Real Estate Glossary

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abandonment:
The voluntary surrender or relinquishment of rights and possession of real property with the intention of terminating one’s possession or interest, but without vesting this interest in any other person.
Accelerated Bi-Weekly Payment:
A mortgage repayment plan in which the borrower makes 26 payments per year instead of 24 which would be required if the payment plan called for two payments per month. The extra two payments each year have the effect of “accelerating” the repayment of the mortgage.
Accelerated Weekly Payment:
A mortgage repayment plan in which the borrower makes 52 payments per year instead of 48 which would be required if the payment plan called for four payments per month. The extra four payments each year have the effect of “accelerating” the repayment of the mortgage.
Acceptance:
An seller’s consent to enter into, and be bound by the terms of, a purchase contract.
Acre:
43,560 square feet or 4,047 square meters of land
Adjustable mortgage interest rate:
With an adjustable rate, both the interest rate and the mortgage payment vary, based on market conditions.
Amortization:
The period of time required to reduce a debt to zero when payments are made regularly. Amortization periods are often 25, 30 or 35 years long.
Anniversary:
Most lenders allow borrowers to make a pre-payment on the anniversary of the mortgage. It is applied against the principal and is a great way of reducing a loan.
Appraisal:
Process that determines the market value of a property.
Appraised Value:
An estimated value of a property that is completed by a certified appraiser for mortgage financing (see Market Value).
Appraiser:
Certified professional who carries out an appraisal.
Appreciation:
The increase in value of something because it is worth more now than when you bought it.
Approved Lender:
A lending institution authorized by the Government of Canada through CMHC to make loans under the terms of the National Housing Act. Only Approved Lenders can negotiate CMHC insured mortgages.
Asset:
Items of value owned by an individual. Assets that can be quickly converted into cash are considered “liquid assets.” These include bank accounts, stocks, bonds, mutual funds, and so on. Other assets include real estate, personal property, and debts owed to an individual by others.
Assumption Agreement:
A legal document signed by a homebuyer that requires the buyer to assume responsibility for the obligations of a mortgage by the builder or the previous owner. The new borrower must still qualify for the loan in order to assume it.
Assignment:
When ownership of your mortgage is transfered from one company or individual to another, it is deemed to be assigned.
Assumable Mortgage:
A mortgage which a qualified buyer can take over from the current owner of a property upon its sale. Assuming a mortgage can provide a buyer with a below market interest rate, (if rates are now higher), as well as saving on the legal costs of creating and registering a whole new mortgage. “Assumption” entails a simple amendment to the mortgage document registered on title. However the Seller is still liable for the mortgage for any and all subsequent terms.

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Balanced Market:
Where demand for property equals the supply of available property. Sellers usually accept reasonable offers and houses generally sell in sufficient time periods. Prices remain stable and there is usually a good number of homes to choose from. (see Buyer’s Market and Seller’s Market)

Bare Land Condominium:
Bare land condominium unit boundaries are defined by boundaries marked on the land; any buildings on the land are contained in the condominium unit. A bare land condominium complex may look like a neighbourhood of single-family homes or townhomes. Bare land condominiums operate in the same way as conventional condominiums, but may not have as many common property elements since yards and driveways are located inside the boundaries of each condominium unit. (See Conventional Condominium)
Bill of Sale:
A written document that transfers title of personal property. For example, when selling an automobile to acquire funds which will be used as a source of a down payment, of for closing costs, the lender will usually require the bill of sale (in addition to other paperwork) to help document this source of funds.

Biweekly Payments:

A mortgage in which you make payments every two weeks. With a biweekly payment schedule you make twenty-six(26) payments a year, reducing the time it takes to pay off your mortgage. (see Semi-Monthly Payments and Monthly Payments)
Blended Payment:
A mortgage payment that includes principal and interest. It is paid regularly during the term of the mortgage. The payment total remains the same, although the principal portion increases over time and the interest portion decreases.
Bridge Loan:
Bridge loans are obtained by those who have not yet sold their previous property, but must close on a purchase property. The bridge loan becomes the source of their funds for the down payment. However sellers often prefer to accept offers from buyers who have already sold their property.
Builder:
A person or company that builds homes.
Building Permit:
A certificate that must be obtained from the municipality by the property owner or contractor before a building can be erected or repaired. It must be posted in a conspicuous place until the job is completed and passed as satisfactory by a municipal building inspector.
Buyer’s Agent:
A Realtor who acts contractually on behalf of the buyer.

