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Accrued Interest
Interest amounts that have accumulated unpaid since the last payment date.
Adjustable Rate Mortgage (ARM)
A mortgage where the interest rate is adjusted periodically according to movement in a pre-selected index such as the Bank of Canada Prime Rate. Most Adjustable Rate Mortgages are tied to the prime rate of The Bank of Canada and prime can only be adjusted on the eight pre-set dates, usually about 6-7 weeks apart during the year, except in unusual financial circumstances.
Adjustments on Closing
Two types of adjustments that a buyer can be charged on closing are:
- prepaid services, where the sellers have prepaid property taxes or certain utilities (the buyers can be charged for the amount of prepayment on a pro-rated basis depending on the closing date), and
- interest, where their is interest required to be prepaid up to the interest adjustment date or the first full payment date (the interest adjustment date is the date where the mortgage interest starts accumulating “in arrears”).
Agreement Of Purchase And Sale [back to top]
A written contract to buy property in which the purchaser and vendor (seller) agree to sell upon terms and conditions set forth in the agreement. All lenders will want to see a copy of this document once accepted and fully signed. Your realtor can fax or email it to your mortgage broker.
Amortization [back to top]
The paying down of the principal balance of the mortgage by equal periodic (usually weekly, bi-weekly or monthly) payments of principal and interest (called a blended payment) set period of time (typically 25-35 years).
Appraisal [back to top]
An estimate of the current market value of the ’subject property’, usually for the lender, using a market value comparison approach, by comparing recent sales of similar properties in the vicinity and adding and subtracting the differences in value of the same features in the subject property.
Annual Percentage Rate (APR) [back to top]
The yearly interest percentage of a mortgage expressed by the actual rate of interest paid, given the rate, term, amount and cost of loan.
Arrears [back to top]
To be in arrears is to be behind in the payments called for as part of the mortgage agreement.
Assessment [back to top]
An “assessment” is the value of a property that is an historical, static estimate of the value of a property used by municipal governments as a basis for calculating annual property taxes.
Assessment Notice [back to top]
An “assessment notice” contains the “assessed value” of the taxable property and is used to calculate the property taxes for the year (property taxes = assessed value * current “mill rate”).
Assignee [back to top]
One who takes the rights or title of another by assignment.
Assignment of Interest [back to top]
Most Provinces allow a legal assignment of interest in a mortgage to have full legal effect without first having to discharge and recreate the existing mortgage.This is particularly useful in (1) a mortgage switch, where the costs of transferring lenders could be very high, and (2) second mortgage, where a postponement may be difficult to obtain.
Assignment of Mortgage [back to top]
The assignment of a mortgagee’s interest in the mortgage to a different mortgagee.
Assignment of Rent [back to top]
The redirection of rental income to a mortgagee (usually in the event of default).
Assignor [back to top]
One who transfers or assigns the rights or title to another.
Assumable Mortgage [back to top]
The type of mortgage where a qualified buyer can take over a mortgage from the current owner upon the sale of a property. If a buyer can assume a mortgage, they may be able to save on the legal costs of creating and registering a new mortgage. ” Assumption” of a mortgage entails a simple amendment to the mortgage document registered on title. When assuming a mortgage, obviously the equity portion of the property must still be paid to the seller or vendor.
Assumption Agreement [back to top]
A document that obligates someone other than the mortgagor to complete the mortgage obligations.
Balance Due On Completion [back to top]
The amount of money the purchaser has to pay to the vendor or seller to complete the purchase after all adjustments have been made.
Balloon Payment [back to top]
The final mortgage payment at the end of the term that pays the outstanding loan in full.
Blended Payment [back to top]
Payments that consist of equal amounts of principal and interest paid at regular intervals during the term of the mortgage.
Blend and Extend [back to top]
A closed mortgage that can be “opened” for the purpose of extending the term; many lenders will blend the penalty for breaking the mortgage (usually an interest rate differential, or IRD) with the rate for the new extended term. The main purpose of the “blend and extend” is to enable the mortgagee to obtain a lower rate and protect against future mortgage rate increases.
Breach of Contract [back to top]
Failure to fulfill an obligation under a contract; breaching confers a right of action on the party whose rights under the contract have been breached.
