Glossary of Terms
Abandonment of Property – To vacate a property with a definite intention never to return.
Abstract of Title –
- Registry System: A condensed history of the title to a parcel of land consisting of a synopsis of every recorded instrument affecting the title to that land arranged in chronological order of recording.
- Land Titles System: A chronological listing of every recorded instrument currently affecting the title to that land.
Acceleration Clause – A clause in a mortgage which provides that where default has occurred in making any payment of moneys due under a mortgage or in the observance of any covenant in a mortgage and under the terms of the mortgage, by reason of such default, all moneys secured thereby become due and payable.
Acceptance – The offeree’s consent to enter into a contract and to be bound by the terms of the offer.
Accrued Interest – The interest charged for the period of time that has elapsed since interest was last deducted.
Action for Possession – A legal remedy available to a mortgagee when a mortgage is in default.
Action on the Covenant for Payment – A legal remedy available to a mortgagee when a mortgage is in default.
Adjustment on Sale – A pro-rated division and distribution of prepaid or accrued taxes, prepaid insurance premiums, prepaid rents and other income and expenses. Apportionment usually occurs when a property is sold, and is the manner of determining the amounts due to and from the parties.
Adverse Possession – The right by which someone occupying a piece of land might acquire title against the real owner, if the occupant’s possession has been actual, continuous, hostile, visible, and distinct for a statutory period. Adverse possession is not possible under Land Titles or when Crown property is involved.
Affidavit – A statement or declaration in writing and sworn to or affirmed before some officer who is authorized to administer an oath or affirmation, such as a notary public, or commissioner of oaths.
Agency – An agency is created when one person, called the principal, authorizes another person, called the agent, to act on behalf of and subject to the control of the principal.
Agreement of Purchase and Sale – A written agreement between vendor and purchaser in which the purchaser agrees to buy certain real property and the vendor agrees to sell upon terms and conditions as set forth in that agreement.
Agreement of Sale – Balance of Sale – A method of financing a sale, but different from a mortgage. The buyer does not receive a deed nor does title pass to him or her immediately; rather he or she receives a contractual interest on a time basis. Payments are made directly to the seller who in turn is still responsible for any outstanding mortgage on the property. The seller who still holds title may mortgage their remaining equity.
Alienation Clause – A type of acceleration clause that demands payment of the entire debt upon sale or other transfer of the title.
Amending Agreement – An agreement between the lender and borrower which may or may not be registered on title by the lender in which the terms of the registered mortgage are changed.
Amortization – Term used to describe the time over which the mortgage is to be paid, assuming equal payments. The life of a loan, e. g. a mortgage with a 25-year amortization period means that if all regular payments were made on time and the terms (payment, interest rate) remained the same, it would take 25 years to reduce the balance to 0.
Amortization Schedule – A table showing the amounts of principal and interest comprising each level payment due at regular intervals and the outstanding principal balance of the loan after each level payment is made.
Amortized Mortgage – A mortgage requiring regular payments which include both principal and interest sufficient to fully repay the loan by maturity.
Anniversary Date – The same date in each calendar year during the term of the mortgage with the first anniversary date taking place one year from the date interest is finally adjusted.
Appointment of a Receiver – A legal remedy available to a mortgagee when a mortgage is in default.
Appraisal Report – An independent assessment of the property by a qualified individual. A statement giving an opinion of value of an adequately described property, as at a specific date and supported by pertinent data.
Appraiser – An appraiser determines the market value of a house based on its condition and the selling price of comparable houses recently sold in the area.
Appurtenance – A right used with the land for its benefit.
Arm’s Length Transaction – A transaction between unrelated parties. A transaction freely arrived at in the open market unaffected by abnormal pressures as might be true in the case of a transaction between related parties.
Arbitration – The determination of a dispute by a disinterested third party.
Assessment (assessed Value) – A value placed upon property (land and buildings) for taxation purposes.
