DAN McCARTHY

RE/MAX Central

Residential Real Estate Glossary

 

A

 

Adjustment Date: The date on which all adjustments of prepaid expenses, taxes, utilities, rents, interest, and similar items will be calculated. Adjustments: Those items of a financial nature which are to be settled between the parties as of the Adjustment Date. The usual items for adjustment are annual property taxes, water rates, local utilities, garbage removal, Strata Fees, Interest on assumed mortgages, and rents, but can also include fuel in a tank, prepaid cable services, insurance, and any other item for which one or the other of the parties should be compensated before the transaction is fully completed Agreement of Sale.

Assets: What the borrower owns. This could include real estate, savings, vehicles, RRSP's, GIC's, stocks, bonds, household goods, etc.

B

 

Base rate, Prime Rate: Generally the lowest interest rate charged by a lender to its most preferred customers. Some loans are expressed as being "X" percentage points above Prime Rate. The Base or Prime Rate plus the percentage agreed upon is used to determine the amount of interest due on a variable rate mortgage loan.

Blended Payment Mortgage: A mortgage with blended payments of principal and interest. Generally resulting in the same monthly payment over the term of the loan.

Building Codes: Provincial or locally adopted regulations that control the design, construction, repair, quality of building materials, use, and occupancy of any structure under its jurisdiction.

Buyer’s Agent: A person or firm representing the buyer. A Buyer’s Agent’s primary allegiance is to the buyer. The buyer is the Buyer Agent’s client.

C

 

Certificate of Title: A document signed by a title examiner or attorney, stating that the seller has good marketable and insurable title.

Chattel: Articles of personal property such as household goods, furnishings, and fixtures that are not permanently affixed to the house.

Client: The person being represented by an agent. The agent owes the client the duties of utmost care, integrity, confidentiality and loyalty.

Closing: The act of completing the registration of the Land Transfer to the Purchaser in the Land Title Office, obtaining Mortgage Funds, if any, and Paying out the Balance of Sale Proceeds to the Vendor.

Closing Costs: All the charges that are attached to the closing date. These one-time fees include charges for an appraisal, legal fees, lender and/or broker fee(s), Property Purchase Tax and title search.

Closing Date: The date upon which the closing is to take place.

Closing Statement: The computation of financial adjustments between buyer and seller as of the day of closing a sale to determine the net amount of money which buyer must pay to seller to complete purchase of the Real Estate, and seller’s net proceeds.

CMHC - Canada Mortgage and Housing Corporation: A Crown Corporation that insures High Ratio (over 75% of the appraised value) mortgages against default. Typical CMHC insurance rates are 1% to 3% of the loan amount.

C.M.H.C. Insurance: If your down payment is less than 25%, you must have mortgage insurance. It insures the lender against the possibility of you defaulting on your mortgage. Canada Mortgage and Housing Corporation is the principal source of mortgage insurance.

Commitment Letter: A letter outlining the amount, terms and conditions under which a lender is willing to offer a mortgage.

Common Areas: Lands or improvements on land that are designated for common use and enjoyment by all occupants, tenants or owners. The lobby, a pool, tennis court or common hallways would all be Common Areas in a condominium or townhouse complex.

Common Tenancy: The ownership of property by two or more persons, where on the death of one, his share does not automatically go to the other(s) but is credited to his estate.

Compound Interest: Interest charged on both the principal amount of a loan as well as on the interest charged in a preceding period.

Conventional Mortgage: A mortgage loan where the mortgage loan does not exceed 75% of the appraised value of the property and is therefore not required to be insured by a government agency such as CMHC.

Convertible Mortgage: A short-term mortgage, usually 6 months or 1 year that allows a borrower to lock in to a longer term at any time without penalty.

Cost of Borrowing: The annual cost of credit over the life of a loan, including interest, service charges, brokerage, loan fees, CMHC or other mortgage insurance.

Covenants: Usually called Restrictive Covenants because they restrict the use of real property. Often required as part of the subdivision process by the approving authority, these are charges registered against the title, and binding upon all subsequent owners. These covenants govern how a property may be used. The most common are Covenants for in favour of the Ministries of Health, Environment or Highways. Also Schemes" which have the same effect but are declared by the developer as away of maintaining controls on the appearance of the homes in the subdivision and the uses of the properties.

Counter Offer: An offer made by the seller back to the buyer altering one or several terms and/or conditions of the offer as originally written.