Bridge Financing [back to top]
Also referred to as interim financing. A loan required by a builder so as to obtain funds during the period between a permanent mortgage commitment and a construction loan. Or another type of Bridge Financing would be a loan to cover the down payment where the purchaser has “sold” their home but the closing is in the near future, but still need the down payment funds that they are expecting from the sale of their existing home to close on their new home purchase.
Building Codes [back to top]
Regulations established at the municipal, provincial or federal government level to provide structural requirements for building construction.
Buy-down [back to top]
Buy-down is a payment to the lender at the time of funding for purposes of reducing the interest rate during the term of the mortgage; often used as marketing features by new home builders, particularly on high ratio second mortgages.
Buyer’s Agent [back to top]
A Realtor who is engaged contractually to act on behalf of the buyer or seller. In most cases, the Realtor acts on behalf of the sellers and is paid out of the proceeds of the sale. A Buyer’s Agency Agreement allows a Realtor (with full disclosure to the sellers or their agent) to negotiate on behalf of the buyer with no legal conflict of interest. In this case, the seller still pays the Buyer’s Agent fees but this is always specified in the agreement and acknowledged in the Offer to Purchase.
Cap Rate [back to top]
The highest rate that a borrower will pay within a defined time period. Examples of the cap rate are (1) the rate stated on the commitment letter or mortgage pre-qualification for the maximum rate that will be paid by the borrower during the term of a protected variable rate mortgage.
Caveat Emptor [back to top]
A Latin statement whose translation is “Let the buyer beware”. In terms of purchasing a home or property, a buyer must fully examine all aspects of the transaction before agreeing to the purchase.
Certificate of Title [back to top]
The sequence of conveyances and encumbrances that affects a title to land, from the time of the original patent or as far back as records are available.
Charge [back to top]
The name applied to a mortgage document when title is registered under the Land Titles Act. A “charge on title” is any encumbrance or claim that affects title to property including mortgages, caveats etc.
Chattel Mortgage [back to top]
An encumbrance that is against moveable possessions or personal property (”chattels”) that may be removed without being damaging to the property.
Closed Mortgage [back to top]
A mortgage whose terms state that it cannot be paid out, even with a penalty, unless the lender agrees. Note that in some cases, a closed mortgage may be paid for in full but at a defined cost such as the interest rate differential (IRD) or sometimes with a punitive penalty such as full interest to maturity or three months interest; whatever is set forth in the mortgage agreement.
Closing or Completion Date [back to top]
The final exchange date of consideration and legal documents completed at the end of a house purchase or mortgage registration (or both) transaction.
CMHC [back to top]
The Canada Mortgage and Housing Corporation (CMHC) is a Canadian federal government crown corporation which administers the National Housing Act. One of the services provided by CMHC is the insuring of high ratio mortgage loans for lenders.
Collateral Mortgage [back to top]
A mortgage where a promissory note is used to secure the loan.
Collateral Security [back to top]
A form of security that one pledges as a way to reduce the risk of a mortgagor.
Commitment Letter [back to top]
A written letter from the lender stating that they will lend mortgage funds to a specified borrower (or borrowers) as long as certain conditions are met within a specified period of time period before the closing date. A key component of the commitment is the “rate hold” - this is where a lender may put a “cap” on the mortgage rate for a defined period of time (e.g. 60 to 120 days), particularly in a period of volatile interest rates. For new homes, commitments on financing may have longer closing dates and can be negotiated between the lender and the builder and be held for as long as 6 months to a year.
Completion Loan [back to top]
A mortgage loan granted following the satisfactory completion of construction or repairs.
Compliance Letter [back to top]
A compliance letter may be required in some municipalities before a property transfer can take place. This letter acknowledges that a property either is clear of outstanding work-orders such as those that specify clean-up or repair requirements that an owner must complete before a transfer of ownership.
Compound Interest [back to top]
Interest on both the principal and interest that has accrued.
Condominium [back to top]
The ownership of separate space within in a multiple dwelling or other multiple-ownership of common elements that are used jointly among other owners.
Connection Charges [back to top]
Fees that utility companies charge to connect new buyers to their services.
Consideration [back to top]
An item of value given to make a promise of repayment enforceable.
Construction Advance [back to top]
A sum of money advanced to the borrower in the form of a construction loan.