Buyer’s Market:
When there is a higher number of homes to choose from than buyers in comparison. Prices of homes tend to be lower and they remain available for sale longer. Buyers usually have more leverage in negotiating a purchase. (see Balanced Market and Seller’s Market)

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Capital Gain:
An increase in the value of a capital asset (investment or real estate) that gives it a higher worth than the purchase price. The gain is not realized until the asset is sold. A capital gain may be short term (one year or less) or long term (more than one year) and must be claimed on income taxes. Long-term capital gains are usually taxed at a lower rate than regular income. This is done to encourage entrepreneurship and investment in the economy.
For example, if an investor bought a house for $500,000 and sold the house five years later for $550,000, the investor would realize a capital gain of $50,000.

Capital Loss:
The loss incurred when a capital asset (investment or real estate) decreases in value. This loss is not realized until the asset is sold for a price that is lower than the original purchase price.
For example, if an investor bought a house for $550,000 and sold the house five years later for $500,000, the investor would realize a capital loss of $50,000.
Carriage home:
A carriage, link, or patio home is joined by a garage or carport. The garage or carport gives access to the front and back yards. Builders sometimes join basement walls so that link houses appear to be single-family homes on small lots. These houses can be less expensive than single-family detached homes.

Caveat:
A Latin word which literally means ‘let a person beware.’ A legal document called a caveat represents a caution noted on title, warning others of a person’s interest in the title or litigation, with the person entering the caveat called the caveator.
For example: The municipality will register a caveat on title providing utility providers access to their utility lines.
Caveat Emptor:
A Latin word which literally means ‘let the buyer beware.’ A common business tenet whereby the buyer is responsible for verifying any and all claims made by a seller.
Certificate of location (or Surveyor’s Certificate):
A document that shows property boundaries and measurements, specifies the location of buildings on the property and states easements or encroachments. (see Real Property Report
Certificate of Status:
Issued by the mortgagee to the mortgagor stating the unpaid principal balance of a mortgage, its interest rate, and any other related information. It is used to preclude the possibility of a claim that the actual unpaid balance or applicable interest rate is different. Also called an Estoppel certificate, it is a certificate that outlines a condominium corporation’s financial and legal state.
Closed Mortgage:
A closed mortgage has a locked-in payment schedule, which does not vary over the life of the closed term. A closed mortgage cannot be paid off, in whole or in part, before the end of its term, without incurring a penalty. Many closed mortgages limit prepayment options such as increasing your mortgage payment or lump sum prepayment (usually up to 20% of your original principal amount).
Closing Costs:
Costs in addition to the purchase price of the home, such as legal fees, transfer fees and disbursements, that are payable on closing day. The are approximately 1% of a home’s selling price.
Closing Day:
Date on which the sale of the property becomes final and the new owner takes possession of the home.

CMHC:
Canada Mortgage and Housing Corporation. A Crown corporation that administers the National Housing Act for the federal government and encourages the improvement of housing and living conditions for all Canadians. CMHC also develops and sells mortgage loan insurance products.
CMHC Insurance Premiums:
The CMHC Mortgage Loan Insurance premium is calculated as a percentage of the loan and is based on the size of your down payment. The higher the percentage of the total house price/value that you borrow, the higher percentage you will pay in insurance premiums.
Commitment Letter (or Mortgage Approval):
Written notification from the mortgage lender to the borrower that approves the advancement of a specified amount of mortgage funds under specified conditions.
Common Property:

is the part of a condominium complex that is owned in common by all unit owners. The bylaws define the common property in a particular complex and will include everything outside the boundaries of an owner’s unit. Items such as hallways, lobbies, recreational facilities, landscaping, exterior finishes, structural components, pipes, electrical wiring are common property. Each unit is assigned a proportional share in the common property. All owners can use, and are responsible for, the common property. Monthly contributions (condo fees) are assessed to pay expenses related to owning and operating the common property.

