Why does Real Estate seem to have it's own language? Common Real Estate Terms.

(May 11, 2016 )

Like many industries, Real Estate has it's own words and phrases that are not used in every day conversation. I've assembled an alphabetical list of most of them, to help you. If you have any questions, send me a text, call or email!

Agreement of Purchase & Sale:  A contract by which one party agrees to sell and another agrees to purchase. 
Amortization:  Period of time required to reduce debt to zero when payments are made regularly. 
Appraisal:  Process by which the mortgage lending value of a property is determined. Appreciation:  The increase of a property’s value over time. 
Assessment:  The value of a property set by the local municipality, for the purposes of calculating property tax. 
Assumable Mortgage:  A mortgage held on a property by the seller that can be taken over by the buyer, who then accepts responsibility for making the mortgage payments. 
Blended Mortgage:  A combination of two mortgages; one with a higher interest rate than the other, to create a new mortgage with an interest rate somewhere between the two original rates. 
Bridge Financing:  Interim financing to bridge between the closing date on the purchase of the new home and the closing date on the sale of the current home. 
Broker:  An intermediary between the buyer and seller who is licensed to carry out such activities. 
Building Permit:  A certificate that must be obtained from the municipality by the property owner or contractor before a building can be erected or renovated. 
Buy-down:  When the seller reduces the interest rate on a mortgage by paying the difference between the reduced rate and market rate directly to the lender, or to the purchaser, in one lump sum or monthly installments. 
Certificate of Status:  A written statement of a condominium unit’s current financial and legal status.  
Closed Mortgage:  A mortgage that cannot be prepaid, renegotiated or refinanced during its term. 
Closing:  The real estate transaction’s completion; When the parties involved agree that all legal and financial obligations have been met, and the deed to the property is transferred from the seller to the buyer. 
Closing Costs:  Expenses in addition to the purchase price for buying and selling a property. 
Closing Date:  The date on which the sale of the property becomes final and the new owner takes possession. 
Commitment:  A notice from a mortgage lender to a prospective borrower that the lender will advance mortgage funds of a specified amount under certain conditions. 
Common Elements:  The portions of a condominium development owned in common (shared) by the unit owners. 
Condition:  A clause in a contract that calls for the happening of some event, or performance of some act before the agreement becomes binding. 
Conditional Offer:  An offer to purchase subject to specified conditions.  These conditions could be the arranging of a mortgage, or the selling of a present home.
Usually a time limit in which the specified conditions must be met is stipulated. 
Condominium:  Shared ownership in property.  Owners have title (Ownership) to individual units and a proportionate share in the common elements. 
Conventional Mortgage:  A mortgage loan of up to a maximum of 75% of the lending value of the property for which a lender does not require loan insurance. 
Counter-offer:  One party’s written response to the other party’s offer during negotiation of a real estate purchase between buyer and seller. 
Debt Service Ratio:  The percentage of the borrower’s income that will be used for monthly payments. 
Deed:  A legal document that conveys (transfers) ownership of a property to the buyer. 
Default:  Non-payment of installments due under the terms of the mortgage. 
Deposit:  Payment of money or other valuables in consideration of or as a pledge for fulfillment of the contract. 
Discharge:  The removal of all mortgages and financial encumbrances on the property. 
Down Payment:  The difference between a property’s purchase price and the amount financed. 
Easement:  The right acquired for access to or over another person’s land for a specific purpose, such as for a driveway or public utilities.  This is referred to as a “servitude” in the Province of Quebec. 
Encroachment:  An intrusion onto an adjoining property. A neighbour’s fence, storage shed, or overhanging roofline that partially (or even fully) intrudes onto your property are examples of encroachments. 
Equity:  The difference between the price for which a property can be sold and the mortgage(s) on the property.  Equity is the owner’s “stake” in a property. 
First Mortgage:  The first security registered on a property.  Additional mortgages secured against the property are “secondary” to the first mortgage. 
Foreclosure:  A legal process by which the lender takes possession and ownership of a property when the borrower doesn’t meet (“defaults on”) the mortgage obligations. 
Hazard Insurance:  An insurance policy required by lenders to protect a property against damage or loss caused by fire, weather, etc. 
High Ratio Mortgage:  Loan that exceeds 75% of the property’s lending value, and which is insured through a mortgage insurance plan. 
Hold-back:  An amount of money withheld by the lender during the progress of construction of a house to ensure that construction is satisfactory at every stage.  The amount of hold-back is generally equivalent to the estimated cost to complete construction. 