Assessment Roll – An annual list of the assessed values of all properties in a municipality, which includes the name of the property owner or tenant and their address. Assessment rolls are usually delivered to a municipality before the end of the year. The term “roll” comes from ancient times and refers to the way information used to be stored – on paper or parchment, rolled up into cylinders.
Assignee – One who takes the rights or title of another by assignment.
Assignment of Lease – The absolute or conditional transfer of the rights of either party to a lease.
Assignment of Mortgage – The transfer of ownership of a mortgage from one party to another.
Assignment of Rentals – A contract whereby the mortgagor grants the mortgagee the right to collect future rents on a given occurrence, normally default. Normally taken as additional security on rental loans.
Assignor – One who transfers or assigns the rights or title to another.
Assumption of Mortgage – The act of assuming liability for an existing mortgage on a property by the purchaser of that property. With builders’ loans, the assumption is usually evidenced by written agreement.
Attachment – The seizure of property by court order.
Attornment of Rents – The agreement of a tenant to pay rent to a new landlord, especially a mortgagee who has commenced a legal action.
Automated Valuation Model (AVM) – AVM stands for Automated Valuation Model. The AVM Product is a highly sophisticated valuation model and methodology that MPAC has developed to render a monthly “real-time” estimate of market value for essentially all residential properties in the province of Ontario.
Balance Sheet – Also known as the Statement of Financial Position or Statement of Assets and Liabilities is a listing of the assets, liabilities, and owners’ equity of a business enterprise at a specific point in time. The assets must equal the liabilities plus the owners’ equity.
Balloon Payment – The payment of the principal balance of a mortgage loan outstanding on maturity of the term. A balloon mortgage is one that does not fully amortize over its term to maturity.
Bank Rate – The rate at which the Bank of Canada charges loans to the chartered banks. This is the rate on which lending institutions base their prime lending rate.
Bankruptcy – A legal process which permits a discharge of most, but not all debts, pursuant to the Bankruptcy and Insolvency Act.
Basis Point – One one-hundredth of one percent. Used to describe the amount of change in yield in money debt instruments, including mortgages.
Basket Clause – A provision in a governing act which allows trust and loan corporations to make investments and loans not authorized, but not specifically prohibited, on up to usually about 7% of assets.
Beacon – A numeric assessment of credit worthiness used by Equifax derived from analysis of current credit report information.
Benchmark – A durable post, block or other device established by surveyors to indicate a definite point from which elevations are set.
Binder Insurance – A temporary agreement whereby one party agrees to insure another party pending receipt of, and final action upon, the application for insurance.
Blanket Mortgage – A single mortgage registered against two or more individual parcels of real property.
Blended Payments – Regular equal mortgage payments combining interest and principal components.
Blended Rate – A new interest rate on an increased mortgage loan which is derived from a formula which takes into account the interest rate and remaining term on the existing loan and the derived rate and term on the new funds being advanced.
Bona Fide – In good faith, with valuable consideration and with absence of notice of any problems.
- A sum paid by the mortgagor, or retained by the mortgagee from the advance of mortgage money, as part of the consideration for the making of the loan.
- A sum paid by the mortgagor to the martgagee as consideration for prepayment of all or part of the principle outstanding.
Bonus Mortgage – A mortgage in which the mortgage broker and/or lender levies a fee (bonus) which is deducted from the face amount of the mortgage prior to advancing funds.
Book Value – The capital amount at which property is shown on the books of an account. Usually it is the original cost, less reserves for depreciation plus additions to capital.
Borrowing By-laws – A document evidencing that a corporation has the power to borrow under its company charter.
Breach of Contract – Failure without legal reason to perform any promise that forms the whole or part of the agreed terms contained in the contract.
Bridge Financing – A loan provided to the borrower to provide financing for purchase, pending closing of the sale of their existing property.
Builder’s Risk Insurance – Fire and extended coverage insurance for a building under construction. Coverage increases automatically as the construction progresses and terminates at completion.
