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Wednesday, June 7th, 2017

Mortgage Glossary


A-C

A

Abandonment of Property
To vacate a property with a definite intention never to return.

Abandonment of Property
To vacate a property with a definite intention never to return.

Abstract of Title
Registry System: A condensed history of the title to a parcel of land. The abstract consists of a synopsis of every recorded instrument affecting the title to that land arranged in chronological order of recording.

Accelerated Weekly Payment
A mortgage repayment plan in which the borrower makes 52 payments per year instead of 48 which would be required if the payment plan called for four payments per month. The extra four payments each year have the effect of “accelerating” the repayment of the mortgage.

Acceleration Clause
A clause in a mortgage which provides that where default has occurred in making any mortgage payment, the outstanding mortgage amount becomes due.

Acceptance
The offeree’s consent to enter into a contract and to be bound by the terms of the offer.

Accredited Appraiser Canadian Institute (AACI)
The highest level of designation bestowed by the Appraisal Institute of Canada. It allows the holder to conduct appraisals and consultations on various types of property.

Accredited Mortgage Professional (AMP)
AMP is Canada’s only national designation for mortgage professionals. The AMP designation sets a single national proficiency standard for Canada’s mortgage professionals and is issued by the Canadian Association of Accredited Mortgage Professionals (CAAMP).

Accrued Interest
The interest charged for the period of time that has elapsed since the last interest date.

Action for Possession
A legal remedy available to a lender when a mortgage is in default. It allows the lender to take possession of the mortgage property.

Action of Receiver
A legal remedy available to a lender when a mortgage is in default, asking the courts to appoint a receiver who takes possession of the property

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

Acquittance
The term for a discharge of mortgage in Québec.

Adjustable Rate Mortgage
See variable rate mortgage.

Adjustment on Sale
A pro-rated division and distribution of prepaid or accrued taxes, prepaid insurance premiums, prepaid rents and other income and expenses. This adjustment usually occurs when a property is sold and is the manner of determining the amounts due to and from the parties.

Adverse Possession
The right by which someone occupying a piece of land might acquire title against the real owner, if the occupant’s possession has been actual, continuous, hostile, visible, and distinct for a statutory period. Adverse possession is not possible under Land Titles or when Crown property is involved.

Advertising Standards Canada (ASC)
Advertising Standards Canada (ASC) is the Canadian advertising industry’s self-regulatory body. ASC’s mission is to ensure the integrity and viability of advertising. They administer The Canadian Code of Advertising Standards.

Affidavit
A statement or declaration in writing and sworn to or affirmed before some officer who is authorized to administer an oath or affirmation, such as a notary public, or commissioner of oaths.

Agency
An agency relationship is created when one person, called the principal, authorizes another person, called the agent, to act on behalf of and subject to the control of the principal.

Agent
One who is authorized to represent and act on behalf of another person or business, the principal in transactions involving a third party. Unlike an employee who merely works for the principal, an agent works in place of the principal.

Agreement of Purchase and Sale
A written agreement between vendor and purchaser in which the purchaser agrees to buy certain real property and the vendor agrees to sell upon terms and conditions as set out in that agreement.

Alberta Mortgage Brokers Association (AMBA)
An independent non-profit organization serving the mortgage industry in Alberta.

Alienation Clause
A type of acceleration clause that demands payment of the entire debt upon sale or other transfer of the title.

Amending Agreement
An agreement between the lender and borrower by the lender in which the terms of the registered mortgage are changed. The amending agreement may or may not be not be registered on title.

Amortization
This refers to the process of paying off a mortgage in regular payments composed of both interest and principal.

Amortization Period
The time over which the mortgage is to be completely repaid, assuming equal payments. This means that when looking, for example, at a mortgage with a 25-year amortization period, it would take 25 years to reduce the balance to zero, if all regular payments were made on time and the terms (payment, interest rate) remained the same.

Amortization Schedule
A table showing the amounts of principal and interest which make up each of the periodic level payments and the outstanding principal balance of the loan after each level payment is made.

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

Anniversary Date
The same date in each calendar year during the term of the mortgage. The first anniversary date occurs one year from the date interest is adjusted and the periodic repayments begin.

Appointment of a Receiver
A legal remedy available to a lender when a mortgage is in default. The receiver takes possession of the property, collects rents, and pays any expenses as required.

