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Friday, October 28th, 2016

Mortgage Glossary M-P


 

M-P

M

Marketable Title
A title that may not be completely clear but has only minor objections that a well-informed and prudent buyer of real estate would accept.

Market Data Approach
One type of appraisal. See direct comparison and methods of appraisal.

Market Value Appraiser (MVA)
A designation awarded to practicing realtors who meet specific experience and education requirements by the Canadian Real Estate Association, the MVA demonstrates an acute sense of local markets and values that enables them to provide realistic residential appraisals to lenders.

Marketing
The process of planning, promoting, and distributing ideas to encourage consumers to purchase a product and/or service.

Marketing Environment
The marketing environment includes economic, demographic, sociological, competitive, political and regulatory forces in the target market.

Marketing Strategy
An organized, detailed plan to meet a specific set of goals. It involves a combination of product concepts, a pricing scheme, promotion ideas, and a distribution plan.

Maturity
The end of the mortgage’s term.

Maturity Date
The final day of the term of the mortgage, on which the balance of the mortgage owing becomes due.

Maximum Loan Amount
The maximum dollar that a lender is willing to fund. It is expressed as a percentage of the value of the property to be purchased when using the loan to value ratio.

Metes and Bounds
A system of land description whereby all boundary lines are set out using terminating points and angles. ‘Metes’ refers to a limit or limiting mark and ‘bounds’ refers to the boundary lines.

Methods of Appraisal
There are three methods of appraisal:

  1. Direct Comparison
    Also known as market data approach. Direct comparison generates a property value based on the current selling prices of similar properties.
  2. Cost Approach
    An estimation of land value and the cost of replacing the building less the depreciation of the property in question.
  3. Income Method
    This method is used for valuating income-producing properties such as apartment complexes, plazas and commercial units.

Migration
The movement of people to or from one country or area to another.

Mill Rate
A rate which, when multiplied by each one thousand dollars of property assessment, gives the annual real estate taxes.

Minor
See infant.

Misrepresentation
A statement of false facts, generally occurring during negotiations prior to contract creation. Misrepresentation typically induces the other party to enter the agreement.

Mistake
An error in the terms of a contract or agreement. There are three types of mistake:

  1. Common Mistake
    Both parties make the same mistake in a contract.
  2. Mutual Mistake
    Each party makes a different mistake on the same contract.
  3. Unilateral Mistake
    One party is mistaken while the other party is aware of it and makes no attempts to rectify it.

Moratorium (Mortgage)
A period during which a borrower is granted the right to delay fulfillment of an obligation.

Mortgage
A legal method by which a borrower can pledge property to a lender as security for a debt. In Quebec, this is referred to as a hypothec.

Mortgage Agent
An individual authorized to deal in mortgages on behalf of a mortgage broker.

Mortgage Averaging
A method of determining a weighted mortgage rate. Mortgage averaging is used when calculating an “average” rate for a first and second mortgage, each of which has a different mortgage rate.

Mortgage Banker
One who originates mortgages with the intent to sell them to permanent investors. The mortgage banker does so under the understanding that it will service these loans for the investor.

Mortgage-Backed Securities (MBS)
An MBS represents an undivided interest in a pool of insured residential first mortgages. As mortgages, these financial instruments are secured by the value of the underlying real estate. NHA MBS carry the CMHC Timely Payment Guarantee and represent an obligation of the Government of Canada.

Mortgage Bond
In recent years, there has been an increased activity in mortgage bonds, mainly for larger loans. When a very large loan is required, the number of potential lenders is limited. A loan in the category of $50,000,000 for instance, is usually made by the mortgage bond method that is really a device for dividing up the loan. A bond could be issued for an amount as low as $100,000 and sold to various pension funds through investment dealers on a public issue, or more commonly sold as a private placement issue.

Mortgage Broker
An individual authorized to deal in mortgage and lend money using real estate as a security.

Mortgage Brokers Act
A piece of legislation that regulates the activities of mortgage brokers across Canada. In Ontario, for example, the Mortgage Brokers Act regulates the activities of mortgage brokers in that province.

Mortgage Brokers Association of British Columbia (MBABC)
A non-profit association of mortgage brokers serving British Columbia.

Mortgage Consultant
See mortgage agent.

Mortgage Creditor Insurance
This type of insurance protects the borrower, by relieving the borrower of the need to make mortgage payments should unforeseen circumstances make it impossible for them to do so (e.g. serious illness or death).

Mortgage Default Insurance
A type of insurance which protects the mortgage lender in case the borrower defaults on the mortgage payments.

Mortgage Fraud
Any material misstatement, misrepresentation or omission relied upon by a lender or insurer to underwrite, approve, fund or insure a mortgage loan.

