Amortization Period - The number of years it will take to repay a mortgage loan in full. This usually goes beyond the term of the loan. For example, mortgages often have five-year terms but 25-year amortization periods.

Appraised Value - An estimate of the value of the property offered as security for a mortgage loan. The appraisal is done for mortgage lending purposes and the appraisal value may be less or more than the purchase price of the property.

Adjustable Rate Mortgage (ARM)

A mortgage in which the interest rate, after an initial period, can be changed by the lender.

Alt-A Loans

A mortgage risk categorization that falls between prime and sub-prime, but is closer to prime. Also referred to as "A minus".


The Annual Percentage Rate, which must be reported by lenders under Truth in Lending regulations. It is a measure of credit cost to the borrower that takes account of the interest rate, points, and flat dollar charges by the lender. The charges covered by the APR also include mortgage insurance premiums, and other payments to third parties, such as payments to title insurers or appraisers. The APR is adjusted for the time value of money, so that dollars paid by the borrower up-front carry a heavier weight than dollars paid in the future. However, the APR is calculated on the assumption that the loan runs to term, and is therefore potentially deceptive for borrowers with short time mortgages.

Assumable mortgage

A mortgage contract that allows, or does not prohibit, a creditworthy buyer from assuming the mortgage contract of the seller. Assuming a loan will save the buyer money if the rate on the existing loan is below the current market rate, and closing costs are avoided as well. A loan with a "due-on-sale" clause stipulating that the mortgage must be repaid upon sale of the property, is not assumable.

Balloon (payment) Mortgage: Usually a short-term fixed-rate loan which involves small payments for a certain period of time and one large payment for the remaining amount of the principal at a time specified in the contract.

Bankruptcy: A provision of Federal Law whereby a debtor surrenders his assets to the Bankruptcy Court and is relieved of the future obligation to repay his unsecured debts. A Trustee in Bankruptcy administers the assets, selling them to pay as much of the debt as possible. If the seller is in bankruptcy, the Trustee in Bankruptcy owns the property and is the party to sign the contract and make decisions. After bankruptcy, the debtor is discharged and his unsecured creditors may not pursue further collection efforts against him. Secured creditors, those holding deeds of trust or judgment liens, continue to be secured by the property but they may not take other action to collect from the debtor.

Benchmark: A permanent reference mark for surveyors.

Beneficiary: A person named to receive a benefit from a trust. A contingent beneficiary has conditions attached to his rights, usually someone else must die first.

Bid: An offer.

Binder: A title insurance binder is the written commitment of a title insurance company to insure title to the property subject to the conditions and exclusions shown on the binder.

Blanket Mortgage: A mortgage covering at least two pieces of real estate as security for the same mortgage. This sort of loan is more common for commercial property or “special case” loans.

Bond: An amount of money, often posted with the Court, to guarantee against loss as a result of a possible claim. For example, if there is a lien against the property, the owner may post a bond and the lien is removed from the property and the parties argue over the money rather than the property.

Breach Of Contract: Failure to perform provisions of a contract.

Bridge loan

A short-term loan, usually from a bank, that "bridges" the period between the closing date of a home purchase and the closing date of a home sale. Unsecured bridge loans are available if the borrower has a firm contract to sell the existing house. Secured bridge loans are available without such a contract.

Broker: An individual in the business of assisting in arranging funding or negotiating contracts for a client buy who does not loan the money himself. Brokers in Canada usually receive a commission for their services from the lender unless a private or sub prime mortgage is needed.

Building Restriction Line: A required set-back a certain distance from the road within which no building may take place. This restriction may appear in the original plat of subdivision, restrictive covenants or by building codes and zoning ordinances.

Buy-Down: When the lender and/or the homebuilder subsidized the mortgage by lowering the interest rate during the first few years of the loan. While the payments are initially low, they will increase when the subsidy expires. These are sometimes used to qualify borrowers for a loan amount that they would not otherwise qualify for but will be able to pay in subsequent years as their income increases.

By-Laws: Rules and regulations governing an association or corporation.

Canada Mortgage and Housing Corporation (CMHC) - The Corporation of the Federal Government that provides mortgage insurance to lenders against borrower default, under the National Housing Act (NHA).

Capital Gains: Profit earned from a sale of real estate

Capitalization: A method used to estimate value of a property based on the rate of return on investment.

Cashflow: The amount of cash derived over a certain period of time from an income-producing property. The cash flow should be large enough to pay the expenses of the income-producing property (mortgage payment, maintenance, utilities, etc.).

