A |
Amortization
The period of time over which your mortgage is to be paid fully, based on regular payments.
Appraisal
An independent assessment of the value of the property by a qualified appraiser. Real-estate agents often offer this service free of charge. Banks offer the service as well, usually for a fee.
Assuming a mortgage
Taking over the previous owner's (or builder's) mortgage when you purchase a property.
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B |
Bridge financing/Bridge loan
A form of short-term loan from a bank, based on the equity you have in the house you are selling, which enables you to purchase your new home. The equity is based on the sale price of your current home with deductions for current mortgages or secured lines of credit, real estate agent commissions and legal fees related to the sale.
Buy down rate
The portion of the interest rate on a buyer's mortgage that you assume when the buyer purchases your home. If you are selling your home and the prospective buyer is not content with the interest rate on their mortgage, you can offer to add a certain percentage of it onto your existing mortgage.
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C |
Capped rate
An interest rate with a pre-determined ceiling or cap, usually associated with a variable-rate mortgage.
Closed mortgage
A mortgage that cannot be prepaid, renegotiated or refinanced prior to maturity, unless by prior arrangement.
Closing costs
Costs in addition to the purchase price of a property, such as legal fees and land transfer taxes. These must be paid on the closing date.
Closing date
The date on which the sale becomes final and the new owner takes possession of the property.
Condominium / condo
One of a group of housing units where each individual homeowner owns their individual unit space, and all homeowners share ownership of common areas and land.
Conventional mortgage
A mortgage for which the borrower contributes more than 20% or more of the value of the property as the down payment.
Convertible mortgage
A mortgage that you can switch from short-term to long-term, depending on your financial needs.
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D |
Default
A homeowner is ‘in default’ when he or she breaks the terms of a mortgage agreement, usually by not making required mortgage payments or by not making payments on time.
Down payment
The money that you pay initially for a house. Down payments typically range from 5%-20% of the total value of the home.
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E |
Equity
The difference between the market value of a property and the amount owed on the property. This difference is the amount a homeowner actually owns outright.
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F |
Floor plan
A scale diagram showing the arrangement of rooms in your home, by floor. It helps you to decide on the best model of home for your needs and to envision furniture placement.
Freehold
Exclusive ownership of your home and property for life, or an indefinite period.
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H |
High ratio mortgage
A mortgage for which the borrower contributes less than 20% of the value of the property as the down payment.
Home insurance
Insurance to cover both your home and its contents (also referred to as property insurance). This is different from mortgage life insurance, which pays the outstanding balance of your mortgage in full if you die. You should ensure that your home insurance will be effective on your closing date.
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I |
Interest adjustment
The amount of interest due between the date your mortgage starts and the date of the first mortgage payment. Sometimes there is a gap between the closing date of your home purchase and the first payment date of your mortgage.
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L |
Land transfer tax
A tax that is levied (in some provinces) on any property that changes hands.
Leasehold
An interest in a property for a specified period, usually in return for the payment of rent. A lease agreement defines terms and obligations.
Legal fees and disbursements
The legal costs associated with the sale or purchase of a property. It is in your best interests to hire a real-estate lawyer.
Lump sum payment
An extra payment that reduces the amount of your mortgage. This is the same as pre-paying, which you cannot do if you have a closed mortgage.
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M |
Mortgage
A loan that you take out in order to buy property. The collateral is the property itself.
Mortgagee/mortgagor
The mortgagee is the lender; the mortgagor is the borrower.
Mortgage broker
A company or individual who helps the homeowner secure the right financing when buying a property. A broker does not actually lend money but seeks out a lender and arranges the mortgage terms. This may include negotiating with the lender for the best deal for the homebuyer.
Mortgage default insurance
Required if you are contributing between 5% and 20% of the value of the property as the down payment. Offered by the Canada Mortgage and Housing Corporation (CMHC).
Mortgage life insurance
This form of insurance pays the outstanding balance of your mortgage in full if you die. An important note: this is different from home or property insurance, which insures your home and its contents.