Compound Interest:
Interest calculated on both the principal and the accrued interest.
Conditional Offer:
An Offer to Purchase that is subject to specified conditions, for example, the arrangement of a mortgage. There is usually a stipulated time limit within which the specified conditions must be met.

Condominium (or strata):
A unit, usually in a highrise or lowrise, or a townhouse that can be owned. You own the unit you live in and share ownership rights for the common space of the building. Common space includes areas such as corridors, the grounds around the building, and facilities such as a swimming pool and recreation rooms. Condominium owners together control the common areas through an owners’ association. The association makes decisions about using and maintaining the common space.
Contractor:
A person responsible for overall construction of a home, including buying, scheduling, workmanship, and management of subcontractors and suppliers.

Conventional Condominium:
A conventional condominium is one where the unit’s boundaries are defined by the walls, floor and ceiling. Ownership consists of the unit and the undivided interest in the Common Property. (See Bare Land Condominium)
Conventional mortgage:
A mortgage loan up to a maximum of 80% of the lending value of the property. Typically, the lending value is the lesser of the purchase price and market value of the property. Mortgage insurance is usually not required for this type of mortgage.
Conveyancing:
The transfer of ownership of property or real estate from seller to buyer.
Counteroffer:

If your original offer to the vendor is not accepted, the vendor may counteroffer. This means that the vendor has amended something from your original offer, such as the price or closing date. If a counteroffer is presented, the individual has a specified amount of time to accept or reject.

Covenant:
A clause in a legal document which, in the case of a mortgage, gives the parties to the mortgage a right or an obligation. For example, a covenant can impose the obligation on a borrower to make mortgage payments in certain amounts on certain dates. A mortgage document consists of covenants agreed to by the borrower and the lender.
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Credit bureau:
A company that collects information from various sources and provides credit information on a person’s borrowing and bill paying habits to help lenders assess whether or not to lend money to the person.
Credit history or Credit Report:
The main report a lender uses to determine your creditworthiness. It includes information about your ability to handle your debt obligations and your current outstanding obligations.
Curb appeal:
How attractive the home looks from the street. A home with good curb appeal will have attractive landscaping and a well-maintained exterior.

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Deed:
A legal document that is signed by both vendor and purchaser, transferring ownership. This document is registered as evidence of ownership.  
Default:
Failure to make a mortgage payment.
Delinquency:
Failure to abide by the terms of a mortgage loan agreement. A failure to make mortgage payments, defaulting on the loan, may give cause to the mortgage holder to take legal action to possess (foreclose) on the mortgaged property.
Deposit:
Money placed in trust by the purchaser when an Offer to Purchase is made. The sum is held by the real estate representative or lawyer/notary until the sale is closed and then it is paid to the vendor.
Depreciation:
The decrease in value of something because it is now worth less than when you bought it. (see Capital Loss)
Discharge of Mortgage:
A document signed by the lender and given to the borrower when a mortgage loan has been repaid in full.
Down payment:
The portion of the home price that is not financed by the mortgage loan. The buyer must pay the down payment from his/her own funds or other eligible sources before securing a mortgage.
Duplex:
A duplex is a building containing two single-family homes, located one above the other.

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Easement:
This is where someone else has the right for access to or over another person’s land for a specific purpose, such as a driveway or public utilities.
Encumbrance:
A registered claim for debt against a property, such as a mortgage, lien or caveat.
Equity:
The difference between the price for which a home could be sold and the total debts registered against it. Equity usually increases as the mortgage is reduced through regular payments. Market values and improvements to the property may also affect equity.
Estoppel Certificate:
Also called a certificate of status, it is a certificate that outlines a condominium corporation’s financial and legal state.

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Fixed mortgage interest rate:
A locked-in rate that will not increase for the term of the mortgage.
FlexHousing™:
A housing concept that incorporates, at the design and construction stage, the ability to make future changes easily and with minimum expense, to meet the evolving needs of its occupants.

Foreclosure:
The legal process where the lender takes possession of your property and sells it to cover the debts you have failed to pay off. When you default on a loan and the lender feels that you are unable to make payments, you may lose your home to foreclosure.
Freehold :
Ownership of land and buildings (house) by one person (or two, such as joint ownership by spouses). Detached and semi-detached homes, duplexes and townhouses are usually owned freehold. Freehold owners can do what they want with their property — up to a point. They must obey municipal bylaws, subdivision agreements, building codes and federal and provincial laws, such as those protecting the environment.