Caveat Emptor: Buyer beware. The buyer must inspect the property and satisfy himself that it is adequate for his needs. The seller is under no obligation to disclose defects but may not actively conceal a known defect or lie if asked.

CC&R’s (Covenants, Conditions, and Restrictions): The basic rules establishing the rights and obligations of owners of real property within a subdivision or other tract of land in relation to other owners within the same subdivision or tract and in relation to an association of owners organized for the purpose of operating and maintaining property commonly owned by the individual owners.

Certificate Of Eligibility: The document given to qualified veterans which entitles them to VA guaranteed loans for homes, business, and mobile homes. Certificates of eligibility may be obtained by sending DD-214 (Separation Paper) to the local VA office with VA form 1880 (request for Certificate of Eligibility).

Certificate Of Occupancy: A certificate issued by a local governmental body stating that the building is in a condition to be occupied.

Certificate Of Satisfaction: A document signed by the Noteholder and recorded in the land records evidencing release of a deed of trust, mortgage or other lien on the property.

Certificate Of Title: A written opinion by an attorney setting forth the status of title to the property as shown on the public records. The certificate does not certify as to matters not of record and affords no protection unless the author was negligent.

Chain Of Title: The series of transactions from Grantor to Grantee as evidenced in the land records.

Chattel: Personal property.

Class Action: A claim brought up on behalf of a group of people.

Closed Mortgage - A closed mortgage agreement may not provide options for payout before the maturity date but if it does, it could be with a large penalty

 Compare - Open Mortgage - Provides you the flexibility for prepayment or a full payout at any time with no penalty. Rates are usually much higher.

Closing: The meeting between the buyer, seller and lender or their agents where the property and funds legally change hands. Also called settlement. Closing costs usually include an origination fee, discount points, appraisal fee, title search and insurance, survey, taxes, deed recording fee, credit report and notary fees.

Closing Date - The date on which the sale of the property becomes final and the new owner is registered on title.

Collateral Mortgage Charge - security is provided in favour of The Lender registered in first position priority on the land and building. The specific details of the mortgage loan are not included in the charge that is registered on the title to your home. A separate credit agreement contains the specific terms of the mortgage loan. This collateral charge may secure other debt besides the mortgage loan.

Cloud On Title: An evidence of encumbrances

Coinsurance: When more than one insurance company shares the risk of a particular transaction or series of transactions. Lenders may require co-insurance on large commercial projects.

Collateral: Property pledged to secure a loan.

Condominium: A system of individual fee simple ownership of portions (units) in a multi-unit structure, combined with joint ownership of common areas. Each individual may sell or encumber his own unit.

Conservator: Also called a Committee or Guardian, a person designated by the Court to protect and preserve the property of someone who is not able to manage their affairs. Examples include the mentally incompetent, minors and incarcerated persons.

Construction Loan: A short-term interim loan to pay for the construction of buildings or homes. These are usually designed to provide periodic disbursements to the builder as he progresses. These are generally done by lenders with offices local to the site of the construction. This enables the lender or their agent to monitor the progress of the construction.

Contract: A legally enforceable agreement between two parties.

Contract For Deed: Also known as a Land Contract or Land Installment Contract. A method of financing where title remains in the Seller’s name until the Buyer has paid the full purchase price. A Contract for Deed will normally trigger the Due On Sale Clause in a Deed Of Trust or Mortgage but Veterans Administration regulations specifically allow Contracts for Deed without invoking the Due On Sale Clause.

Conventional Loan: A mortgage not insured by NHA or another mortgage insurer- usually when there is 20% down payment or more.

Cooperative: A system of individual ownership of stock in a corporation that. in turn, owns the structure. Each owner has an exclusive right to use his individual unit and must pay his portion of the debt encumbering the entire building.

Cost Approach: A method used by an appraiser to estimate replacement costs of improvements less depreciation.

Cotenancy: Ownership in the same land by more than one person. See, Tenants In Common, Joint Tenants, Tenants By The Entirety.

Covenant: A written agreement or restriction on the use of land or promising certain acts. Homeowner Associations often enforce restrictive covenants governing architectural controls and maintenance responsibilities. However, land could be subject to restrictive covenants even if there is no homeowner’s association.

Credit Report: A report documenting the credit history and current status of a borrower’s credit standing.