Joint Tenancy:  A form of ownership in which two or more individuals (often spouses) have an equal share in the ownership of a property.  In the event of one owner’s death, his or her share is automatically transferred to the surviving owner(s), apart from the deceased’s will. 
Land Survey:  The accurate mathematical measurement of land and building there on. 
Land Transfer Tax:  Payment to the provincial government for transferring property from the seller to the buyer. 
Lien:  Any legal claim against a property, filed to ensure payment of a debt. 
Listing Agreement:  The contract between the listing broker and an owner, authorizing the REALTOR to facilitate the sale or lease of a property. 
Listing Broker:  The REALTOR who signs a contract with an owner to sell the property. 
Maintenance Fee: A monthly fee paid by condominium owners for maintaining the development’s common areas. 
Mortgage:  A contract between a borrower and a lender.  
Mortgage Broker:  A licensed individual who, for a fee, brings together a borrower in search of a mortgage and a lender willing to issue that mortgage. 
Mortgage Insurance Premium:  A premium, which is added to the mortgage and paid by the borrower over the life of the mortgage.  The mortgage insurance insures the lender against loss in case of default on the part of the borrower. 
Mortgage Life Insurance:  A form of reducing term insurance available for all mortgagors.  In the event of the death of the owner or one of the owners, the insurance pays the balance owing on the mortgage.  The intent is to protect survivors from losing their home. 
Mortgage Payment:  The regular installments made towards paying back the principal and interest on a mortgage. 
Mortgage Term:  The length of time a lender will loan mortgage funds to a borrower.  Most mortgage terms run from six months to five years, after which the borrower can either repay the balance (remaining principal) of the mortgage, or renegotiate the mortgage for another term. 
Mortgagee:  The entity that lends the money. 
Mortgagor:  The entity that borrows the money.  The borrower pledges a property as security to guarantee repayment of the mortgage debt. 
Multiple Listing Service (MLS):  A system for relaying information to REALTORS about properties for sale. 
Offer to Purchase:  A written contract setting forth the terms under which a buyer agrees to purchase a property.  Upon acceptance by the seller, it forms a contract, which will form the basis for the final document to be prepared by a lawyer or notary.  It includes the legal and/or municipal description (this may consist of the lot number as well as the street address), purchase price, closing date, mortgage and terms of repayment, and lists specific items included as part of the sale. 
Open Mortgage:  A mortgage that can be prepaid or renegotiated at any time and in any amount without penalty. P, I & T:  Principal, interest, and taxes due on a mortgage. P & I:  Principal and interest due on a mortgage. 
Partially Open Mortgage:  (Also called a “partially closed” mortgage.)  Allows the borrower to prepay a specific portion of a mortgage principal at certain times with or without penalty. 
Penalty:  A sum of money paid to a lender for the privilege of prepaying a mortgage in part or in full. 
Portability:  A mortgage feature that allows borrowers to take their mortgage with them without penalty, when they sell their present home and buy another one. 
Power of Sale:  The right of a mortgagee to force the sale of the property without judicial proceedings should default occur. 
Prepayment Option:  The right to prepay a specified amount of the principal balance.  Penalty interest may be incurred on prepayment options. 
Prepayment:  Full or partial payment of all or part of the principal, separate from the regular payments called for under a mortgage agreement. 
Principal:  The amount owing to the lender at any time. 
Rate (interest):  The return the lender receives for loaning you the money for the mortgage. 
Refinancing:   The process of obtaining a new mortgage, usually at a lower interest rate, to replace the existing mortgage. 
Roll-over Mortgage:  A mortgage loan where the interest rate is established for a specific term.  At the end of this term, the mortgage is said to “roll-over” and the borrower and lender may agree to extend the loan. If satisfactory terms cannot be agreed upon, the lender is entitled to be repaid in full.  In this case, the borrower may seek alternative financing. 
Sales Representative:  A licensed employee of a Real Estate Broker authorized to trade in real estate. 
Second Mortgage:  A second financing arrangement, in addition to the first mortgage, also secured by the property.  Second mortgages are usually issued at a higher interest rate and for a shorter term than the first mortgage.
Selling Broker:  The REALTOR who actually finds the buyer. 
Term:  The length of time, which you pay a specific interest rate on your mortgage loan.  At the end of the term, you may repay the balance of the loan or re-negotiate at current rates and conditions. 
Title:  Evidence of ownership. 
Vendor Take Back:  Where the seller of a property provides some or all of the mortgage financing in order to sell the property. 
Zoning Laws:  Municipal laws restricting the use of land for special purposes.