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Genworth Financial Canada:
One of Canada’s private default mortgage insurer (see CMHC).
Gross Debt Service Ratio (GDS):
The percentage of the borrower’s gross monthly income that will be used for monthly payments of principal, interest, taxes and heating costs (P.I.T.H.) and half of any condominium maintenance fees.
Gross monthly income:
Monthly income before taxes and deductions.

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High-ratio mortgage:
A mortgage loan higher than 80% of the lending value of the property. This type of mortgage may have to be insured — by CMHC, for example — against payment default.
Holdback:
An amount of money withheld by the lender during construction of a house to ensure that construction is satisfactory at every stage. It may be 10% of the total cost of the building project.
Home inspector:
A person who visually inspects a home to tell you if something is not working properly,  or is unsafe. He or she will also tell you if repairs are needed, and maybe even where there were problems in the past.
Home warranty:
(New Home Warranty Program) A guarantee that if something covered under the warranty needs to be repaired it will be. If the builder doesn’t repair it, the repair will be made by the organization that provided the warranty.
Household budget:
A plan that allocates income for household expenses.

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Insurance:
Insurance provides coverage to ensure a loan is paid. (See Mortgage Loan Insurance and Mortgage Life Insurance.)
Insurance premium:
Payment for insurance.
Interest:
The cost of borrowing money. Interest is usually paid to the lender in regular payments along with repayment of the principal (loan amount).
Interest rate:
The price paid for the use of money borrowed from a lender.

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Joint Venture:
A joint venture (JV) is a business agreement in which parties agree to develop, for a finite time, a new entity and new assets by contributing equity. They exercise control over the enterprise and consequently share revenues, expenses and assets. .

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Land registration:
A legal document that records the ownership of a property and land.
Land survey:
(Survey or Certificate of Location) : A document that shows property boundaries and measurements, specifies the location of buildings on the property and states easements or encroachments.
Land surveyor:
A professional who can survey a property in order to provide a certificate of location.
Lawyer:
A legal advisor who assists people by representing them on legal matters.
Lender:
A mortgage lender is an institution (bank, trust company, credit union, etc.) that lends money for a mortgage.
Life insurance:
See Mortgage life insurance.

Lien:
A claim against a property for money owing. A lien may be filed by a supplier or a subcontractor who has provided labour or materials but has not been paid.
Link home:
A link, carriage home, or patio home, is joined by a garage or carport. The garage or carport gives access to the front and back yards. Builders sometimes join basement walls so that link houses appear to be single-family homes on small lots. These houses can be less expensive than single-family detached homes.
Lump Sum Prepayment:
An extra payment, made in lump sum, to reduce the principal balance of your mortgage, with or without penalty. A closed mortgage typically restricts the amount and frequency of the prepayments you can make. With an open mortgage, however, you can make a lump sum prepayment at any time without penalty. Making prepayments can help you pay off your mortgage sooner and ultimately save on interest costs over the life of your mortgage.

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Manufactured home:
Sometimes called a mobile home is a factory-built, single-family home. It is transported to a chosen location, and placed onto a foundation, piers or piles.
Maturity Date:
The last day of the term of the mortgage. On this day, the mortgage loan must either be paid in full or the agreement renewed.
Mobile home:
These are built in factories, and then taken to the place where they will be occupied. While these homes are usually placed in one location and left there permanently, they do retain the ability to be moved.
Modular Home:
A factory-built, single-family home. The home is typically shipped to a location in two, or more, sections (or modules).

Monthly Payments:

A mortgage in which you make payments every month. With a Monthly Payment Schedule you make twelve(12) payments a year. (see Semi-Monthly Payments and Bi-Weekly Payments).

Mortgage:
A mortgage is a security for a loan on the property you own. It is repaid in regular mortgage payments, which are usually blended payments. This means that the payment includes the principal (amount borrowed) plus the interest (the charge for borrowing money). The payment may also include a portion of the property taxes.
Mortgagee:
The lender who provides the mortgage loan.
Mortgagor:
The borrower who pledges the property as security for the loan.
Mortgage approval:
Written notification from the mortgage lender to the borrower that approves the advancement of a specified amount of mortgage funds under specified conditions.
Mortgage Broker:
Mortgage brokers are professionals who are paid a fee to bring together lenders and borrowers. They usually work with dozens or even hundreds of lenders, not as employees, but as freelance agents. They are most often paid by the lender for finding a borrower and securing a mortgage contract.

