| Acceleration Clause: A clause in your mortgage which allows the lender to demand payment of the outstanding loan balance for various reasons. The most common reasons for accelerating a loan are if the borrower defaults on the loan or transfers title to another individual without informing the lender. |
| Adjustment Date The date agreed to by both parties for the allocation and adjustment of property taxes, interest, utilities, rents and other appropriate items. This date is usually the same as the possession date. (See Seller’s and Buyer’s statements). |
| Agreement For Sale: The Seller agrees to sell the property to a Buyer on credit terms. Normally the Seller carries the financing himself and the Buyer arranges a payment with the Seller. The Seller remains on the title as registered owner. Very similar to a first mortgage. The agreement for sale is the registered contract. |
| Amortization: Paying off a debt, such as a mortgage, by instalments. The conventional amortization period for a mortgage is anywhere between 15 and 25 years. The shorter the amortization period, the less interest you have to pay. |
| Appraisal: An estimate of a property's value. |
| Asking (List) price: The price placed on the property for sale by the seller. |
| Assessed Value: Used for the purpose of assessing property tax by a local municipality, this property value is assessed by the B.C. Assessment Authority. |
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Balloon Mortgage: A mortgage loan that requires the remaining principal balance be paid at a specific point in time. For example, a loan may be amortized as if it would be paid over a thirty year period, but requires that at the end of the tenth year the entire remaining balance must be paid. |
| Blended Payments: Payments consisting of principal and interest components, paid during the amortization period of a mortgage. |
| Broker: A person licensed by the provincial or territorial government to trade in real estate. Real estate brokers may form companies or offices which appoint sales representatives to provide services to the seller or buyer, or they may provide the same services themselves. In parts of Canada, brokers are referred to as agents. |
| Buy Down: When the interest rate on a mortgage is higher than current rates, sometimes the rate can be reduced by payment to the lender of a lump sum that represents the interest differential from the present to the end of the mortgage term. |
| Buyer Brokerage Agreement: A written agreement between the buyer and the buyer's agent, outlining the agency relationship between the two parties and the manner in which the buyer's agent will be compensated. In some provinces, a buyer agency relationship arises automatically, without a written agreement establishing the relationship. |
| Buyer's Agent : A person or firm representing the buyer. A Buyer's Agent's primary allegiance is to the buyer. The buyer is the Buyer Agent's client. |
| Buyer's Broker: A person or firm representing the buyer. A Buyer's Agent's primary allegiance is to the buyer. The buyer is the Buyer Agent's client. |
| Buyer’s Statement Of Adjustment: The statement indicates the balance of cash (after all adjustments) required to complete the transaction. |
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Cap: Adjustable Rate Mortgages have fluctuating interest rates, but those fluctuations are usually limited to a certain amount. Those limitations may apply to how much the loan may adjust over a six month period, an annual period, and over the life of the loan, and are referred to as "caps." Some ARMs, although they may have a life cap, allow the interest rate to fluctuate freely, but require a certain minimum payment which can change once a year. There is a limit on how much that payment can change each year, and that limit is also referred to as a cap. |
| Caveat: A note placed on the register in the Land Titles Office at the instigation of a person who claims a certain interest in the land. In B.C., a caveat remains in force for only 2 months, then lapses. |
| Chattels: Personal property not attached or affixed to the land or property. Also refers to appliances, etc. in a rental property. |
| Client: The person being represented by an agent. The agent owes the client the duties of utmost care, integrity, confidentiality and loyalty. |
| Closing or Completion Date: The date on which the Seller is entitled to the net proceeds of the sale and the Buyer is entitled to the transfer of the title. Real Estate commissions and legal fees are paid out at this time. |
| CMHC: Canada Mortgage and Housing Corporation. A Crown corporation providing information services and mortgage loan insurance. |
| Co-Op Suite: A co-op is a company formed to create and operate defined living spaces within a building. A Buyer purchases shares in the company that normally owns the building. The purchase of these shares usually entitles the owner to the sole use of a suite in a co-op building through a long term lease or shareholder’s agreement. |
| Commissions: An amount agreed to by the seller and the real estate broker/agent and stated in the listing agreement. It is payable to the broker/agent on closing and shared, if applicable, among those salespeople involved in the sale. |
| Consideration: Something done or promised (i.e. deposit money) to be done by one party in return for something done or promised to be done by the other party (i.e. the transfer of title to the property). |
| Counter Offer: A response from the Seller to an offer from the Buyer. Legally this is an offer to sell. |
| CREA: The Canadian Real Estate Association. A national association representing the real estate industry on federal public policy matters, providing member services and education. CREA promotes adherence to a strict Code of Ethics and Standards of Business Practice. |
| CTAM: Cash to a new mortgage to be arranged. |