Mortgage rate
The percentage of interest that you pay on top of the loan principal. For example, you may take out a mortgage of $100,000 at a rate of 12%. Your monthly payments will consist of a portion of the original $100,000, plus 12% interest.
Mortgage term
The length of time the interest rate is guaranteed for a mortgage. Mortgage terms typically range from six months to five years or more, after which you can repay the balance of the principal owning or re-negotiate the mortgage at current rates.
Moving expenses
Costs related to hiring packers, movers or renting a van.
Multiple Listing Service (MLS)
A computerized listing of the properties available in your area, including information and pictures of each property, and contact details for the real estate agency.
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O |
Offer to purchase/conditional offer (see purchase agreement)
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: offer being subject to arranging the mortgage or selling a home.
Open mortgage
A mortgage which you can pay off, renew or refinance at any time. The interest rate for an open mortgage is usually higher than for a closed mortgage rate.
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P |
Porting
Transferring your existing mortgage from one home to a new home. This is known as a "portable" mortgage.
Pre-approved mortgage certificate
A written agreement that you will get a mortgage for a set amount of money at a set interest rate. Getting a pre-approved mortgage may give you peace of mind in the process of searching for a house.
Pre-delivery inspection (PDI)
All builders of new homes and condominiums in Ontario are required by Tarion Warranty Corporation (see entry on Tarion) to conduct a pre-delivery inspection, or PDI, of the home, both inside and out, with their customers prior to the homeowner taking possession. A record is made of any items that are incomplete, damaged, missing, inaccessible or not working properly, which require attention by the builder before occupancy. It is also used by Tarion as a reference for any future warranty-related issues.
Pre-paid property tax and utility adjustments
The amount you will owe if the person selling you the home has pre-paid any property taxes or utility bills. The amount will be calculated based on the closing date.
Pre-payment
Repaying part of your mortgage ahead of schedule. (You may incur a penalty for pre-paying, depending on your mortgage agreement.)
Property survey
A legal description of your property and its location and dimensions, which is usually required by your mortgage lender. If not available from the vendor, your lawyer can obtain the property survey for a fee.
Purchase agreement
An agreement of purchase and sale, or an offer, states the buyer’s wish to purchase a property and to negotiate the terms of sale. In the offer, the buyer can indicate conditions they want to place on the sale, such as making the offer conditional on obtaining mortgage financing, or on the sale of their current home, or on the completion of a home inspection. The seller may make changes to the offer as well, and the purchase agreement might pass back and forth between buyers and seller until a final agreement is reached.
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R |
Refinancing
Increasing the amount of your current mortgage, at a new interest rate. The term of the new mortgage must be equal to or greater than the term remaining on your current mortgage.
Renewal/renewing
Once the original term of your mortgage expires, you may renew it with the original lender or pay off the outstanding balance.
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S |
Sales taxes
Taxes (Harmonized Sales Tax / HST) applied to the purchase cost of a new property.
Service charges
The extra costs payable for hooking up utilities and services such as hydro, gas and phone at your new address.
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T |
Tarion Warranty Corporation
Tarion administers the Ontario New Home Warranties Plan Act, which outlines the warranty protection that new home and condominium builders must provide, by law, to their customers. Tarion registers new home builders and vendors, enrols new homes for warranty coverage, investigates illegal building practices, resolves warranty disputes between builders/vendors and homeowners, and promotes high standards of construction among Ontario’s new home builders. Tarion also works with the building industry to help educate new home buyers about their warranty rights, and about how to protect and maintain their warranty.
Title search
A search through the list of previous owners of the property to ensure that the title is clear, in other words, that there is no lien on the property. Your real-estate lawyer typically conducts such a search at your request.
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V |
Variable rate mortgage
A mortgage with an interest rate that changes with the market each month. Therefore, the portion of your monthly payment that goes towards interest may rise or fall each month, but your total monthly payment will probably stay the same.
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W |
Warranty
A home warranty provides specific coverage against materials, labour, major systems, structural or building envelope defects, often from your first agreement to purchase through to a specified period after you have taken ownership.
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