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Wednesday, June 7th, 2017

Mortgage Glossary – G-L


 G-L

G

Gale Date (for Mortgages)
The date on which interest is charged or compounded on the loan.

Garnishment
The legal attachment of a debtor’s wages, cash flow or assets by creditors. The party served with notice must comply with the Garnishee Order and forward funds to the creditor(s) named.

Genuine Consent
For genuine consent both parties must have a clear understanding of the details of the contract in question. Lack of genuine consent can void an agreement.

Good Title
A proof of ownership that is free of any legal holds or claims.

Grant
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 Area
The total floor area of a building, measured from the outside of the exterior walls.

Gross Debt Service Ratio (GDS)
The percentage of the borrower’s income that is needed to make all payments for costs associated with housing. There is a maximum amount associated with this ratio to ensure that borrowers can afford to carry the debt.

Gross Income (Single Family)
The total annual personal income before deductions used in the calculation of an applicant’s debt service ratios.

Gross Leasable Area
The total floor area designed for tenant occupancy and exclusive use and that area on which tenants pay rent. This does not include common areas.

Gross Profit (Income Statement)
Total revenue of a business minus the cost of goods it sold.

Ground Lease
Contract for the rental of land, usually for a long term.

Group Insurance
A type of insurance plan in which premiums are set for a large group as a whole, as opposed to individual premiums set on personal characteristics. All mortgage creditor insurance plans are group insurance plans.

Guarantor
One who promises to pay a debt or perform an obligation contracted by another in the event the original borrower fails to pay or to perform as contracted.

H

High Ratio Mortgage
A mortgage is considered high ratio when the loan-to-value is 75% or more. This occurs when the borrower’s down payment is 25% or less of the property value.

Highest and Best Use
This is the most probable, legally allowable, financially feasible use for the property in question. The appraiser includes an opinion on this as part of the appraisal report.

Holdback
The withholding of or non-advancement of a portion of a mortgage loan to maintain adequate security,
1. pending achievement of a performance requirement, or
2. as protection against liens.

Home Equity Financing
A type of mortgage refinancing in which the mortgage amount is increased to take advantage of the increased equity in a home.

Household Formation
Looks at how individuals group together to create a household. A household can be made up of an individual, a couple, or either one of these with children. Generally mirrors growth, aging, and divorce/separation patterns of the general population.

Hypothec
The appropriate civil law term that corresponds to the common law concept of ‘mortgage’.

I

ICI Properties
Investment, commercial, and industrial properties.

Illegal Contract
A contract that requires criminal acts and is thus void. The parties involved have no standing in court.

Illiterates
In law, an illiterate refers to an individual who cannot read or speak English. Illiterate individuals are bound to an agreement if they understand its nature. However, if it is fraudulently interpreted by another party, then the contract is void. See foreigner.

Immigration
To enter and settle in a country or area in which one is not native.

Immovable Property
The term used for real property (as opposed to personal property) in civil law.

Incapacity
Refers to the inability of people to make or engage in certain binding dispositions of their rights, such as entering into contracts.

Income Property
Real property that is used, or is capable of being used, for the production of annual income through leasing of the property.

Income Statement
Summarizes the findings of calculations between a company’s revenues and expenses. The income statement can be reported annually, quarterly or monthly. The income statement is generally broken down as follows:

  • Revenue or Sales – Earnings from day-to-day operations of the business
  • Cost of Goods Sold -The costs of production and manufacturing
  • Gross Profit – Total revenue of a business minus the cost of goods it sold
  • Operating Expenses -The total costs of the day-to-day operations
  • Net Income from Operations – The amount that is remaining when you subtract all costs and taxes from total sales

Incorporated Companies
A form of business ownership in which the business is set up as a separate legal entity under the laws of the jurisdiction it operates in (provincial and/or federal). When an incorporated company is a party to a contract it is important to determine if the company exists, and if it has the capacity to become a party to the contract.

Indefeasible
That which cannot be forfeited or done away with.

Independent Mortgage Brokers Association of Ontario (IMBA)
A volunteer-based organization serving independent mortgage professionals in Ontario.

Industrial Property
Property that contains units that are designed for manufacturing, production and warehousing.

Infant
A person younger than the age of majority (varies among provinces and territories).

Inflation
A general increase in the price level of goods and services.

Ingress
Going in; right of entrance.

Injunction
An order of a court of equity prohibiting an act or compelling an act to be done.

Insanity
Categorized as a form of Incapacity which means that such individuals cannot engage in contractual agreements. If insanity occurs after entering a binding agreement, contracts can be cancelled or, if sanity is regained, a reasonable time is allowed to rescind a contract.

Instrument
A formal written legal document.

Insurable Interest
An interest of such a nature that the occurrence of the event insured against would cause financial loss to the insured. Such interests, for example, may be that of an owner, a lender, a lessee or a trustee.

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

Intangible Assets
Non-physical goods that have value to a business. Most common forms are business goodwill or legal rights to market a product.

Interest
An amount, expressed as a percentage, which a borrower agrees to pay on borrowed money, at a certain frequency as per an agreement with the lender.

Interest Accruing Loan
In this type of loan no payments on interest or the principal are paid until the end of the term. Only when the mortgage contract has expired are the payments due.

Interest Adjustment
The process of calculating compound interest payable on the amount borrowed between the day the loan is disbursed and the day the amortization period starts.

Interest Adjustment Date
The date from which interest is calculated at the rate and compounded at the frequency set out in the mortgage contract. It is normally the first day of the month following the closing of the mortgage transaction.

Interest Factor
The decimal equivalent for an interest rate on a unit amount for a certain period of time, calculated as the interest rate divided by the number of days in a year, times the number of days accrued.