Mortgage Impairment Insurance
A master insurance policy carried by mortgage lenders that provides them with insurance proceeds in the event of an otherwise uninsured loss of a property securing their debt. Some policies also insure losses resulting from the borrower’s failure to pay real estate taxes.

Mortgage Originator
A mortgage professional engaged in the acceptance, completion and/or submission of the mortgage loan applications to an underwriting lender.

Mortgage Portfolio
The aggregate of mortgage loans held by an investor.

Mortgage Refinancing
The replacement of current mortgage financing with new financing, usually to take advantage of different interest rate or financial conditions or the existing equity in the property.

Mortgage Representative
Employees of a financial institution who originate mortgages. Unlike originators operating outside of lending institutions and are regulated provincially, institutional originators, if working for federally incorporated lenders, are governed under the Office of the Superintendant of Financial Institutions (OSFI).

Mortgage Servicing
The process of managing the administrative duties resulting from the mortgage contract.

Mortgage Specialist
See mortgage agent.

Mortgage Term
The length of time the interest rate is guaranteed for a mortgage. Mortgage terms normally range from 6 months to 5 years or more, after which time the borrower can either repay the balance of the principal owing or re-negotiate the mortgage at current rates.

Mortgaged Out
The situation existing when the total mortgage debt equals or exceeds the market value or cost of the property.

Mortgagee
The lender or creditor.

Mortgagor
The borrower or debtor.

MorWEB
The electronic mortgage application system available through Marlborough Stirling.

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

Municipal Property Assessment Corporation (MPAC)
MPAC is responsible for administering a consistent, Ontario-wide property valuation to property owners, municipalities, and the Province of Ontario. It operates using an automated valuation model (AVM).

Mutual Mistake
Each party makes a different mistake on the same contract.

N

National Housing Act (NHA)
A federal act, administered by CMHC, which seeks to assist the private market in producing affordable housing to meet the needs of most Canadians.

Net Income/Net Loss from Operations (Income Statement)
The amount that is remaining when you subtract all costs and taxes from total revenues.

No Cost Switching of Payment Option
This option allows the borrower to change the payment schedule (to either monthly/semi-monthly/bi-weekly/weekly) in an open mortgage at no charge.

No-Doc
Refers to ‘no document necessary’ when confirming past income earnings.

No-Fault
Title insurance claims are paid on a no-fault basis, which means that the insurer cannot argue negligence in order to deny coverage.

Nominal Interest Rate
Also known as the stated rate. This is the interest rate used to calculate interest payments. It differs from the effective interest rate.

Non-Conforming Use
A property that is being used in contravention of current zoning by-laws but is permitted to remain because it pre-dates the enactment of these zoning by-laws.

Non-Disturbance Agreement
An agreement that permits a tenant under a lease to remain in possession despite any action by a lender.

Non Est Factum
Latin for “it is not my deed”. A claim of ‘non est factum’ means that the signature on the contract was signed by mistake or without knowledge of its meaning.

Notes to Financial Statements
The part of a financial statement that includes an auditor’s or accountant’s opinion on the statements and other relevant notes pertaining to the company’s operations and the specific methods of accounting used.

O

Offer to Purchase
A written contract outlining the terms under which the buyer agrees to purchase the property. There may be conditions attached to the offer, for example, the offer may be conditional on the buyer arranging mortgage financing or selling a current home.

Offeree
The individual or group who receives an offer to enter into a contract.

Offeror
The individual or group who presents something to another for acceptance or rejection.

Open Mortgage
An open mortgage allows a borrower to repay any amount of the principal at any time without notice or penalty. Mortgages may be partially open, having clauses that allow partial pre-payment at specified times, or in specified ways. For example,

  • Double Up Option
    The opportunity to double the scheduled principal and interest payments.
  • Lump Sum payment Option
    The choice to prepay a portion of the principal.
  • No Cost Switching of Payment Option
    This option allows the borrower to change the payment schedule (monthly/semi-monthly/bi-weekly/weekly).
  • Skip Payment Option
    This alternative grants the borrower the ability to skip a monthly payment without the mortgage going into default.

Operating Expenses (Income Statement)
The total costs of the day-to-day operations of a business.

Operational Costs (Mortgage Fraud)
Costs associated with collections, legal commitments and foreclosure, property repair, management, and resale of homes. See reputational costs and public costs.

Option Agreement
This is an agreement in which the seller has the right, but not the obligation, to undertake an action. This act allows the offer to be kept open for a period of time under a separate contract.

Owner Occupied
The owner of the land also resides in that property. The opposite of an investment property.

Owner’s Equity
The amount left over for the firm’s owner(s) if the company’s assets were used to pay off all its liabilities.

P

Par
An expression used when a mortgage is sold or purchased for the outstanding balance without premium or discount.

Pari Passu
“On an equal basis”. When mortgages are syndicated, the lenders participate equally. No one party has preferential access to gains or is able to opt out of losses. In company stock, it refers to equal ranking of a company’s preferred shares.