Appraisal
An independent, unbiased report that uses various analysis techniques and market research to determine the realistic value of a property.

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

Appraisal Report
An independent assessment of a property by a qualified individual. A statement giving an opinion of value of an adequately described property, as at a specific date and supported by pertinent data.

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

Arm’s Length Transaction
A transaction between unrelated parties. A transaction freely arrived at in the open market unaffected by abnormal pressures as might be the case in a transaction between related parties.

Arbitration
The determination of a dispute by a disinterested third party.

Arrears
An overdue payment (in reference to a mortgage for the purposes of this text).

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

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

Assets
Goods of value, either tangible or not, that a borrower or business owns.

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

Assignment
The act of transferring rights held by one party, the assignor, to another party, the assignee.

Assignment of Lease
The absolute or conditional transfer of the rights of either party to a lease.

Assignment of Mortgage
The transfer of ownership of a mortgage from one party to another.

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

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

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

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

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

Attachment
The seizure of property by court order.

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

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

B

Balance Sheet
Also known as the Statement of Financial Position or Statement of Assets and Liabilities. The Balance Sheet is a listing of the assets, liabilities (debts), and owners’ equity of a business enterprise at a specific point in time. The assets must equal the liabilities plus the owners’ equity.

Balloon Payment
Any payment of principal over and above the regular payment.

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

Bank Rate
The rate at which the Bank of Canada charges loans to the chartered banks. This is the rate on which lending institutions base their prime lending rate.

Basis Point
One one-hundredth of one percent. Used to describe the amount of change in yield in money debt instruments, including mortgages.

Beacon Score
The name given to the credit score published by Equifax. See also Empirica Score.

Binder Insurance
A temporary agreement where one party agrees to insure another party while awaiting receipt of, and final action on, the application for insurance.

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

Blended Payments
Regular equal mortgage payments combining, or blending, interest and principal components in one constant payment.

Blended Rate
The rate that results from the blending of an existing mortgage and a new mortgage with differing interest rates into one consolidated mortgage. The calculation to determine the final rate takes into account both the interest rates and the amount of principal for each of the component loans.

Bona Fide
In good faith, with valuable consideration and with absence of notice of any problems.

Bonus

  • A sum paid by the borrower, or retained by the lender, from the advance of mortgage money as part of the consideration for the making of the loan.
  • A sum paid by the borrower to the lender as consideration for prepayment of all or part of the principle outstanding.

Book Value
The capital amount at which an asset is shown on the books of an account. Usually it is the original cost, less reserves for depreciation.

Book Value of a Mortgage
The mortgage amount outstanding on a mortgage at any given point in time. The book value is determined by deducting the amount of principal repayment from the original principal amount.

Borrowing By-laws
A document providing proof that a corporation has the power to borrow under its company charter.

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

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

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

Brokerage
The aspect of business concerned with bringing parties together for the transaction of business and the execution of contracts. Brokerage involves sales, exchanges and rentals.

Broker
One who acts as an intermediary between parties in a transaction. A broker, for a fee or other consideration, arranges a transaction (a sale) by a seller to the buyer.

Builder’s Loan
A loan designed for borrowers who need financing for construction projects. These differ from normal loans as the funds are received in stages (also known as draws) during the building process to protect the lender from construction abandonment.

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

Building Code
A set of minimum regulations respecting the safety of buildings with reference to public health, fire protection and structural sufficiency.

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

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

Buy Down
A lump sum payment as consideration for the reduction in the interest charged on a loan from that which would normally be charged.

C

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

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

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

Canadian Code of Advertising Standards
These are administered by Advertising Standards Canada. The goal of the standards is to promote the professional practice of advertising, by setting criteria for what is or is not acceptable practice.

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

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

Caisses Populaires
Credit unions as they are known in Québec. See credit union.

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

Capacity (5 Cs of Credit)
The ability of a borrower to repay a loan.

Capital (5 Cs of Credit)
The amount of money the borrower has invested into the property.

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

Capped Rate Variable Mortgage
A variable rate mortgage on which the lender has set a limit to interest rate increases or decreases.

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

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

Caveat Emptor
“Let the buyer beware”. Buyers must examine the goods or property they are buying since they buy at their own risk.

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

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

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

Chain of Title
Chain of title refers to who has owned the land in the past. It is uncovered through the lawyer’s search. See extent of title.