Interest Only Loan
A loan in which the borrower only pays regularly scheduled payments on the interest to the lender and the principal remains the same during the life of the loan. The principal is repaid in full at the end of the loan’s term.

Interests Less than Estates, or Interests Less than Full Ownership
These describe the situation when a fee simple owner divides ownership according to the kind of use permitted or restricted upon the land.

Interest Plus Specified Principal Loan
Also known as a straight-line principal reduction loan. In this type of loan an equal amount of principal is repaid at every interest compounding period in addition to the interest that must be paid for that period.

Interest Rate
Interest rate is the percentage charged on outstanding loan balances.

Interest (Unities)
All joint tenants must have the same interest (extent, nature, duration) in the land.

Interim Financing (Construction Financing)
Interim loans are used to provide construction financing until the permanent loan can be funded.

Internal Rate of Return
That rate at which the present worth of all present and future investment costs equals the present worth of all present and future investment benefits.

Intoxication
see Insanity. This is another form of incapacity in contract law.

Investment Property
Property which is rented out to individuals who do not own the property, and pay rent to the owner of that property. The opposite of an owner occupied property.

Invitation to treat
It is an action by one party inviting others to make an offer. It is not a contract. An invitation to treat may be seen as a request for expressions of interest.

J

Joint Tenancy
An ownership of property by two or more people, each of whom has an undivided interest subject to the right of survivorship.

Joint Venture
An arrangement under which two or more people or businesses go into a single venture as partners.

Judgement
The official and authentic decision of a court of justices upon the respective rights and claims of the parties to an action or suit being litigated and submitted to its determination.

Judicial Sale
A legal remedy available to a lender when a mortgage is in default. With this remedy any excess money from the sale of the property over and above the mortgage debt is distributed to the borrower.

Junior Mortgage
A mortgage that is subsequent to the claims of the holder of a prior (senior) mortgage.

K

Known Defects
Problems associated with the title that are known before the policy is taken out.

L

Land
Includes not only the ground or soil, but also everything that is attached to the earth, whether by course of nature, such as trees and herbage, or by the hand of man, such as houses and other buildings. It includes not only the surface of the earth but everything under it and over it. Condominium Acts divide land horizontally thereby limiting the vertical ownership.

Land Titles System
This is a system of land registration under which the registrar, or master of titles, passes on the validity of the mortgage instrument, determines its legal effect, and the Government guarantees title.

Land-use Regulations
Municipal level regulations that restrict and regulate the types of buildings and uses allowed on a property.

Late Charge
An additional charge a borrower is required to pay as penalty for failure to pay a regular instalment when due.

Latent Defects
Present or potential imperfections or blemishes that are not readily evident.

Lawyer’s Report (or Opinion) on Title
The Lawyer’s Report outlines the mortgage details, including the results of the title search, tax details, fire insurance and any other related insurance coverage details, verification that title insurance has been obtained (if applicable), and any other relevant facts (i.e. easements, restrictions, liens).

Lead Lender (Mortgages)
A financial institution that heads up a financial consortium or syndicate of two or more lenders to provide funds for a mortgage.

Lease
A contract between landlord (lessor) and tenant (lessee) for the occupation or use of the landlord’s interest in a property by the tenant for a specified period of time and for a specified consideration (rent).

Lease Guarantee Insurance
Insurance that protects the owner of leased commercial and industrial real estate from loss of rental income through the failure of a tenant to make rental payments.

Leasehold
An estate or interest in an estate in real property held by virtue of a lease for a term of years. A leasehold is considered personal property.

Leasehold Mortgage
A mortgage given by lessees on the security of their leasehold interests in the land.

Legal Description
The written geographical description of a property (metes and bounds) as described in the land register.

Legal Intent
This means that for an individual to be bound by a contract, that person has intended to create a commitment.

Lending Value
The property value for mortgage purposes. Usually, the lesser of appraised value or sale price.

Lessee
Tenant.

Letter of Instruction
A letter of instruction will call for the lawyer to act for the lender and administer the distribution of the mortgage loan.

Liabilities
A business’ or a borrower’s debts and legal obligations.

Lien
A claim on real or personal property for the payment of some undischarged debt or duty.

Life Estate or Interest
An interest in land that gives exclusive possession of the land for a lifetime only.

Limited-Restricted Appraisal
A type of appraisal that provides only an exterior inspection for transactions that are somewhat riskier than standard, e.g., in a new or unknown market, or in mixed use neighbourhoods but not high risk. Also known as a drive-by appraisal.

Liquidity
The readiness or ease with which an asset can be converted to cash.

Listing Agreement
The listing agreement is a contract between a seller and a real estate agent or broker. It sets out the conditions of the listing. A listing agreement generally includes, but is not limited to, the following: the length of the listing period, the desired sales price and the amount of the commission.

Loan Companies Act
A federal act regulating loan companies.

Loan Qualification
Also known as qualifying the borrower. Loan qualification is the process of analyzing the buyer’s eligibility for financing.

Loan-to-Value Ratio (LTV)
The amount of the mortgage loan compared to the value of the property. This ratio is calculated by the lender prior to providing the loan. The results of this calculation help to determine whether or not the applicant will qualify for a loan and whether the application, if approved, will be for a conventional loan or a high ratio loan.

Long Term Investments
These investments are similar to fixed assets but typically do not depreciate in value.

Long Term Liabilities
Debts and obligations that must be repaid over a long period of time, e.g. mortgages.

Lump Sum Payment Option
A clause that may be included in an open mortgage allowing the borrower to prepay a portion of the principal if desired and in accordance with the specific terms of the contract.

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