Building Code – A set of minimum regulations respecting the safety of buildings with reference to public health, fire protection and structural sufficiency.
Bundle of Rights – Legal rights which real estate ownership embraces which include the right to use, sell, lease, enter, or to give away the property, plus the right to refuse to take any of these actions.
Buy Down – A lump sum payment as consideration for the reduction in the interest charged on a loan from that which would normally be charged.
Canada Housing Trust – A special purpose vehicle (SPV) created to issue Canada Mortgage Bonds (CMB) and utilize the proceeds to purchase mortgages packaged in newly issued NHA Mortgage Backed Securities.
Canada Mortgage Bonds – A bullet pay type of bond investment. Issued by Canada Housing Trust and guaranteed as to full and timely payment by CMHC, these bonds feature semi-annual interest payments and principal at maturity.
Capital Cost Allowance – A deduction from rental income of such part of the capital cost of property as is allowed by regulation under the Income Tax Act.
- In the appraisal process, the conversion of earnings anticipated from the typical operation of
a property into a sum of present worth (capital value).
- In mortgaging, the addition of interest owed and/or other charges onto a principal balance and
and the subsequent amortization of that sum with interest.
Capped Variable Rate Mortgage – A variable (floating) rate mortgage in which interest decreases/increases are capped during the term.
Caution – A notice registered on title by a person claiming to have a proprietary interest (i.e. a right to call for or receive a transfer of charge) in land or in a charge of which he or she is not the registered owner to protect their interest. The registered owner of the land or charge cannot deal with the land or charge without consent of the cautioner.
Caveat Emptor – “Let the buyer beware”. The buyer must examine the goods or property he or she is buying and he or she, therefore, buys at their own risk
Central Bank – A body established by a national government to regulate currency and monetary policy on a national/international level. In Canada, it is the Bank of Canada; in the United States, the Federal Reserve Board; in the U.K., the Bank of England.
Certificate of Charge – A mortgage document in the Land Titles System.
Certificate of Occupancy (Permit) – A certificate provided by the municipality that a property has been constructed under the authority of the issued building permit and may be occupied.
Cessation of Charge – A discharge of a mortgage registered under the Land Titles Act.
Chain of Title – Chain of title is uncovered through the lawyer’s search, revealing any factors affecting ownership of land.
Charge – The name given to a mortgage document when title is registered under the Land Titles System.
Charge/Mortgage of Land – A standard form (Form 2) for registering a charge/mortgage under either registry or land titles.
Chattels – Movable possessions, personal property (generally items that may be removed without injury to the freehold estate).
Chattel Mortgage – A mortgage given on chattels. Usually given as collateral security to a mortgage on real estate. As an example, a chattel mortgage on refrigerators and stoves in an apartment building.
Closing Date – The date on which the sale becomes final, the new owner takes possession of the property, and funds are transferred from the purchaser to the vendor.
Cloud on Title – Any encumbrance or claim that affects title to real property.
Co-Applicant – A person applying with another for a loan.
Co-Insurance – A sharing of risk between insurer and insured which depends on the relationship of the amount of the insurance carried versus the amount of insurance required at the time of the loan.
Collateral Mortgage – A mortgage backed by additional security, such as a second property which is pledged to further secure the mortgage.
Collateral Security – In mortgaging, security given in addition to the direct security and subordinate to it.
Collection Agency – Means a person other than a collector who obtains or arranges for payment of money owing to another person, or who holds out to the public as providing such a service or any person who sells or offers to sell forms or letters represented to be a collection system or scheme; (“agence de recouvrement”)
Commitment – A letter/document issued by a lender reciting the basic terms of a loan which when accepted by the borrower forms a binding contract.
Completion Loan – The single disbursement of the total loan following satisfactory completion of the property.
Compound Interest – Interest charged not only on the principal sum but also on interest amounts charged but not paid in preceding periods that accumulate as new principal.
