When you begin your journey to a new living space, the language can be confusing – but you don’t need to be a linguist to understand all of the acronyms and words being thrown at you! We’re here to help. Our real estate dictionary is a quick and easy reference guide to all of the terms you’ll hear while embarking on this new adventure.
Adjustable Rate Mortgage
A mortgage loan whose interest rate is changed according to the movements of the current financial market.
A document setting out instruments registered against the title to a property, like deeds, mortgages, etc.
Agreement of Purchase and Sale
A legal agreement that outlines a certain price for a home. It may be conditional (certain conditions must be met before a deal can be closed) or unconditional (no conditions attached).
A payment plan which the borrower reduces debts through monthly payments of principal and interest.
The time in which all regular payments would entirely pay off a mortgage loan. The maximum allowance for a federally insured residential mortgage is 25 years.
Annual Percentage Rate (APR)
The annual cost over the life of a loan, including interest, service fees, points, loan fees, loan insurance and all other items.
Evaluation to determine the value of a piece of property for the marketplace.
The increase of value of a piece of property.
A tax applied to a property or the value placed on the worth of the property by a taxing authority.
A transaction which allows the buyer of a home to take over responsibility for an existing loan on a home instead of getting a new loan.
A legal document signed by the purchaser of a property to assume the responsibility of an existing loan, rather than obtaining a new one.
A receipt for the deposit made to secure the purchase of a home at the terms agreed on by both purchaser and seller.
A payment on a mortgage that is paid regularly (could b e weekly, bi-weekly, or monthly) during the term of the mortgage. The payments remain the same, however the principal increases and the and interest decreases over the lifetime of the mortgage.
A subsidy (usually paid for by a developer or builder) to help offset the cost of monthly payments on a mortgage loan.
The limit to the amount of the interest rate on a monthly payment can be increased for an adjustable rate loan, either during the adjustment period, or the lifetime of the loan.
Certificate of Occupancy
A document issued by an official agency declaring that a property meets the requirements of local codes, ordinances and regulations.
A mortgage loan that cannot be prepaid, renegotiated, or refinanced before the end of its term.
A meeting to sign all of the documents that officially transfer the ownership of property from the seller to the purchaser.
Charges paid at the closing for obtaining a mortgage loan and transferring the title of the property.
The date on which the close of a sale becomes official, and the new owner takes possession of the property.
Interest paid on both the principal of a loan, and the accrued interest.
Conditions, Covenants, and Restrictions (CC and Rs)
The standards that define how a property can be used (commercial, residential, combination), and the protections that a developer has laid out to protect all of the owners in a particular subdivision.
A home in a multi-unit complex, with each purchaser owning their individual unit and common areas are jointly shared and maintained with condominium fees.
The person responsible for the overall construction of a home, including purchasing, scheduling, craftsmanship, and management of subcontractors and suppliers.
A mortgage loan that is not insured by a government agency.
The ability to change a lone from an adjustable rate schedule to a fixed rate schedule.
A form of ownership in a multi-unit complex. Each purchaser owns shares of the entire complex rather than an individual unit.
When the owner of a property does no accept a purchasers offer, they may come back to negotiations with a counteroffer, which will include an amendment.
An agency which collects information from various sources to provide a credit score based on your borrowing and bill paying habits.
A report required by a lender from a credit bureau to determine the borrowers credit risk.
How attractive a property looks from the street or outside. A home with good curb appeal will have good landscaping and a well-maintained exterior.
A breach of the mortgage contract, such as not meeting the expected monthly payments.
The number of homes built on a parcel of land. Allowable densities are usually determined by local jurisdictions.
Money placed in trust by the purchaser when an offer is made. The amount is held by a lawyer, notary, or estate representative until the close of the sale.
The decrease in value of something over time after you have purchased it.
The difference between the sales price and the full mortgage amount on a property. The downpayment is usually paid at closing.
A clause in a mortgage contract that requires a borrower to pay the entire outstanding balance on sale or transfer of the property. A mortgage with a due-on-sale clause is not assumable.
A building containing two single-family homes.
A sum paid to a seller to show that a potential purchaser is serious about purchasing.
Permission granted to a person or company allowing access to the owner’s land. For example, a utility company or builder may be granted an easement. The owner may grant the easement, or they may be compelled by a local jurisdiction.
The difference between the value of the home, and what is left owing on it.