| Customer: A person who receives valuable information and assistance from a real estate broker or salesperson, but is not represented by that individual. |
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Debt-Service Ratio: The measurement of debt payments to gross household income which may include, in addition to the main wage earner's salary, salaries of other wage earners, commissions, bonuses, overtime, etc. |
| Deed: The legal document conveying title to a property. |
| Deposit: Monies taken at the time of acceptance as a sign of good faith. These monies are held in a real estate company’s trust account pending the completion of the purchase and are credited towards the purchase price. |
| Dual Agent: A real estate broker or salesperson who acts as agent for both the seller and the buyer in the same transaction. Both buyer and seller are the agent's clients. |
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Earnest Money Deposit: A deposit made by the potential home buyer to show that he or she is serious about buying the house. |
| Encumbrances: Anything that affects or limits the title to property such as a mortgage, lease, easement, etc. |
| Equity: The difference between the value of the property and the amount owing (if any) on the mortgage. |
| Escrow: An account set up by the real estate firm or Seller’s solicitor who acts as stakeholder on behalf of the Seller, to hold deposit funds. The money can be arranged to bear interest for the Buyer in certain circumstances. |
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Fair Credit Reporting Act: A consumer protection law that regulates the disclosure of consumer credit reports by consumer/credit reporting agencies and establishes procedures for correcting mistakes on one's credit record. |
| Financial Institutions: Banks, credit unions, insurance or trust companies. |
| Fixtures: All things attached to the property or growing on it. To avoid this dispute, specify in writing any items that will not be included in the sale of the property. Better yet, remove them prior to offering the property for sale. |
| FSR: Floor Space Ratio. A City zoning term that defines the maximum allowable square footage to be built or occupied in a building in relation to its lot size. |
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GE Capital Mortgage Insurance Company: GE Capital Mortgage Insurance Company is the only private sector source of mortgage insurance to lenders in Canada. |
| Government loan (mortgage): A mortgage that is insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA) or the Rural Housing Service (RHS). Mortgages that are not government loans are classified as conventional loans. |
| Gross Debt Service Ratio: Gross debt service divided by household income. A rule of thumb is that GDS should not exceed 30%. It is also referred to as PIT (Principal, Interest and Taxes) over income. Sometimes energy costs are added to the formula, producing PITE, which moves the rule of thumb GDS to 32%. |
| Gross Debt Service: The amount of money needed to pay principal, interest, taxes and sometimes, energy costs. If the dwelling unit is a condominium, all or a portion of common fees are included, depending on what expenses are covered. |
| Gross Taxes: The total amount of taxes owing as per your B.C. Assessment and municipal property tax bill before any deductions are made. |
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Hazard Insurance: Insurance coverage that in the event of physical damage to a property from fire, wind, vandalism, or other hazards. |
| High Ratio Mortgage: A situation where the loan exceeds 75% of the appraised value. This loan must be insured by C.M.H.C., G.E. Capital (Mortgage Insurance Canada) or other insuring agencies for a fee. |
| Highlight Sheet: An information and marketing sheet given to the public and other sales agents that outlines details of the property for sale. |
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Joint Tenancy: A form of ownership or taking title to property which means each party owns the whole property and that ownership is not separate. In the event of the death of one party, the survivor owns the property in its entirety. |
| Judgment: A decision made by a court of law. In judgments that require the repayment of a debt, the court may place a lien against the debtor's real property as collateral for the judgment's creditor. |
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Late Charge: The penalty a borrower must pay when a payment is made a stated number of days. On a first trust deed or mortgage, this is usually fifteen days. |
| Lease: A lease is a rental for a fixed period of time. Leases over 3 years duration should be registered in the Land Titles Office. |
| Listing Agreement: The legal agreement between the listing broker and the seller, setting out the services to be rendered, describing the property for sale and stating the terms of payment. A commission is generally payable to the broker upon closing. |
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Market Value: The highest price paid for a piece of property which has been exposed ‘for sale’ in the open market allowing a reasonable time to find a Buyer. |
| Maturity: The date on which the principal balance of a loan, bond, or other financial instrument becomes due and payable. |
| MLS® Listing: Multiple Listing Service. A listing service handled by the Real Estate Board that issues print and online listing information comprising details of properties for sale on MLS® in our market areas. |
| Mortgage Broker: A person or company having contacts with financial institutions or individuals wishing to invest in mortgages. The mortgagor pays the broker a fee for arranging the mortgage. Appraisal and legal services may or may not be included in the fee. |