Deed: The written document conveying real property. The Deed must be executed (signed), Acknowledged, and Delivered to the Grantee. Once recorded at the Courthouse, the original piece of paper is not needed to convey title in the future.

Default: Failure to meet legal obligations in a contract, specifically, failure to make the monthly payments on a mortgage.

Deferred Interest: When a mortgage is written with a monthly payment that is less than required to satisfy the note rate, the unpaid interest is deferred by adding it to the loan balance. See negative amortization

Deficiency Judgment: If the foreclosure sale does not bring sufficient proceeds to pay the costs of sale and the note in full, the holder of the note may obtain a judgment against the maker for the difference.

Delivery: The final, unconditional and absolute transfer of a Deed to the Grantee so that the Grantor may not revoke it. A Deed, signed but held by the Grantor, does not pass title.

Dower: A spouse’s interest in the property of a deceased spouse.

Debt Service Ratios (GDSR & TDSR) - The Gross Debt Service Ratio (GDSR) is the percentage of gross annual income required to cover payments associated with the principal residence (mortgage principal and interest, taxes, secondary financing, heating, and 50% of condominium fees, if any). The GDSR should not exceed 32% of gross annual income. The Total Debt Service Ratio (TDSR) is the percentage of gross annual income required to cover payments associated with housing and all other debts and obligations, such as payments on a car loan. The TDSR should not exceed 40% of gross income.

Down Payment - The amount of money put forward by the purchaser, which includes the deposit. It represents the difference between the purchase price and the amount of the mortgage loan.

Dual Agency: Representation of opposing parties (buyer and seller) at the same time in the same transaction. This situation most often refers to cases where the Realtor is the agent for both parties.

Due On Sale Clause: A clause in the MORTGAGE that makes the loan non-assumable by providing the noteholder may call the loan immediately due and payable upon a sale or conveyance of an interest in the property. The FNMA/FHLMC form provides that a lease of more than three years or a lease with an option to buy also triggers this provision.

Earnest Money: A good faith deposit.

Easement: The right to use the land of another for a specific limited purpose. Examples include utility lines, driveways, and Ingress And Egress. Easements can be temporary or permanent.

Eminent Domain: The power of the state to take private property for public use upon payment of just compensation.

Encroachment: The physical intrusion of a structure or improvement on the land of another. Examples include a fence or driveway over the property line.

Encumbrance: Any lien, liability or charge against a property.

Equity: The difference between the fair market value and current indebtedness, also referred to as the owner’s interest. The value an owner has in real estate over and above the obligation against the property.

Equity Sharing: A form of joint ownership between an owner/occupant and an owner/investor. The investor takes depreciation deductions for his share of the ownership. The occupant receives a portion of the tax write-offs for interest and taxes and a part of his monthly payment is treated as rent. The co-owners divide the profit upon sale of the property.

Escheat: Property that reverts to the state when an individual dies without heirs and without a will.


An agreement that money or other objects of value be placed with a third party for safe keeping, pending the performance of some promised act by one of the parties to the agreement. It is common for home mortgage transactions to include an escrow agreement where the borrower adds a specified amount for taxes and hazard insurance to the regular monthly mortgage payment. The money goes into an escrow account out of which the lender pays the taxes and insurance when they come due..

Executor: A person named in a will to carry out its terms and administer the estate. The feminine form is Executrix.

Equity - Equity is the difference between the price for which a property could be sold and the total debts registered against it.

Fee Simple: The absolute total interest in real property. Compare, Life Estate, Reversion.

Fixed Rate Mortgages - A fixed rate mortgage is where the rate of interest and payment amount are fixed for a specific term.

Flexible Mortgage - A closed mortgage agreement does not provide options for payout before the maturity date. A lender may permit early payout of a closed mortgage under certain circumstances but will charge a prepayment charge. The flexible mortgage agreement offers flexibility allowing you to renew your mortgage at an earlier date into a fixed rate closed term of one year or longer without incurring a prepayment charge.


The legal process by which a lender acquires possession of the property securing a mortgage loan when the borrower defaults.

Genworth - Genworth Financial Canada, a private mortgage default insurance provider, competing with CMHC.

High Ratio Mortgage - A mortgage loan that exceeds 80% of the lesser of the appraised value or purchase price of the property. This mortgage must be insured and borrowers must pay an application fee and the insurance premium (which is usually added to the mortgage) to the insurer.