The handling of funds and documents by a third party on behalf of the purchaser and/or property owner.
An offer to purchase a property with no conditions attached.
Fixed Rate Mortgage
A mortgage that has a constant interest rate over the life of the loan, but payments are not necessarily level.
Fixed Schedule Mortgage
A mortgage that has a payment schedule that established at closing. The payments and interest rate are not necessarily level.
The legal process of which the lender takes possession of a property when the purchaser has failed to make payments on the loan. The lender can sell the property to cover the debts lost by a purchasers inability to pay the loan.
Ownership of land and buildings by one person, or two such as joint ownership. Includes detached, semi-detached, duplexes and townhouses. Freeholders can do what they want with their property, but must abide by local bylaws, building codes, and ordinances.
A fixed-rate, fixed-schedule loan that starts with a lower monthly payment. The payments rise annually for the first 5-10 years and then remain constant for the remaining payments. GPMs involve a negative amortization.
Gross Debt Service Ratio (GDS)
The percentage of a purchasers monthly income that will be used for monthly payments on a property, including principal, interest, taxes, heating costs, and half of condominium maintenance fees. Most lenders recommend that your GDS be no more than 35% of your before tax household income.
Gross Household Income
The total income before deductions of all household members who are co-applicants of a mortgage.
Growing Equity Mortgage (Rapid Payoff Mortgage)
A fixed-rate, fixed-schedule loan that starts with the same monthly payments as a level payment loan. The payments rise annually, with the entire increased amount being applied to reduce the outstanding balance. There is no negative amortization, and the increase in payments allows the purchaser to pay off their mortgage much sooner.
Protection against damages cause by fire, wind storms, or other common hazards. Most lenders require borrowers to have this insurance in an amount at least equal to the mortgage amount.
A mortgage loan that is higher than 80% of the value of the property. This type of mortgage usually needs to be insured against default.
An amount of money withheld by the lender during the construction or renovation of a home to ensure that the construction is completed satisfactorily.
The person who visually inspects a home to tell you if it requires repairs or if a home has had previous issues.
The interest rate which determines the changes in monthly payments on an adjustable rate mortgage.
The public facilities and services needed to support any residential development, including streets, bridges, water systems, and schools.
The cost paid to a lender for the use of the loan.
The rate set by a lender which is the cost of borrowing money.
Interest Rate Differential Amount (IRD)
A prepayment amount that may apply if you pay the principal amount of a mortgage before its maturity date, or pay the principal down beyond the prepayment privilege amount. It is equal to the difference between your annual interest rate and the posted interest rate on a mortgage that is closest to the remainder of the term, less any rate discounts received, multiplied by the amount being prepaid, and multiplied by the time remaining on the term of the loan.
S form of short-term financing to bridge the gap between the closing date of a new home and the closing date on the sale of their current home.
Property ownership where the tenants own a piece of property equally. If one owner dies, the other would automatically inherit the entire property.
A legal document that records the ownership of a piece of property.
An institution that lends money for a mortgage.
Level Payment Mortgage
A mortgage that has the same payments for the lifetime of the loan.
A claim against a property for money owed. A lien may be filed by a supplier or contractor that has not received payment for services rendered.
Lump Sum Prepayment
An extra payment, made in a lump sum, that reduces the principal balance of your mortgage. Can be made with or without penalty. A closed mortgage restricts the amount and frequency of prepayments, where an open mortgage you can make a lump sum prepayment anytime without penalty.
A factory built home that is transported to a location, and set on a permanent base, but still has the ability to be moved.
The last day of the term of a mortgage. On this day, the mortgage must be paid in full, or the terms renewed.
A factory built, single family dwelling, normally shipped in two or more parts (modules).
A broker that represents several lenders to help a purchaser find the right type of mortgage. The broker only takes a fee if they purchaser finds a loan.
A formal document issued by a lender, laying out the terms, specifying a loan amount, and length of time for a mortgage on a specified property.
Mortgage Life Insurance
A form of reducing term insurance recommended for all purchasers. Insurance will cover the mortgage payments in case of death, terminal illness, or accident.
A contracted loan in which a borrower’s property is leveraged as collateral, which can be paid in instalments over a long period. The buyer promises to repay all principal and interest, insure the home, pay property taxes, and keep the property in living condition.
Mortgage Loan Insurance
Required insurance if you have a high-ratio mortgage.