Construction Lien [back to top]
A claim against property that is pursuant to labour, services, or materials supplied.
Construction Loan [back to top]
A mortgage that is advanced in pre-determined stages, according to the amount of work completed, for a construction or building project.
Contract [back to top]
An agreement between two or more parties given receipt of lawful consideration to do or refrain from doing some act.
Conventional Mortgage [back to top]
A mortgage usually amounting to 80% Loan to Value ratio (or less) of the property value.
Convertible Mortgage [back to top]
The type of mortgage whereby one converts their mortgage to a new one of longer term while it is still in effect.
Credit Report [back to top]
A report, available from a credit bureau such as Equifax, that specifies an individual’s payment history. Anyone who wishes to obtain a credit report can order a copy of their report by contacting their local credit bureau.
Damages [back to top]
Compensation or indemnity for loss owing to breach of contract.
Default [back to top]
Failure to fulfill an obligation; failure to make monthly mortgage payments as agreed, or to meet certain other terms of a mortgage agreement.
Deposit [back to top]
Payment of money or other valuable consideration as pledge for fulfillment of contract.
Discharge of Mortgage [back to top]
A document executed by the mortgagee, and given to the mortgagor when a mortgage loan has been repaid in full before, at, or after the maturity date.
Disclosure Statement [back to top]
A statement contained in a consumer credit transaction in order to disclose complete credit terms and interest rates.
Double-Up [back to top]
This feature (not offered by all lenders) allows you to double up your mortgage payments anytime without penalty. This feature is often associated with the ability to “skip” an equivalent number of payments. This can be used either to accelerate the pay-off of a mortgage (as it is an enhanced prepayment privilege) or to manage a volatile cash flow. For example, commission-based individuals such as Realtors could “double-up” with each commission cheque, and “skip” during low cash flow periods.
Dower Interest [back to top]
A wife’s interest in the lands of her husband accruing to her by virtue of the marriage.
Down Payment [back to top]
The amount of cash paid towards the purchase transaction by the buyer of a home. This is also known as the purchaser’s initial “equity” in the property, but is used by a lender to judge the personal commitment to the property. For example, a lender considers that, if a buyer saved the down payment, or received it as a gift from a loved one, they will be far more committed to maintaining the property value and making the mortgage payments than if they acquired it for “no money down”.
Easement [back to top]
The right acquired for access over another person’s land for a specific purpose, e.g that to build a driveway, fence, wall, or public utilities.
Effective Interest Rate [back to top]
The actual interest rate on investment where a debt or loan was bought at discount or at a premium.
Encroachment [back to top]
Some type of fixture, e.g. wall or fence, which illegally intrudes onto or invades on public or private property diminishing the size and value of the invaded property.
Encumbrance [back to top]
The outstanding claim or lien recorded against property, or any legal right for use of the property by another person who is not the owner.
Equity [back to top]
The difference between the value for which one can sell their property and what is owed against it.
Estoppel Certificate [back to top]
A written statement or certificate which states certain facts upon which the receiver of the statement or a third party may rely. For example, a lender’s estoppel statement as to a purchaser or property: this states that a lender cannot later deny the truth of these statements because a third party has relied and acted upon them.
Extension Agreement [back to top]
The lengthening of a term on a contract to (1) extend the maturity date, (2) permit more time for the performance of an obligation or condition, or (3) extend the coverage of a lien to include more property.
First Mortgage [back to top]
Gives the lender a primary lien/charge against your house and property which has precedence over all other mortgages. Priority is determined by the date and time registered. So a first mortgage was literally and legally registered “first”. A new first mortgage can therefore only be registered as a “first” mortgage upon the discharge of an existing one if the holder of a second mortgage “postpones” (i.e., “puts back in time”) to a time immediately following the registration of the new first mortgage.
Five-Percent Down Program [back to top]
This allows buyers to obtain up to 95% financing on properties up to a certain value. The loan must be insured against default by CMHC (Canada Mortgage and Housing Corporation) or Genworth Financial or AIG.
Fixed Rate Mortgage [back to top]
This is the form of mortgage where the interest rate remains the same during the entire term of the loan.
Floating Rate of Interest [back to top]
Rate of interest which fluctuates according to prime lending rates, eg. 2% above prime rate usually chargeable on short term loans such as construction loans.