| Mortgage Insurer: In Canada, high-ratio mortgages (those representing greater than 75% of the property value) must be insured against default by either CMHC or private insurers. The borrower must arrange and pay for the insurance, which protects the lender against default. |
| Mortgage: A contract providing security for the repayment of a loan, registered against the property, with stated rights and remedies in the event of default. Lenders consider both the property (security) and the financial worth of the borrower (covenant) in deciding on a mortgage loan. |
| Mortgagor: The property owner borrowing the money, secured by a mortgage. |
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Negative Amortization: Some adjustable rate mortgages allow the interest rate to fluctuate independently of a required minimum payment. If a borrower makes the minimum payment it may not cover all of the interest that would normally be due at the current interest rate. In essence, the borrower is deferring the interest payment, which is why this is called "deferred interest." The deferred interest is added to the balance of the loan and the loan balance grows larger instead of smaller, which is called negative amortization. |
| Net Taxes: The amount owing after allowable deductions made such as homeowners’ grant, and senior citizen’s deductions. |
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Offer to Purchase and Sale: The document through which the prospective buyer sets out the price and conditions under which he or she will buy the property. A legal agreement which offers a certain price for a specified piece of real estate. |
| Open Houses/Agents\' Opens: An agent’s open is an open arranged by the listing agent to allow all other agents in the area to view the property for their prospective Buyers, normally on a weekday morning. A public open house is usually held for a two hour time period between 1 and 5 p.m. on weekends when the listing agent will be present and potential Buyers will be encouraged to drop in. (Sellers are advised to be absent during these times). |
| Original Principal Balance: The total amount of principal owed on a mortgage before any payments are made. |
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P.C.D.S. or P.D.S.: See Property Disclosure Statement. |
| P.I.T.: Principal, Interest and Taxes. A method of combined mortgage payment. |
| Partial Payment: A payment that is not sufficient to cover the scheduled monthly payment on a mortgage loan. Normally, a lender will not accept a partial payment, but in times of hardship you can make this request of the loan servicing collection department. |
| Possession Date: The date the Buyer is entitled to possession of the property at twelve noon that day, subject to existing tenancies. |
| Pre-Approved Mortgage: A situation where a mortgagee (lender) will appraise a property prior to putting it on the market and set the ceiling mortgage funds that it will lend to a Buyer who meets its internal qualifications. |
| Property Disclosure Statement: The Property Disclosure Statement is designed to protect all persons involved in real estate transactions. It provides a written record of representations made and, as importantly, not made, allowing the Seller the opportunity to review the condition of your property so you're less likely to overlook a defect. Disclosure can make the property more attractive to potential Buyers who often require completion of this form to reduce any risk of misunderstanding. |
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Quitclaim Deed: A deed that transfers without warranty whatever interest or title a grantor may have at the time the conveyance is made. |
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Rate Lock: A commitment issued by a lender to a borrower or other mortgage originator guaranteeing a specified interest rate for a specified period of time at a specific cost. |
| Real Estate Board: A non-profit organization representing local real estate brokers/agents, salespeople, which provides services to its members and maintains and operates a MLS® system in the community. |
| Realtor: Trademark identifying real estate professionals in Canada who are members of The Canadian Real Estate Association, and as such, subscribe to a high standard of professional service and to a strict Code of Ethics. |
| Recorder: The public official who keeps records of transactions that affect real property in the area. Sometimes known as a "Registrar of Deeds" or "County Clerk." |
| Right Of Survivorship: In joint tenancy, the right of survivors to acquire the interest of a deceased joint tenant. |
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Seller Take-Back Mortgage: A situation where a Seller will agree to hold the mortgage in the case of a Buyer who may or may not qualify for a conventional mortgage, or as a way to attract Buyers by offering a lower interest rate. The Seller must be secured in his loan. |
| Seller's Agent: The Seller's Agent represents the seller -- either as a Listing Agent under the listing agreement with the seller or by cooperating as a Sub-Agent, typically through the MLS® system. In dealing with prospective buyers -- customers-- the Seller's Agent can provide a variety of information and services to assist the buyer in his/her decision-making. The Seller's Agent does not represent the buyer. |
| Seller's Statement Of Adjustments: The statement indicates the balance of cash to be forwarded to the Seller after all adjustments. |
| Seventy-Two Hour Clause: A protection clause for the Seller who accepts an offer which is subject to the sale of a property that the Buyer owns. The Buyer must remove his subjects within 72 hours or the Seller has the right to deal with the new offer to purchase. This clause is sometimes written as either a 24 or 48 hour clause. |
| Strata Property: The Condominium Act permits air space to be divided and fee simple titles created from that air space.