Credit Bureau Report: A report by a credit-reporting agency that maintains a history of timely, or untimely, repayment of debt. The lender’s primary source of information regarding the credit history of a borrower.

D

 

Deposit: A sum paid to secure the right to purchase a home or property at terms agreed upon by the buyer and seller. The Deposit should be sufficient to satisfy the Seller that the Purchaser would not willingly forfeit the deposit if he or she found another home more to their liking after the Interim Agreement was made but before closing.

Deed: In other jurisdictions, a deed is the title to your property. In B.C. the title is properly called a "Certificate of Indefeasible Title" and referred to commonly as the "Title".

Double-Up: The option to make twice the normal regular payment at a regular payment due date .Down payment: The amount of cash put forward by the buyer toward the purchase price of real estate.

Dual Agent: A real estate broker or salesperson who acts as agent for both the seller and the buyer in the same transaction. Both buyer and seller are the agent’s clients.

E

 

Easement: A legal right to use or cross (right-of-way) another person’s land for limited purposes. A right-of-way granted to a person or company allowing access to or use of the grantor’s land. The most common are utility easements for the servicing of properties with utilities such as water, sewer, gas, and hydro electric power. There are also access easements for driveways and access lanes etc. Encroachment: An intrusion onto an adjoining property. Common examples are a neighbour’s fence, storage shed, or overhanging roof line that partially (or even fully) intrudes onto your property .

Encumbrance: A lien or charge, whether financial or non financial, registered against the title to the property. An easement is a non Financial Charge, while a mortgage, Judgment or Claim of Builder’s Lien would be a financial charge.

Equity: The interest or value which owner has in Real Estate over and above the debts against it. (Sale Price - Mortgage Balance = Equity)

F

 

Fee Simple: Ownership without conditions. The English Common Law provided for a number of ways of owning title to land. The word "Fee" meant ownership and additional words added described the style of ownership. "Fee Simple" was simple ownership, without any reservations or terms. An estate limited absolutely to a person and his or her heirs and assigns forever without limitation or condition. The name survives today.

Fire insurance, All Risk Broad Form Insurance Coverage: Insurance against loss by fire, wind, storm, or other common hazards that a homeowner can purchase. While optional if you own your property outright, it is mandatory if you have a mortgage as the Lender looks to the value of the house on the property for most of its security. In such case you will be required to name your Mortgage lender as the party to be paid first in the case of a loss.

Fixture: What was formerly personal property which is now permanently attached to real property and goes with the property when it is sold. Fixed Rate Mortgage: A mortgage with a fixed interest rate for the term of the loan.

G

 

GE Capital Mortgage Insurance Company: GE Capital Mortgage Insurance Company is the only private sector source of mortgage insurance to lenders in Canada.

Gross Debt Service Ratio: The amount of money needed to pay principal, interest, taxes and sometimes, energy costs. If the dwelling unit is a condominium, all or a portion of common fees are included, depending on what expenses are covered. Gross debt service is divided by household income. A rule of thumb is that GDS should not exceed 30%. It is also referred to as PIT (Principal, Interest and Taxes) over income.

H

 

High Ratio Mortgage: A mortgage loan in which the amount borrowed exceeds 75% of the appraised value of the property. In such cases the loan must be insured against default by CMHC or GE Capital Mortgage Insurance at a cost of approximately 2% of the loan.

I

 

Interest: The cost paid to a lender for borrowed money. The rate of interest over a period of time for a specific amount of money, usually expressed as a percentage. Interest Adjustment Date: The date on which the mortgage really begins, usually the first of the month. The interest owed for the number of days between the closing date and the last day of the month is paid on the closing date by cheque or by deduction from the mortgage advance and covers.

J

 

Joint Tenancy: The form of ownership in which the Registered Owners of equal interests in the property declare that there shall be an automatic right of survivorship. If one dies, the other automatically becomes the owner of the entire property. The property does not form part of the deceased’s estate and is deemed to pass to the surviving owner the moment before death.

K

 

L

 

Lien: A charge registered against a property.

Listing Contract: Between a home owner (as principal) and a licensed Real Estate broker (as agent) by which the broker is employed to sell the Real Estate within a given time for which service the owner agrees to pay a commission. Also, "listing agreement".

LTV (Loan to value): The ratio between the mortgage loan amount and the value of the property usually expressed as a percentage, i.e. 75% LTV. The value of the property for lending purposes is the purchase price or appraised value, whichever is lower.