Character (5 Cs of Credit)
The overall opinion on a borrower’s credibility to repay a loan; the borrower’s length of employment is a key measurement.

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

Chattels
Movable possessions, personal property (generally items that may be removed without injury to the freehold estate).

Chattel Mortgage
A mortgage given on chattels. This type of mortgage is usually given as collateral security to a mortgage on real estate. As an example, there may be a chattel mortgage on refrigerators and stoves in an apartment building.

Closed Mortgage
A mortgage agreement that cannot be repaid, refinanced or renegotiated until maturity, unless otherwise stated in its terms.

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

Closing Process
The procedure of finalizing the sale, once the lender receives an accepted commitment.

Co-Applicant
One of two or more people applying together for a loan.

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

Collateral (5 Cs of Credit)
Guaranteed support for a loan, generally consisting of funds or real estate, that ensures added security to the lender. Collateral can also take the form of guarantees provided by third parties, i.e. guarantors.

Collateral Mortgage
The mortgage registered to document collateral security.

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

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

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

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

Common Mistake
Both parties make the same mistake in a term of the contract.

Completion Loan
The single disbursement of the total loan following satisfactory completion of the property.

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

Comparative Method of Appraisal
A method of appraisal that bases the value of the property on that of comparable properties.

Compound Interest
Interest charged not only on the principal sum but also on interest amounts charged, but not paid, in preceding periods that accumulate as new principal.

Condition
A clause or statement in the contract, which must be met to fulfil an obligation in the agreement.

Condition Precedent
Clause in a contract that lays down factors and/or events that must occur for the agreement to be binding.

Condominium
Ownership of property whereby the owners hold negotiable title to their own unit. At the same time they share with fellow owners the title and cost of operation of the balance of the property (common elements) making up the condominium.

Consideration
Consideration means “some right, benefit or profit accruing to the promisor or some forbearance, detriment, loss or responsibility suffered by the promissee”. In other words, when dealing with contracts, the party trying to enforce the contract must have provided some benefit in return for the promise to complete the contract.

Contract
A contract is a legally binding agreement between two or more capable people for consideration or value, to do or not do some lawful and genuinely intended act.

Contract of purchase and sale
A contract involving the sale of a property that outlines the complete duties of the promisor and the promissee in the real estate transaction.

Conveyance
The transfer of an interest in property from one person to another.

Conventional Mortgage
A loan based on the credit of the borrower and on the collateral for the mortgage. A conventional mortgage does not exceed 75% of the market value of the property. This means that the borrower must have 25% or more available for the down payment.

Convertible Rate
Mortgages with a convertible rate feature allow borrowers to fix the rate of their variable rate mortgage at any time with no penalty.

Co-Operative
A form of multiple ownership of real estate in which a corporation or business trust holds title to a property. Individual unit holders have the exclusive right to occupy their unit by lease but their investment in the corporation is by way of shares.

Co-Ownership
The idea that a property (present or future) can be held at the same time by several persons. The most common types of co-ownership are joint tenancy and tenancy-in-common.

Corporation
A separate legal entity which exists apart from a person but has the rights and liabilities of an individual.

Cost of Goods Sold (Income Statement)
The costs of purchasing or producing and manufacturing items sold.

Counter Offer
A new offer made in response to an offer received. This has the effect of rejecting the original offer and placing the counter offer on the table for consideration.

Covenant
An agreement in writing (in Common Law must be under seal) contained in a deed and creating an obligation. It may be positive, stipulating the performance of some action. It may be negative or restrictive, forbidding the commission of some act.

Credit (5 Cs of Credit)
The repayment history of the borrower.

Credit Report
A detailed description of the applicant’s credit records. This includes information provided by lenders concerning credit card payments and loans repayment history.

Credit Score
A single number that represents the information found in a borrower’s credit history. Equifax’s credit score is known as the Beacon Score, while TransUnion’s score is called the Empirica Score.

Credit Unions
Credit unions are lending institutions owned by their members. Membership is often based on a common bond of association such as employment or ethnic background.

Creditor
One to whom a debt is owed.

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

Current Assets
Goods that can easily be turned into cash, sold or consumed within a year’s time.

Current Liabilities
Debts and obligations that are expected to be paid within a year, e.g. account payable, expenses, taxes.

Current Ratio
A measure that shows the ability of a firm to pay its current liabilities. It is calculated by dividing current assets by current liabilities.

 

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