Condition Precedent – A condition in an agreement calling for the happening of some event, or performance of some act, before the agreement becomes binding on the parties.
Condition Subsequent – A condition referring to a future event upon the happening of which the contract becomes no longer binding on the parties.
Conditional Sales Agreement – An agreement by which it is provided that the title to the goods being sold remain in the name of the seller until payment in full of the purchase price, possession being given forthwith and the price usually being payable in installments.
Condominium – Ownership of property whereby the owners hold negotiable title to their own unit and, at the same time, share with fellow owners the title and cost of operation of the balance of the property (common elements) constituting the condominium.
Consideration – Consideration means “some right, benefit or profit accruing to the promissor or some forbearance, detriment, loss or responsibility suffered by the promissee.” In other words, the party trying to enforce the contract must have paid something in return for the promise.
Construction Loan – A claim against the estate or interest of the owner in a property for labour, services, or material supplied to it and not paid for and it must be registered on title to the property in question to be perfected.
Consumer Proposal – A legal process to assist a borrower in resolving indebtedness problems pursuant to the Bankruptcy and Insolvency Act.
Contract – A contract is a legally binding agreement between two or more capable persons for consideration or value, to do or not to do some lawful and genuinely intended act.
Contractual Power of Sale – Power of Sale proveedings based on contractual provisions containde within the mortgage document and generally governed by Part III of the Mortgages Act.
Conventional Mortgage – A mortgage that does not exceed a 75% loan-to-value ratio.
Convertible Mortgage – A mortgage, usually short-term (i.e. less than one year), allowing the mortgagor to lock in for a longer fixed term without penalty.
Conveyance – The transfer of an interest in property from one person to another.
Co-Operative – A form of multiple ownership of real estate in which a corporation or business trust entity holds title to a property. Individual unit holders have the exclusive right to occupy their unit by lease but their investment in the corporation is by way of shares.
Co-Ownership – The idea that an estate (present or future) can be simultaneously held by several persons. The most common types of co-ownership are joint tenancy and tenants-in-common.
Correspondents – A company that originates, possesses, and administers mortgage loans or other real estate investments on a continuing basis for investors.
Cost of Borrowing – A direct link to what can be a rather complicated disclosure requirement for Mortgage Brokers.
Covenant – An agreement in writing (in Common Law must be under seal) contained in a deed and creating an obligation. It may be positive, stipulating the performance of some action. It may be negative or restrictive, forbidding the commission of some act.
Creditor – One to whom a debt is owing.
Cross Default Clause – Mutual clauses in two or more mortgages which state that a default under one mortgage constitutes a default under the other(s).
Current Value Assessment (CVA) – Refers to the amount of money a property would realize if sold at arm’s length by a willing seller to a willing buyer.
Debt Coverage Ratio – The percentage of the borrower’s income used for monthly payments of principal, interest, taxes, heating costs and condo fees (if applicable).
Declaration of Trust – An acknowledgement by one holding title to property (mortgage) that he or she holds it in trust for the benefit of someone else.
Dedication – The granting of land by the owner for some public use and its acceptance for such use by authorized public officials.
Deed – A legal document in writing, duly executed and delivered, that conveys title or an interest in real property.
Default – Failure to fulfill contractual obligations.
Deficiency Judgement – A court order to pay the balance owed on a loan or mortgage if the proceeds from the sale of the security are insufficient to pay off the loan.
Deficiency Settlement – A monetary settlement by a mortgage lender or insurer where the net proceeds under a Power of Sale or Judicial Sale is less than the mortgagee’s total claim.
Demand Letter – A letter sent by the mortgagee to the mortgagor demanding immediate payment of all arrears, together with costs.
Discharge of Mortgage / Charge – A legal document (Form 3) executed by the mortgagee, and given to the mortgagor when a mortgage loan has been repaid in full releasing him or her from all obligations and covenants contained in the mortgage.