Foreclosure [back to top]
Remedial court action taken by a mortgagee when default occurs on a mortgage, to cause forfeiture of the equity of redemption of the mortgagor.
Freehold [back to top]
The ownership of a tract of land on which the building(s) are located. The oldest and most common typed of ownership of real estate.
Genworth Financial [back to top]
Genworth Financial is Canada’s only private default mortgage insurer - insures high ratio mortgages for lenders in a similar way that does CMHC.
Gross Debt Service Ratio (GDSR) [back to top]
The percentage arrived at by dividing your monthly shelter costs (principal, interest, property taxes, heating and half of condominium fees if applicable) by your gross monthly income and multiplying by 100. This calculation is used by all lenders as a yardstick by which they can measure the ability of a borrower (or borrowers) to make mortgage payments. Most lenders set a threshold of 32%-35% for this ratio, while other lenders may allow higher limits; 32%-35% is also the maximum qualifying GDS for most default insurance applications.
Gross Income [back to top]
The amount of income the employer pays the employee prior to taking off any deductions for tax or EI etc, customarily stated on an annual basis.
Guarantor [back to top]
A guarantor is a third party who has no interest in a property but agrees to assume responsibility for a debt in the event of default by the mortgagor.
High-Ratio Mortgage [back to top]
A mortgage where the Loan To Value ratio is greater than 80% of the value of the property; this type of mortgage normally requires the mortgagee to purchase insurance from CMHC or Genworth to ensure the lender is protected against default.
Hold Back [back to top]
An amount of money retained by a construction lender or owner until satisfactory completion of the work performed by a contractor.
Home Inspection Report [back to top]
A report commissioned by a property owner or purchaser, usually to verify the condition of a property prior to the “firming up” of a Real Estate transaction. The scope and detail may vary, but most reports indicate the specific problem and the cost to repair. Unfortunately, no licensing is required, and this service is not specifically regulated other than by general consumer protection legislation. The best safeguard against inadequate work is to ask for the resume of the Inspector, and if possible check references from previous customers.
Instrument [back to top]
A written legal document.
Inter-Alia Mortgage [back to top]
A single registered document that encumbers multiple properties.
Interest Adjustment Date [back to top]
A date from which interest on a mortgage advanced is calculated for regular payments. The IA date is usually one payment period before regular mortgage payments begin, as interest payable is due from the date a mortgage is advanced.
Interest Only Loan [back to top]
Where the borrower pays back only the interest on the loan and there is no amortization until the end of the term. An “interest-only loan” may be used when a purchaser wishes to resell property after a short period or if they wish to accumulate enough income from the property before amortization.
Interest Rate Differential [back to top]
A penalty for early prepayment of all or part of a fixed rate mortgage outside of its normal prepayment terms. Normally this is calculated as the difference between the existing rate and the rate for the term remaining, multiplied by the principal outstanding and the balance of the term.
Interim Financing [back to top]
See Bridge Financing.
Joint and Several Note [back to top]
A promissory note in which there are two or more promisors who are jointly liable.Joint Tenancy [back to top]
Ownership of land by two or more persons where, on the death of one, the survivor or survivors take the whole estate.
Land Contract [back to top]
A contract drawn between a seller and buyer for the sale of property.
Land Transfer Tax [back to top]
A tax payable to the crown (usually the provincial government) by the purchaser upon the transfer of title from a seller.
Legal Description [back to top]
A written description by which property can be locatedfor purposes pf registration in a land registry system. Usually stated for a residential property in terms of Lot, Block and Plan number.
Lending Value [back to top]
An independent appraiser’s value interpreted by the lender as to the worth of a property in the current market given a reasonable time period to sell the property.
Letter of Commitment [back to top]
A letter written by a lender that states the amount of the loan, specified interest rate, term of loan, amortization period, and other specific conditions.
Lien [back to top]
A lien is a claim made against a property for the payment of a debt or obligation related to the property or its owners.
Lien Hold Back [back to top]
A percentage of the contract price, or estimated cost of work to be done, that is held back from a mortgage advance.
Line of Credit [back to top]
A maximum credit limit allowed by a bank to a borrower, provided the borrower maintains an acceptable balance on account or has a good credit rating.