(A) Strata Suites: each strata lot (i.e. suite or office) is traced out on a strata plan that is filed in the land Titles Office. Each strata owner owns a fee simple title to his suite plus a share of the common property (i.e. hallways, land).
(B) Strata Duplex Or Townhouse: Strata owner owns fee simple title to a unit plus has exclusive use of limited common property (balcony, sundecks, yards, etc.).
(C) Bare Land Strata: Exists where a large parcel of property is divided into strata lots (i.e. homesites) and recreation facilities etc. are provided in the development as common property.
Unit Entitlement Of Strata Lot: Indicates the share of an owner in the common property and is used to calculate strata owner’s contribution to common expenses.
Strata Corporation: Strata owners collectively become the strata corporation and elect a strata council to run the daily operations of the project.
Strata By-Laws: Strata corporation have by-laws providing control, management, administration, use and enjoyment of the strata lots, common property, facilities and assets. These by-laws, may among other things, restrict the right of an owner to rent out his strata lot or restrict the keeping of pets. |
| Subject Offer: A legal agreement where there are certain conditions that must be met, before the agreement becomes firm and binding on both parties. |
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Tenancy In Common: As opposed to joint tenancy, when there are two or more individuals on title to a piece of property, this type of ownership does not pass ownership to the others in the event of death. |
| Term: The actual life of a mortgage contract (usually 1-5 years). Upon expiration of this time period the mortgage becomes due and payable (without penalty) or the mortgage rate is renegotiated for a further agreed upon term (See Amortization). |
| Title Registration: The legal title to an interest in land (by an innocent Buyer) is not disputable once it is registered in the Land Titles Office. Indefeasible or absolute security is given to registered titles in fee simple in British Columbia. This is not so in Ontario, for instance, where lawyers must take the trouble and expense of investigating the history of the title back to the original grant from the Crown to check for fraud, etc. or in Washington State, where a Buyer must purchase an insurance policy form a private title insurance company to protect his title to property. |
| Title Search: A check of the title records to ensure that the seller is the legal owner of the property and that there are no liens or other claims outstanding. |
| Title: A legal document evidencing a person's right to or ownership of a property. |
| Transfer Tax: State or local tax payable when title passes from one owner to another. |
| Trust Accounts (Escrow): An account set up by the real estate firm or Seller’s solicitor who acts as stakeholder on behalf of the Seller, to hold deposit funds. The money can be arranged to bear interest for the Buyer in certain circumstances. |
| Trustee: A fiduciary who holds or controls property for the benefit of another. |
| Truth-in-Lending: A federal law that requires lenders to fully disclose, in writing, the terms and conditions of a mortgage, including the annual percentage rate (APR) and other charges. |
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Variable-Rate Mortgage: A mortgage in which payments are fixed, but the interest rate moves in response to trends. If interest rates go up, a larger portion of your payment goes to the interest; if rates go down, more goes to cover the principal. |
| Veterans Administration (VA): An agency of the federal government that guarantees residential mortgages made to eligible veterans of the military services. The guarantee protects the lender against loss and thus encourages lenders to make mortgages to veterans. |