Partial Discharge
A release from the mortgage of a definite portion of the mortgaged lands. A partial discharge may be given after the borrower has prepaid a specific portion of the mortgage debt.

Partially Amortized Mortgage
A mortgage that protects both borrowers and lenders from the risk of unexpected interest rate fluctuations. The loan matures on a short term basis, at which time the full amount of the outstanding amount must be either repaid or refinanced at current interest rates.

Participation
Income Participation: The lender’s right to share in the annual income produced by the property over the term of the mortgage, in addition to receiving debt repayments on the mortgage.

Equity Participation: Partial ownership of income or investment property given by the owner to the lender as part of the consideration for making the loan. There may be an indefinite term and may endure beyond the maturity of the loan. It need not involve any equity investment by the lender beyond the amount of the mortgage loan.

Partnership
A business co-owned by two or more people. This form of ownership is less common than a sole proprietorship or a corporation. Like a sole proprietorship, a partnership does not exist as a separate legal entity. Each partner is taxed on his or her share of any profits.

Performance
The actions required by a contract or agreement to fulfill one’s obligations. The contract is considered completed following the last act of performance.

Patent Defects
An obvious flaw.

Percentage Adjustments
These are estimates of differences between each factor being compared to the subject property, expressed as a percentage of the sales price in an appraisal. For example, a buyer might pay 10% more (calculated as a percentage of the selling price) for a home with a finished basement compared to one with an unfinished basement. See dollar adjustment.

Perfecting Title
The elimination of any claims against title.

Performance Bond
A bond issued by a duly incorporated surety company. It covers faithful performance of the contract and payment of all obligations arising under the contract

Permanent Loan
An amortizing loan on completed property, intended to remain on that property over the full amortization period. The terms and conditions of the loan usually change during that period.

Personal Liability
The borrower’s personal assets are pledged, or subject to claim, in addition to a primary security.

Personal Property
Alternatively referred to as ‘chattels’. Personal property is more temporary and more destructible than real property.

PITH
The four costs included in the calculation of the gross debt service ratio, namely principal, interest, taxes, and heat.

Plot Plan
A drawing showing a layout of improvements on a site, including their location, dimensions and landscapes. It is generally a part of the architectural plans.

Portable Mortgage
A mortgage with an option that allows a buyer to transfer a current mortgage to a new property (typically subject to credit approval and a property appraisal).

Possession (Unities)
Each interest is an undivided interest in the whole of the property.

Postal Acceptance Rule
This rule provides guidelines on how to accept offers. Basically it indicates that an acceptance should be delivered in the same manner as the offer is made and defines when that acceptance goes into effect. For example, if an offer is made by non-instantaneous means such as mail, then the acceptance is effective when it is put in the mailbox, rather than when it is received.

Postponement
The deferment of a prior charge on title to another.

Power of Attorney
A written instrument, duly signed and executed by an individual, that authorizes someone to act on his or her behalf, to the extent indicated in the instrument.

Power of Sale
A clause generally inserted in mortgages giving the lender the right and power, on default by the borrower, to sell the mortgaged property by public auction, private contract or tender.

Pre-Authorized Cheques
Direct withdrawals of payments due from a borrower’s bank account in accordance with authority granted by the borrower.

Premium
The amount, often stated as a percentage, paid in addition to the face value of a mortgage when a mortgage is being purchased.

Prepayment Clause
A clause inserted in a mortgage that gives the borrower the privilege of paying all or part of the mortgage debt in advance of the maturity date.

Prepayment Penalty
The sum of money (usually equal to an amount of interest) a lender may require from a borrower to repay all or part of any outstanding principal in advance.

Prime Rate
The interest rate at which financial institutions lend to their best customers.

Principal
The amount upon which interest is paid.

Principal Risk
A risk to the lender associated with interest only loans. This risk is a result of market fluctuations. If the market value of a property falls, it might be less than the principal amount of the loan due at the end of the mortgage term. The lender might not be able the entire principal.

Prior Charge
An encumbrance ranking in priority over other, subsequent charges.

Private Mortgages
Mortgages provided by private corporations and individuals.

Profit Margin
A calculation of how effectively a firm is using its resources, calculated by dividing net income after taxes by revenues.

Promissee
The person who can enforce the promise in a contract is called the promissee.

Promisor
The person who makes the promise in a contract is called the promisor.

Property Valuator
This automated valuation model from Landcor Data Corp. produces estimates of current market value based on data from the British Columbia Assessment Authority.

Public Costs (Fraud)
These are costs that affect the consumer and industry, such as new authentication methods and protection procedures. See reputational costs and operational costs

Pur Autre Vie
A life estate, or interest, measured by the life of a third person rather than that of the person enjoying the property.


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