Loan-to-Value Ratio [back to top]
The percentage of the value of a property for which a mortgage is required. The LTV ratio is used to determine whether or not default mortgage insurance is required, and, if so, the cost of mortgage insurance. For example, given a property value is $250,000, and the down payment available is $25,000, the required mortgage is $225,000; therefore, the LTV is $225,000 / $250,000 or 90%.
Matrimonial Home [back to top]
Any property in which a person has an interest and that is or has been occupied by the person and their spouse as the family residence; matrimonial homes include condominiums, co-operatives, and leasehold interests.
Maturity Date [back to top]
The last day of the term of the mortgage agreement; a mortgage loan must then be paid in full or the agreement renewed by this date.
Mortgage [back to top]
The legal pledge of real estate as security for a loan.
Mortgage Broker [back to top]
A registered agent who negotiates with lenders on behalf of a borrower to obtain the best overall mortgage for that borrower’s circumstances. Mortgage Brokers are particularly useful in financing “non standard” situations which cannot be funded by a major national bank lender. This is possible because a Mortgage Broker has access to lenders who do not advertise nationally or operate retail locations.
Mortgage Commitment [back to top]
A formal indication by a lending institution that it will grant a mortgage loan on property, for a specified amount, based on specified terms.
Mortgagee [back to top]
The “lender” of a mortgage loan.
Mortgage Insurance [back to top]
If the down payment is less than 20% of the purchase price of the property, the lender is will require either private mortgage insurance or public mortgage insurance through Canada Housing and Mortgage Corporation (CMHC) or Genworth Financial The fee is calculated as a percentage of the mortgage; known as “default insurance” and is most often added to the mortgage loan amount.
Mortgage Insurance Premium [back to top]
An insurance 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 by the borrower.
Mortgage Life Insurance [back to top]
A form of insurance recommended for the borrower; in the event of the death of the owner(s), the insurance pays the balance owing on the mortgage. The intent of mortgage life insurance is to protect survivors from losing their home.
Mortgage Portfolio [back to top]
Several mortgages held by a mortgagee, lender or broker.
Mortgage Postponement [back to top]
The process where a mortgagee may permit the mortgagor to renew or replace an existing mortgage that falls due prior to the maturity date.
Mortgage Underwriter [back to top]
A mortgage lender or broker who approves or turns down loan applications based upon the quality of the real property, credit-worthiness and ability to pay according to the guidelines of the lender with regard to ratio of mortgage loan to value of property.
Mortgagor [back to top]
The mortgagor is the “borrower”.
Multiple Listing Service (MLS) [back to top]
A service of a local Real Estate Board which publishes and exchanges details of properties registered with them. The majority of properties sold in Canada are sold through the local MLS.
Net Worth [back to top]
The difference between what you own (assets) and what you owe (liabilities) is called your net worth.
Nominal Interest Rate [back to top]
The interest rate stated on the face on a loan document. Note that if the loan amount is discounted or sold at premium, the effective rate of interest will either be higher or lower.
Offer To Purchase [back to top]
A written proposal that is either “firm”, i.e. it has no conditions, or “conditional”, i.e. certain conditions that have to ve fulfilled, to purchase real estate that becomes binding upon acceptance of the vendor.
Open Mortgage [back to top]
This enables one to pay back the borrowed funds without notice or penalty.
Open Or Closed [back to top]
The restriction or denial of repayment rights until the maturity of the mortgage is a closed mortgage. For example, if the mortgage is specified as open, then the mortgagor can pay extra payments of principal sums at any time or at specified times with or without repayment penalty.
Owner [back to top]
The lawful possessor of the title to real property.
Portable Mortgage [back to top]
A mortgage which allows one to transfer the amount and terms over to a new property without cost or penalty. The mortgage must be registered on title of the new property, therefore it is not identical in all respects. While most mortgages have a portability feature, one may require additional money when transferring the mortgage to the new property.
Postponement Clause [back to top]
A mortgage may contain a postponement clause where the mortgagee permits the borrower to renew or release an existing first mortgage that falls due prior to the maturity date of the current mortgage.
Power of Sale [back to top]
The right of a mortgagee to force sale of the property without judicial proceedings should default occur.
Prepayment Clause [back to top]
A clause inserted in a mortgage that gives the mortgagor the privilege of paying off some or all of the mortgage debt in advance of the maturity date.