Mortgage life insurance:
Mortgage life insurance gives coverage for your family, if you die before your mortgage is paid off.

Mortgage loan insurance:
If you have a nigh-ratio mortgage (more than 80% of the lending value of the property) your lender will probably require mortgage load insurance, which is available from CMHC or a private company.
Mortgage payment:
A regular payment to the lender that includes both the interest and the principal.
Mortgage term:
Length of time that the agreed-upon mortgage contract conditions, including interest rate, is fixed.
MLS — Multiple Listing Service:
A multiple listing service is a Realtors’® cooperative service that contains descriptions of most of the homes that are for sale. Realtors® and the public alike, use this computer-based service to keep up with properties they are listing for sale in their area.

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Net worth:
Your financial worth, calculated by subtracting your total liabilities from your total assets.
New Home Warranty Program:
Coverage in the event that an item under the warranty needs to be repaired. If the builder doesn’t repair it, the repair will be made by the organization that provided the warranty.
Notary:
There is a considerable difference between lawyers and notaries. Lawyers are automatically notaries public but the reverse is not true. Without putting too fine a point on it, the difference between lawyers and notaries is something like the difference between doctors and nurses.

Notary also cannot advise you on legal matter, for example, if you go to a notary to convey a real estate transaction and you ask questions like “I think my neighbour’s fence is on my land, what should I do?”, the notary cannot give you advice on what your recourse is.

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Offer to purchase:
A written contract setting out the terms under which the buyer agrees to buy the home. If the Offer to Purchase is accepted by the seller, it forms a legally binding contract that binds the people who signed to certain terms and conditions.
Open mortgage:
A flexible mortgage that allows you to pay part before the end of its term.
Open-house:
A period of time during which a home for sale is held open for public viewing. We will advertise the Open House and showcase your home to any buyers as they come through.
Operating Costs:
The expenses that a homeowner has each month to operate a home. These include property taxes, property insurance, utilities, telephone and communications charges, maintenance and repairs.

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Payment schedule:
The monthly, biweekly, or weekly mortgage payments
Portability:
An option available on a mortgage that enables the mortgagor to take their current mortgage loan with them to another property without penalty.
Pre-Approval:
When a lender approves the potential mortgagor for a specified amount, based on how much money the lender is prepared to lend to the borrower. This allows buyers to shop for homes that they already know they can obtain financing for and not homes that are potentially too expensive, or out of the borrowers means to finance.
Premium:
See CMHC Insurance Premiums.
Principal:
The amount that you borrow for a loan. Each monthly mortgage payment consists of a portion of the principal that must be repaid plus the interest that the lender is charging you on the outstanding loan balance. During the early years of your mortgage, the interest portion is usually larger than the principal portion.
P.I.T.H.:
Principal, Interest, Taxes and Heating — costs used to calculate the Gross Debt Service ratio (GDS).
Property Insurance:
Insurance that you buy for the building(s) on the land you own. This insurance should be high enough to pay for the building to be re-built if it is destroyed by fire or other hazards listed in the policy.
Property taxes:
Taxes charged by the municipality where the home is located based on the value of the home. In some cases the lender will collect a monthly amount to cover your property taxes, which is then paid by the lender to the municipality on your behalf. In other cases, you will have to pay the municipality directly.

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Real estate:
Property consisting of houses and land.

Real Property Report:
A document that illustrates the location of visible improvements(ex: a house, garage, shed, deck fence etc.) located on a property, relative to the property boundaries. RPRs are not prepared for condominium units.(see Title Insurance
Readvanceable Mortgage:
A readvanceable mortgage has two parts: 1. A “mortgage” portion 2. A line of credit (LOC) portion

As you make your mortgage payments your lender increases your LOC according to the amount of principal you pay off each month. Some lenders do this automatically. Sometimes you have to request the credit increase manually. With a readvanceable mortgage, as soon as you make a payment you can then borrow back a percentage of the principal you’ve paid. The more payments you make, the more your credit line grows. The best part is that you don’t have to reapply for the additional credit.