Disclosure Statement – A written statement by lenders disclosing information about a specific loan as may be required under various consumer protection acts.
- The sale of a mortgage for less than the principal balance thereby affecting an increase in the
percentage of interest paid on the investment.
- In appraising, the valuation of the present worth of an income stream at a specific interest
Document General – Standard Form (Form 4) relating to land registration process.
Dominant Tenement – The estate which derives benefit from an easement over a servient tenement, as in a Right-of-way.
Easement – A right enjoyed by one landowner over the land of another.
Economic Life – The estimated period over which it is anticipated that a property may profitably be utilized.
Effective Age – The age of a structure based on its condition and utility, as opposed to its chronological age.
Effective Interest Rate – Rate of interest on a loan which includes compounding, as opposed to the stated rate. For example, a loan rate might be published at 10%, but with compounding the true (effective) rate is somewhat higher based on number of compounding periods.
Effective gross Income (Income Property) – The annual income from a property if fully leased, less an annual allowance for vacancies and bad debts.
Egress – Going out (access to exit).
Eminent Domain – The right reserved by government to take by expropriation private property for public benefit provided it pays just compensation.
EMPIRICA – A numeric assessment of credit worthiness used by TransUnion, calculated based on current credit report information.
Encroachment – An improvement that intrudes illegally upon another’s property.
Encumbrance – Outstanding claim or lien recorded against property or any legal right to the use of the property by another person who is not the owner.
Equifax – One of two national credit reporting bureaus, the other being TransUnion.
Equity – In mortgaging, the difference between lending value and indebtedness.
Equity Financing (Lending) – The investment in the equity in leveraged or unleveraged real estate by investors. These investors are usually institutional and may or may not have provided the mortgage financing.
Equity of Redemption – The right of the mortgagor to have title to their property restored to him or her when he or she has repaid the mortgage in full.
Equitable Mortgage – A mortgage that has a claim solely on the equity of redemption and not to the title of the property itself.
Escheat – The reversion of property to the state in the event the owner thereof dies, leaving no will and having no legally qualified heir to whom the property may pass by lawful descent.
Escalation Clause – Lease provisions whereby the tenant pays for increases in certain expenses over a specified base. Usually these expenses are maintenance, insurance premiums and real estate taxes. The base is usually those expenses incurred by the landlord in a specified year.
Escheat – The reversion of property to the state in the event the owner thereof dies leaving no will.
Escrow – Securities, instruments, money, or other property deposited by two or more persons with a third person, to be delivered on performance of a certain event.
Estoppel Certificate – Legal certificate usually issued by a condominium corporation indicating details of the project and given to the lender / purchaser or tenant. Delivery of the certificate prevents one from claiming a different set of facts at a later date.
Expropriation – Taking private property for public use, with fair compensation to the owner, through the exercise of the right of eminent domain.
Extended Coverage Endorsement – An endorsement that may be attached to fire insurance policies. It generally includes coverage against the peril of windstorm, hail, explosion, riot, civil commotion, damage by aircraft or vehicle and smoke.
Extension Agreement – An agreement extending a loan past the original maturity date.
Exculpatory Clause – A clause in a contract holding one party harmless in the event of some default.
Face Rate – The contractual interest rate stated in a mortgage document or other financial instrument.
Face Value – The face value of the loan is the amount of money the borrower promises to repay (at the contract rate of interest).
Fee – An inheritable estate in land. The right of ownership of a property.
Fee Simple – The highest estate or absolute right in real property.
FICO – A numeric assessment of credit worthiness provided to consumers requesting online credit reports, which may differ somewhat from BEACON and EMPIRICA scores used by Equifax and TransUnion respectively. FICO is an acronym for Fair, Isaac and Co., a US company responsible for developing both BEACON and EMPIRICA scores.
Fiduciary – An individual or a trust institution charged with the duty of acting for the benefit of another party as to matters coming within the scope of the relationship between him or her. The relationship between a trustee and a beneficiary is an example of a fiduciary relationship.