Prepayment Penalty [back to top]
If one’s mortgage is not fully open, they may be charged a penalty to pay off all or part of the mortgage before the end of the fixed term. Normally, the prepayment penalty is the greater of three months’ interest or the interest rate differential (IRD) on the amount to be prepaid. Note that with CMHC (insured) mortgages, plus a few of the major lenders, the maximum penalty is set at 3 months interest after the mortgage has been in effect for three years regardless of the number of times it has been renewed.
Prepayment Privilege(s) [back to top]
The right to periodically repay an amount that is greater than the scheduled principal payment. This may be limited to a single annual payment on the anniversary date of no more than 10% of the original principal.
Pre-Qualification [back to top]
An interview with a client, generally prior to the writing of an offer to purchase a property, in order to determine the applicant’s qualifications for obtaining a mortgage.
Prime Rate [back to top]
The rate charged by banks to their most credit-worthy borrowers; this rate is also referred to as the rate of interest paid on government bonds.
Principal [back to top]
The amount borrowed for a mortgage.
Principal, Interest, Taxes, Heating (PITH) [back to top]
The principal, interest, taxes, heating and half of any condominium fees, if applicable. These expenses are known as the “shelter expenses”. The “shelter expenses” are a basic component of the ratios used to determine whether one qualifies or not for a mortgage.
Progress Advances [back to top]
Loan advances made on a property under construction where a lender makes advances on the basis of the retention at all times of an amount of the loan which, in their opinion, will be sufficient to complete the building should the construction fail to be completed.
Promissory Note [back to top]
A written document that acknowledges a debt and promising payment.
Property [back to top]
Refers to the rights which an individual enjoys by virtue of their ownership.
Refinance [back to top]
To first discharge a current mortgage and all registered encumbrances and then arrange a new mortgage.
Registration Fees [back to top]
Fees paid to the municipal or provincial government for a title transfer, mortgage registration or other instrument such as an assignment or lien.
Registration and Discharge Dates [back to top]
Dates of registration by number and date given to the mortgagee. When the mortgage loan has been paid in full on or after maturity date, the mortgagee executes the discharge or cessation of charge and registers same to liquidate the mortgage which allows the mortgagor to redeem the mortgage.
Renewal Agreement [back to top]
An agreement where the lender may agree to extend the mortgage loan, possibly on revised terms as to the repayments of the principal or interest rate.
Right of Way [back to top]
The right to pass over another’s land according to the nature of an easement.
Roll-over Mortgage [back to top]
A type of mortgage where the interest rate is established for a specific period of time. At the end, the mortgage is said to “roll over” and the lender and borrower may agree to extend to loan. If satisfactory terms are not be agreed upon, the lender is entitled to be repaid in full. In this case, the borrower may seek alternative financing.
Second Mortgage [back to top]
A mortgage loan granted and registered when there is already a first mortgage registered on the property.
Set Back [back to top]
The distance from the curb or other established line within which no construction may occur.
Simple Interest [back to top]
Interest that is computed only on the principal balance - it is not compounded by calculating interest payable on accrued interest.
Single Family Dwelling [back to top]
A residential property designed for occupancy by one family that is situated on land zoned specifically for that purpose.
Statement of Adjustments [back to top]
A statement that establishes the details of a mortgage transaction and usually prepared by the lawyer.
Survey [back to top]
Also called a real property report or RPR. The legal written and mapped description of the location and dimensions of a property. The survey should also show the dimensions and placement on the lot of any structure, including additions such as pools, sheds and fences. An up-to-date survey may be required by a lender as part of the mortgage transaction. Often Title Insurance can be purchased in liew of the survey.
Switch [back to top]
This is the term almost universally applied to changing lenders at the end of a term, when the mortgage becomes “open”. Many lenders will now pay all of the costs of a “switch.” Also referred to as a transfer.
Takeout Mortgage Loan [back to top]
A long term mortgage loan that is advanced to borrower on completion of construction or in compliance with any other conditions in the loan commitment.
Tax Certificate [back to top]
At the time of a sale, the lawyer for the buyer must confirm that all local taxes have been paid up to date. If they are, a tax certificate is issued from which any adjustments can be made - usually requiring the buyer to compensate the seller for any prepaid taxes. However, if the taxes are not up to date, the municipality requires that the seller pay them off from the proceeds of the sale. If there are insufficient proceeds, then it usually falls on the buyer to pay them.