M

 

Market Value: The value of a property based on what the market will bear. Determined by a comparison of the subject property to others in a similar area that have sold recently. Basis for "listing price" or "asking price".

Market Price: The actual amount for which a piece of property is sold. Also, "sales price", "purchase price".

Mortgage Broker: Trained professionals with a wealth of knowledge and experience to find the mortgage that best suits your needs, at the best rate available, from a large selection of lenders that include most major banks, trust companies, and credit unions. A mortgage broker works for you, not for the lender. Many financial institutions pay finders fees to mortgage brokers who refer business to them making it possible for you to get the best mortgage product at no cost to you.

Mortgage Insurer: In Canada, high-ratio mortgages (those representing greater than 75% of the property value) must be insured against default by either CMHC or private insurers. The borrower must arrange and pay for the insurance, which protects the lender against default.  

Mortgage Lender: A Bank, Credit Union, Trust Company, life insurance company or private company that lends money on the security of land, houses, and real estate.

Mortgage Loan: A loan agreement where the security is the borrower’s real property. The mortgagor (borrower) agrees to repay the loan, and interest, and during the term of the mortgage (lender) to keep the home insured, to pay all taxes and to keep the property in good condition.

Mortgagee: The person or financial institution lending the money, secured by a mortgage. Mortgagor: The property owner borrowing the money, secured by a mortgage.

N

 

Net Worth: The value of ones assets minus their liabilities.

O

 

Open Mortgage: A mortgage which allows for extra payments, principal reductions or full payment at anytime without penalty.

Occupancy Permit: The local building inspector’s certification that the property has been fully completed in accordance with the building code and local regulations.

P

 

PIT: The standard components of a monthly residential mortgage payment: Principal, Interest, and Taxes. Some lenders do not include the Tax component and allow the borrower to pay their own taxes annually.

P.I.T.I. Principal, Interest, Taxes and Insurance: The standard components of a monthly residential mortgage payment: Principal, Interest, and Taxes. Some lenders do not include the Tax component and allow the borrower to pay their own taxes annually. Most residential mortgage payments include the above and are therefore referred to as PITI.

Portability: The ability to transfer your mortgage including rate and terms, from your existing property to a new property.

Possession Date: The date on which the purchaser is to take occupancy of the premises.

Prepayment Clause: A clause in a mortgage agreement that allows you to pay off all or a percentage of the mortgage before the maturity date. Prepayment Penalty: A fee charged by a lender when the borrower prepays all or a part of a mortgage in excess of the regular payments allowed by the mortgage terms.

Prepayment Privilege: The right to pay all or part of a mortgage loan in advance of the required payment date. While a standard mortgage does not permit any prepayment, most lenders will allow a borrower to prepay a portion, typically 10% or 15% of the principal, once in each year. They may also allow a similar increase in the monthly payment once in each year. Principal: The amount borrowed, excluding interest and other charges.

Promissory Note: A legal document verifying the existence of a debt and an unsecured promise to repay it, setting out the terms of repayment and the interest rate to be paid.

Prorate: To allocate between seller and buyer their proportionate share of an obligation paid or due. For example, a prorate of real property taxes, fire insurance, or condominium fee.

Property Condition Disclosure Statement: This form enables sellers to disclose known defects. If the seller decides not to complete the form and does not disclose known defects, he or she can still be held liable. The form also serves as a checklist for buyers enabling them to address concerns about the property’s condition on the spot.

Property Taxes: This levy is affected by location and the value of the property as determined by BC Assessment. The rate of taxation is determined by local government. Property taxes are paid on an annual basis.

Q

 

R
Rate Commitment: A commitment to offer to hold a specific rate for a certain length of time. Rate commitments can vary from 30 to 180 days.

Refinance: To pay in full and discharge a mortgage with the proceeds of a new mortgage.
Realtor: Trademark identifying real estate professionals in Canada who are members of The Canadian Real Estate Association, and as such, subscribe to a high standard of professional service and to a strict Code of Ethics.

Rights of Way: Are indicated on title at the Land Title Office; often for use of utilities or city or municipality in order to make repairs to pipes, etc.; no permanent structure may be built on a right of way.

S

 

Second Mortgage: A mortgage registered against real property which is already encumbered with one mortgage. Date and time of registration determines which is first and which is second.