Final Order of Foreclosure – A judgement which extinguishes the mortgagor’s (defendant’s) equity of redemption and beneficial title goes over to the mortgagee. With an equitable mortgage, the equitable estate is forfeited and transferred to the mortgagee.
Finder’s Fee – A fee or commission paid by a lender to a mortgage professional for referring a mortgage loan.
First Mortgage – A mortgage registered before all others on title.
Fiscal Policy – The policy pursued by the Federal Government to direct the economy through taxation and the level and allocation of public spending.
Fiscal Year – A corporation’s fiscal year. Some companies do not use the calendar year for their bookkeeping.
Fixed Assets – Fixed assets are typically long term in nature. The value of fixed assets to a company lies in their use in producing goods and services, rather than in their sale value. Fixed assets wear out time or otherwise lose their usefulness.
Fixed Rate Mortgages – One of two common variations involving blended (amortized) mortgages in which the interest rate is fixed for a specified term, the other being a variable rate mortgage.
Fixture – Chattels that have been attached to the land or building so as to lose their character as chattels.
Forbearance – The waiving of a covenant in a mortgage document.
Foreclosure – A legal remedy available to a mortgagee where there is default under any of the covenants in the mortgage. It deprives the mortgagor of their equitable right to redeem.
Fraud – A false representation of fact knowingly made by an individual that induces another person to act upon the representation.
Freehold Estate – An estate in land or real property of uncertain duration that is either of inheritance or for the life of the tenant. There are three (3) freehold estates: fee simple, fee tail and life estate.
Front-end Money – Funds required to start a development and generally advanced by the developer or equity owner as a capital contribution to the project.
Fully Amortized Mortgage – A mortgage in which the amortization period and the term are the same.
Gale Date – In mortgaging, the date on which interest is charged or compounded on the loan.
Garnishment – The legal attachment by creditors of a debtor’s wages, cashflow or assets. The party served with notice must comply with the Garnishee Order and forward funds to the creditor(s) named.
Grant – Technical term used in deeds of conveyance to indicate a transfer of an interest or estate in land.
Grantee – The party to whom an interest in real property is conveyed (the buyer).
Grantor – The person who conveys an interest in real estate by deed (the seller).
Gross Area – The total floor area of a building, measured from the outside of the exterior walls.
Gross Income (Single Family) – The total annual personal income before deductions used in the calculation of an applicant’s debt service ratios.
Gross Lease – A lease that provides that all expenses attributable to the real estate are paid by the landlord. According to local terminology, leases may require some expense to be paid by the tenant.
Gross Leasable Area – The total floor area designed for tenant occupancy and exclusive use and that area on which tenants pay rent. As adopted by the shopping centre industry, it is measured from the centre line of joint partitions and from outside wall faces. This will not include common areas.
Ground Lease – Contract for the rental of land usually for a long term.
Guarantor – One who promises to pay a debt or perform an obligation contracted by another in the event the original obligor fails to pay or to perform as contracted.
Holdback – The withholding of or non-advancement of a portion of a mortgage loan to maintain adequate security,
- pending achievement of a performance requirement, or
- as protection against liens.
Home Inspection – A visual inspection of the major components of a home, by a qualified individual, giving the homebuyer a true and unbiased picture of the home’s condition.
Income Property – Real property that is used, or is capable of being use in the normal market, primarily for the production of annual income through leasing of the property.
Indefeasible – That which cannot be forfeited or done away with.
Indemnity – Protection of exemption from loss or damage.
Ingress – Going in; right of entrance.
Injunction – An order of a court of equity prohibiting an act or compelling an act to be done.
Instrument – A formal written legal document.
Insurable Interest – An interest of such a nature that the occurrence of the event insured against would cause financial loss to the insured. Such interests, for example, may be that of an owner, a mortgagee, a lessee or a trustee.