Tax Lien [back to top]
A lien imposed by a taxing authority on real estate for failure to pay taxes within the time required by law.
Tenancy In Common [back to top]
Ownership by two or more persons; however, unlike joint tenancy, in that interest the deceased does not pass to the survivor but is treated as an asset of the deceased’s estate.
Term [back to top]
The length of time which a mortgage agreement covers; payments made may not repay the outstanding principal by the end of the term because of a longer amortization period.
Title [back to top]
The means of evidence by which the owner of land can prove their ownership.
Title Insurance [back to top]
A policy which insures the lender against loss due to a flaw in the title of property held as collateral for a mortgage, and thus the mortgage lender against any legal questions on the title to the real estate or of legal priority of the mortgagee.
Title Search [back to top]
An examination of the title of a property as indicated in the public records in order to determine the ownership of the subject property and the existence of any encumbrances or defects.
Total Debt Service Ratio (TDSR) [back to top]
The percentage of gross annual income required to cover payments associated with housing and all other debts and obligations. The Total Debt Service Ratio (TDS) is a percentage calculated by dividing monthly shelter costs (principal, interest, property taxes, heating and half of condominium fees if applicable) PLUS all other monthly debt obligations by the gross monthly income and multiplying by 100. TDS is used by all lenders as the upper limit on which to measure the ability of a borrower to make mortgage payments. Most lenders require that this ratio be no more than 40%-44% for a particular application with some as low as 37%; 40%-44% is also the maximum qualifying TDS in most applications for default insurance.
Transfer of Title [back to top]
A document signed by the seller and purchaser transferring ownership, at which time the document is registered against the property.
Trust Account [back to top]
An account held by an agent on behalf of their principal for the payment of money due to a third party on the event of specified incidents. For example, a vendor’s lawyer will hold funds on their behalf until title deeds to property have been delivered and property registered and the keys delivered to the purchaser, or an account maintained by a mortgagee for the payment of property taxes or life insurance premiums.
Umbrella Mortgage [back to top]
This type of mortgage is also referred to as a “wrap around”, which is a special arrangement where one document encompasses one or more already existing mortgages registered on the same property. The mortgagee is responsible for remission of payments to the lender while the mortgagor makes one payment to the mortgagee.
Undertaking [back to top]
This is a promise made by a lawyer to ensure that certain conditions of the lender are met after closing, due to time constraints. For example, to register a discharge of an old first mortgage after the new one has been registered because there is simply not enough time to do so at closing. Furthermore, undertaking also governs such closing activities as releasing funds before a new mortgage document is officially registered.
Underwriting [back to top]
The process of deciding whether or not to lend money, or the amount of the loan, based on information provided to the lender. Every lender has a different underwriting process and lending criteria which differ between various lenders.
Variable Rate Mortgage [back to top]
A mortgage where the interest rate is usually compounded monthly and fluctuates with the prime rate at the chartered banks.
Vendor [back to top]
A seller of real property.
Vendor Financing [back to top]
The seller sometimes takes the mortgage at a rate lower than market rates. Most of these arrangements are not renewable nor transferable to the next owner.
Vendor Take Back Mortgage [back to top]
A type of mortgage where a vendor of a property takes from the purchaser as partial payment of the purchase price for that property.
Verification of Employment [back to top]
The lender will sometimes contact an applicant’s employer in order to verify information provided in a mortgage application or a job letter, e.g. income structure, length of employment, position.
Waiver [back to top]
An international relinquishment of some right or interest, the renunciation, abandonment, or surrender of some claim.
Witness [back to top]
When a person places their name to a deed, will or other document for the purpose of attesting its authenticity and proving its execution by testifying.
Wrap-Around Mortgage [back to top]
This type of mortgage is often erroneously referred to as a “blanket mortgage”. It is a new mortgage, registered on the title, that includes a prior existing mortgage as the new mortgagee undertakes the responsibility as mortgagor under the original mortgage.
July Mortgage & Finance Statistics
Credit Score Secrets
June Mortgage & Finance Statistics
Bank of Canada raises Variable Rates by 0.25%