Seller’s Agent: The Seller’s Agent represents the seller -- either as a Listing Agent under the listing agreement with the seller or by cooperating as a Sub-Agent, typically through the MLS system. In dealing with prospective buyers -- customers-- the Seller’s Agent can provide a variety of information and services to assist the buyer in his/her decision-making. The Seller’s Agent does not represent the buyer.

Statements of Adjustments: Closing statements in a real estate transaction that set out the sources of funds that make up the purchase price, adjustments to and from the purchase price, the final amount required from the purchase and the amount due to the seller. Lawyers will prepare a statement for the seller and the buyer.

State of Title Certificate: A copy of the title which lists charges against the property, i.e.: liens, mortgages, rights of way, etc.

Strata Fee: A charge (usually monthly) by a Strata Corporation to cover the costs of maintenance, repair, cleaning etc. of common areas. This fee will usually include a reserve to cover major repairs such as reproofing and heating system replacement.

Statutory Building Scheme: A Special form of Restrictive Covenant that is filed by the developer to establish special building and design guidelines and land use controls for the subdivision which are over and above those of the municipality.

"Subject-to" Clause: A statement of a condition to be fulfilled by the benefiting part which must include a specific deadline for removal.

Surveyor’s Certificate of Location: A survey to determine that the buildings or improvements located on a property are properly situated within the boundaries of the property and that the distance from the buildings to the property lines complies with local regulations. Note that a Surveyor’s Certificate of Location does not establish property boundaries.

Survey: A map or plat made by a licensed surveyor showing the results of measuring the land with its elevations, improvements, boundaries, and its relationship to surrounding tracts of land. A survey is often required by the lender to assure a building is actually sited on the land according to its legal description.

T

 

Tax Hold Back: When your property taxes are included with your mortgage payments, your lender will withhold funds from your disbursement to cover interim or final taxes payable to the municipality. The amount depends on the month that the mortgage was funded and the dates when interim and final taxes are due. Tax hold backs are used to pay for the current year’s taxes while your monthly tax installments are accumulated in an account to pay the tax bills for the following year.

Term: The length of time a mortgage has been committed for. The interest rate usually remains constant during this term unless the commitment states otherwise.

Title: Properly called A "Certificate of Indefeasible Title". This is the proof of a person’s ownership of a property. The original "Certificate of Title" cannot be removed from the Land Title Office and is in fact only an electronic record. A Duplicate of the "Certificate of Indefeasible Title" may be requested if there are no financial charges registered against the property. This Duplicate Title must be returned to the Land Title Office before the Owner can deal with his property. As such, the "Title" may be hypothecated or used as security for a loan, since the lender knows that the owner cannot dispose of the property without returning the Duplicate Title to the Land Title Office.

Title Search: A detailed examination of the ownership documents to ensure there are no liens or other encumbrances on the property, and no questions regarding the seller’s ownership claim.

Total Debt Service Ratio: Percentage of gross annual income of a borrower required to maintain annual payments of mortgage, property taxes, hydro and other debts such as loans, credit card payments, child support and leases.

U

 

Underwriting: The assessment of loan applications based on: the value of real property, a borrowers credit worthiness and ability to pay and the lending guidelines of the lender.

V

 

Variable Rate Mortgage: A mortgage loan where the interest rate is adjusted according to movements in the Bank of Canada Discount Rate, or the Prime Rate offered by the lending institution. Most variable rate mortgages carry the option of converting to a Fixed Rate Mortgage at any time.
 
 
 W
Warranty: A promise, either written or implied, that the material and workmanship of a product is defect-free or will meet a specific level of performance over a specified period of time. Written warranties on new homes are either backed by the B.C. New Home Warranty Program or by the builders themselves.

Weekly and Bi - Weekly Payments: You can usually choose to make your mortgage payments once a week or once every two weeks. This accelerates the reduction of your mortgage because you are making the equivalent of one extra monthly payment per year.

X

Y

Z

 

Zoning Regulations: Strict guidelines set and enforced by municipal governments regulating how a property may or may not be used.

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"EVERY STEP of THE WAY"
 
  
Please contact me at 604.649.1541 or email dan@danmccarthy.ca
 to be of further assistance,

  

Dan McCarthy
Mobile: 604-649-1541
Office: 604-433-2211
Toll Free: 1-866-433-2211
Fax: 604-433-5274
RE/MAX Central
# 1 - 5050 Kingsway
Burnaby BC V5H 4C2