Mortgage Organization Fee
A charge imposed by a lender for the work involved to prepare and service a mortgage application. Usually around 1% of the loan amount.
A regular payment to a lender that includes both principal and interest.
The number of years or months over which you pay a specified interest rate.
The lender that makes a mortgage loan.
Multiple Listing Service (MLS)
The real estate agents cooperative service that shows homes that are for sale or have been sold recently.
An increase in the outstanding balance of a mortgage when the monthly payment is not large enough to cover the principle and all interest due.
Your financial worth, calculated by subtracting your liabilities from your total assets.
A formal document showing the existence of a debt and stating the terms of repayment.
The contract setting out the terms under which the purchaser agrees to buy a home.
A period of time in which a property is open for public viewings.
A mortgage that can be prepaid at any time without additional fees.
The expenses that are involved in maintaining a home. These include property taxes, insurance, utilities, communications charges, maintenance and repairs.
The monthly, semi-monthly, biweekly, or weekly mortgage payments.
Principal, interest, taxes and insurance, which make up the 4 main components of a home payment.
A charge of 1 percent of the mortgage amount. Points are assessed by the lender at close to increase the interest yield on a loan, and are a one-time fee.
Allows a purchaser to move to another property without losing their existing interest rate. Allows you to keep your current mortgage balance, term, interest rate, plus save by avoiding early discharge fees.
Payment of all or part of a debt before it matures.
Compensation to a lender when a closed mortgage is prepaid more quickly than is set out by the terms of the mortgage.
The ability to prepay all or a portion of the principal of a mortgage. A prepayment charge may apply if your mortgage is closed.
The amount of a mortgage loan.
Insurance you purchase for the buildings on your land.
Property Survey/Land Survey
A survey done to assess the boundaries of your property lines. The cost will depend on the complexity of the survey.
Taxes charged by the municipality where the home is located, based on the value of the home.
The resistance of insulation material to heat passing through it. The higher the number, the greater the value. Includes windows and building materials.
Realtor/Real Estate Agent
An intermediary between the seller and the purchaser of a property.
A charge for the recording of a transfer of property ownership. Paid to a city, county, or other appropriate branch of government.
Renegotiating a current mortgage agreement. May include increasing the principal or paying out the mortgage in full.
At the end of a mortgage term, the loan may roll over on to new terms and conditions accepted by both the lender and the borrower.
A fund set aside by a purchaser so that funds are available in case of an emergency repair needed.
Row House/Town House
One unit of several single family dwellings that are side by side and share a common wall.
A contract between the seller and the purchaser of a property, outlining what the purchase includes, the guarantees, when the purchaser can move in, and what recourse the purchaser has should the contract not be fulfilled, or if the purchaser cannot obtain a mortgage within the agreed upon terms.
Property that can be claimed by a creditor if a loan is not repaid.
Shared Appreciation Mortgage
A loan in which partners agree to share specifically outlined portions of the downpayment, monthly payments, and property appreciation.
Single-family Detached Home
A single family house that is not attached to any other houses.
Single-family Semi-detached Home
A single family house that is attached on one side to another building.
Two two-story homes that are stacked one on top of each other. Each unit has direct access from the outside.
A form of ownership in which the tenants own separate but equal parts of a property. If one partner should die, the surviving tenant would either have to be mentioned in the will, or in the absence of a will, be eligible to inherit based on local laws.
The length of a current mortgage agreement. A mortgage can be amortized over a longer period of time with a shorter term. After the term expires, the remainder must either be paid entirely, or renegotiated to a new term.
Evidence of a person’s legal ownership of a property, usually found in the form of a certificate or deed.
Insurance against loss or damage caused by a matter affecting the title.
Total Debt Service Ratio (TDS)
The percentage of gross income needed to cover monthly payments for housing and other debts and financing obligations. It is suggested that this amount not exceed 40% of your gross income.
Taxes paid for the transfer of property, levied by the local jurisdiction.
A mortgage for which the rate of interest can change depending on changes in the market.
The seller of a property.
Vendor Take-back/Take Back Mortgage
When the vendor finances the mortgage of the property.
An inspection of a home performed before the closing or settlement, to assess problems that need to be repaired before transfer of ownership.
A promise, written or implied, that the material and craftsmanship of a product meets a specified level of performance over a specified period of time. Written warranties on new homes can be backed by insurance companies, or by the home builders.
Regulations that outline the location, height, and purpose for any given property, issued by local governments.
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