Home equity line of credit (HELOC)

A mortgage set up as a line of credit against which a borrower can draw up to a maximum amount, as opposed to a loan for a fixed dollar amount. For example, using a standard mortgage you might borrow $150,000, which would be paid out in its entirety at closing. Using a HELOC instead, you receive the lender’s promise to advance you up to $150,000, in an amount and at a time of your choosing. You can draw on the line by writing a check, using a special credit card, or in other ways.

Interest Adjustment Date (I.A.D.) - The date the term of the mortgage starts and is usually the first of the month. An interest-only payment on mortgage funds advanced prior to the IAD will be due on this date. The first regular monthly principal and interest payment is due one month after the IAD.

Leasehold Mortgage - A mortgage loan on a home where the building is on leased (rented) land. The lender takes an interest in the lease.


The lender’s right to claim the borrower’s property in the event the borrower defaults. If there is more than one lien, the claim of the lender holding the first lien will be satisfied before the claim of the lender holding the second lien, which in turn will be satisfied before the claim of a lender holding a third lien, etc.

Loan-to-Value Ratio - The ratio of the mortgage loan to the appraised value or purchase price of the property, whichever is less, expressed as a percentage.

Maturity Date - The last day of the term of the mortgage agreement. The mortgage agreement must then be renewed or the mortgage balance paid in full.

Mortgagee - The lender

Mortgage Insurance - Distinct from mortgage life insurance or home, property, fire and casualty insurance; mortgage insurance provides protection to the lender in the event of a default by the borrower.

Mortgagor - The borrower

National Housing Act (NHA) Loan - A mortgage loan insured by Canadian Mortgage and Housing Corporation (CMHC).

Offer to Purchase - A formal, legal agreement between buyer and seller that offers a certain price for a specified real property, usually with conditions.

Nominal interest rate

A quoted interest rate that is not adjusted for either intra-year compounding, or for inflation. A quoted rate of 6% on a mortgage, for example, is nominal. Adjusted rates are called "effective"

Per diem interest

Interest from the day of closing to the first day of the following month. In some cases, however, the borrower can get a credit at closing by making the first payment a month earlier.

P.I.T. – Monthly,bi-weekly etc. Principal, interest, and taxes.

Prepayment Charge - A fee charged by the lender when the borrower pays off all or a portion of a mortgage more quickly than provided for in the mortgage agreement.

Refinance - The process of arranging a new mortgage for an increased amount or switching from a conventional to a collateral mortgage. The old mortgage(s) is (are) paid off/discharged from the proceeds of the new loan. This type of loan is also referred to as "equity take out."

Renew - To extend a mortgage agreement with the same lender for another term. The length of the term and the conditions (such as the rate of interest) may be changed.

Reverse mortgage

A loan to an elderly home owner on which the balance rises over time, and which is not repaid until the owner dies, sells the house, or moves out permanently.

Secondary Homes - A secondary home is a property other than the owner's principal residence. It may be a cottage or leisure residence, and is intended for occupancy by the owner or a relative. It does not include rental properties, part-time rentals, timeshares or rental pools.

Term - The period of time over which the interest rate, payment and other mortgage conditions are set. At the end of the term the mortgage is due and payable unless renewed.

Short sale

An agreement between a mortgage borrower in distress and the lender that allows the borrower to sell the house and remit the proceeds to the lender. It is an alternative to foreclosure, or a deed in lieu of foreclosure.

Stated income

A documentation requirement where the lender verifies the source of the income but not the amount.

Sub-prime borrower

A borrower with poor credit, who can borrow only from sub-prime lenders who specialize in dealing with borrowers who have poor credit. Such borrowers pay more than prime borrowers, and are sometimes taken advantage of. Not all borrowers who deal with sub-prime lenders, however, are sub-prime borrowers. Some could obtain loans from mainstream lenders if they properly shop the market.

Title insurance

Insurance against loss arising from problems connected to the title to property.

Type A or Type B Vacation Properties - Generally speaking, Type A vacation properties are the same as standard residential properties in terms of quality of construction and materials used. They have year-round road access, and generally meet standard residential property lending requirements. Type B vacation properties must meet all Type A property requirements except for the following:

  • A standard heating system is not required.

Year-round road access is not required (e.g. unplowed road in the winter is acceptable)


The process of examining all the data about a borrower's property and transaction to determine whether the mortgage applied for by the borrower should be issued. The person who does this is called an underwriter. They work for the lender.

VA mortgage

A mortgage in the US with no down payment requirement, available only to ex-servicemen and women as well as those on active duty, on which the lender is insured against loss by the Veterans Administration.