after operating
expenses are deducted, but before income
taxes and interest are deducted. If this is
a positive value, it is referred to as net
operating income, while a negative
value is called a net operating loss (NOL).
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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 fro 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.
Usury Law: The act of
lending money at an unreasonably high
interest rate, this rate is defined at the
state level. Repayment of loans at a
usurious rate makes repayment
excessively difficult to impossible for
borrowers. This is also called "loan
sharking" or "predatory lending".
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
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
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