Realtor® or real estate agent:
A professional who acts as an intermediary between the seller and the buyer of a property. It is our trademark name for for members of the Canadian Real Estate Association.
Refinance:
To pay off a mortgage or other registered encumbrance and arrange for a new mortgage, sometimes with a different lender.
Reserve Fund:
This amount is set aside by the homeowner on a regular basis so that funds are available for emergency or major repairs. Setting aside 5% of your monthly take-home pay will give you a well-funded reserve. If you own a condominium, the condo association will allocate a percentage of your monthly condo contributions to ensure the Reserve Fund has enough capital to pay for shared expenses.
Row house:
Also called a townhouse, a row house is one unit of several similar single-family homes, side-by-side, joined by common walls.

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Second Mortgage:
An additional mortgage on a property that already has a mortgage.
Security:
Property that can be claimed by a creditor if a loan is not repaid.

Seller’s Market:
More buyers are looking for homes than there are homes for sale. There is a smaller inventory of homes available for sale and many buyers looking to purchase. House prices generally increase and homes sell quickly. (see Buyer’s Market and Balanced Market)

Semi-Monthly Payments:

A mortgage in which you make two payments every month. With a Semi-Monthly Payment Schedule you make twenty-four(24) payments a year, reducing the time it takes to pay off your mortgage (see Monthly Payments and Bi-Weekly Payments).
Single-family detached home:
Free-standing home for one family, not attached to a house on either side.
Single-family semi-detached home: 
Home for one family, attached to another building on one side.
Statement of Adjustments:
A balance sheet statement that indicates credits to the vendor – for example, the purchase price – and any prepaid taxes and credits to the buyer, such as the deposit, and the balance due on closing.
Strata: (see condominium)
Survey or Certificate of Location: (see Real Property Report)

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Tenancy-At-Will:
The situation where a buyer receives possession of the property prior to payment of the full purchase price to the seller. Sometimes, for a number of different reasons, the buyer may not be able to pay the purchase price to the seller on the possession date. One example is where the buyer’s mortgage lender is late sending the mortgage funds to the buyer’s lawyer which results in the buyer’s lawyer not having the money to pay the seller the purchase price on the day of closing. Another example, is where the seller has not provided the buyer with a document required to close and therefore the buyer’s lawyer wants to delay the payment of the purchase price so as to protect the buyer.

Please Note: the seller is under no obligation to allow the buyer to move in prior to the buyer paying the full purchase price and the buyer completing all it’s obligations under the purchase agreement (unless the purchase agreement says otherwise).

Term:
Mortgage term is the length of time that the mortgage contract conditions, including interest rate, are fixed.
Title:
Legal Possession: A freehold title gives the holder full and exclusive ownership of the land and building for an indefinite period. A leasehold title gives the holder the right to use and occupy the land and building for a defined period.

Title Insurance:
Insurance against loss or damage caused by a matter affecting the title to immoveable property, in particular by a defect in the title or by the existence of a lien, encumbrance or servitude.(see RPR
Total Debt Service Ratio (TDS):
The percentage of gross monthly income required to cover the monthly housing payments and other debts, such as car payments.
Townhouse:
Also called a row house, a townhouse is one unit of several similar single-family homes, side-by-side, joined by common walls.

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Variable mortgage interest rate:
Fluctuates based on market conditions but the mortgage payment remains unchanged.
Vendor:
The seller of a property.
Vendor take-back mortgage (Sometimes called take-back mortgage):
The vendor, not a financial institution, finances the mortgage. The title of the property is transferred to the buyer who makes mortgage payments directly to the seller. These types of mortgages, can be helpful if you need a second mortgage to buy a home.

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Warranty (New Home Warranty Program):
Coverage in the event that an item under the warranty needs to be repaired. If the builder doesn’t repair it, the repair will be made by the organization that provided the warranty. All provinces have New Home Warranty programs for newly built homes. However, there are currently no such programs in the Territories.

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Zoning Bylaws:
Municipal or regional laws that specify or restrict land use.

One Response to Real Estate Glossary

  1. If you have any terms that we haven’t listed above, please feel free to call or email us anytime and will give you clarification as soon as possible.

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