Insurable Value – The term is used conventionally to designate the amount of insurance that may be carried, on destructible portions of a property to indemnify the owner in the event of loss.
Interest Adjustment Date – The date one month prior to commencement of amortization when accrued interest computed on the moneys advanced becomes due.
Interest Factor – The decimal equivalent for an interest rate on a unit amount for a certain period of time. Computed by interest rate divided by number of days in basic year, times the number of days accrued.
Interest Only Payment Plan – One of four traditional payment plans in which interest is repaid on an unamortized loan with the full principal coming due at the end of the mortgage term.
Interest Plus Principal Payment – One of four traditional payment plans in which principal is reduced through scheduled payments with interest due and payable on the outstanding balance at times set out in the mortgage.
Interest Rate – Interest rate is the percentage charged on outstanding loan balances.
Interest Rate Buydown – A financing technique to increase a property’s marketability by reducing an existing mortgage rate to the current or a lower market rate.
Interest Rate Differential – The difference in interest rate between the annual effective rate charged on an existing mortgage and the current rate charged for a term equl to the remaining mortgage term.
Interim Financing (Construction Financing) – Interim loans are used to provide construction financing until the permanent loan can be funded.
Internal Rate of Return – The rate at which the present worth of all present and future investment costs equals the present worth of all present and future investment benefits.
Investor/Lender Disclosure Statement (Form 1) – A prescribed form under the Mortgage Brokers Act that must be provided by the broker to investors/lenders prior to advancing any funds or entering into an agreement to receive such funds.
Irrevocable – Unalterable.
Joint Tenancy – An ownership of property by two or more persons each of whom has an undivided interest subject to the right of survivorship.
Joint Venture – An arrangement under which two or more people or businesses go into a single venture as partners. Priority is determined solely by date of registration.
Judgement – The official and authentic decision of a court of justices upon the respective rights and claims of the parties to an action or suit therein litigated and submitted to its determination.
Judicial Sale – A legal remedy available to a mortgagee when a mortgage is in default.
Junior Mortgage – A mortgage that is subsequent to the claims of the holder of a prior (senior) mortgage.
We currently have no definitions beginning with “K”.
Land – Includes not only the ground or soil, but also everything that is attached to the earth, whether by course of nature as trees and herbage, or by the hand of man, as houses and other buildings. It includes not only the surface of the earth but everything under it and over it. Condominium Acts divide land horizontally thereby limiting the vertical ownership. It includes dwellings, tenements (rents), hereditaments (property that can be inherited) whether corporeal (tangible) or incorporeal (intangible) and any undivided share in land.
Land Titles System – This is a system of land registration under which the registrar or master of titles passes on the validity of the instrument, determines its legal effect, and the Government guarantees title.
Charge – An additional charge a borrower is required to pay as penalty for failure to pay a regular installment when due.
Lead Lender – A financial institution that heads up a financial consortium or syndicate of two or more lenders to provide funds for a mortgage.
Lease – A contract between landlord (lessor) and tenant (lessee) for the occupation or use of the landlord’s interest in a property by the tenant for a specified period of time and for a specified consideration (rent).
Lease Guarantee Insurance – Insurance that protects the owner of leased commercial and industrial real estate loss of rental income through the failure of a tenant to make rental payments.
Leasehold – An estate or interest in an estate in real property held by virtue of a lease for a term of years. A leasehold is considered personal property.
Leasehold Mortgage – A mortgage given by a lessee on the security of their leasehold interests in the land.
Legal Description – The written geographical (metes and bonds) description of a property as described in the land register.
Legal Mortgage – A mortgage which results from the law alone, e.g. legal mortgage of minors, interdicted persons, or the crown.
Lending Value – The property value for mortgage purposes. Usually, the lesser of appraised value or sale price.
Lessee – Tenant.
Letter of Instruction – Detailed directives and guidelines most commonly associated with mortgage funding, which are provided to the solicitor by the lender when advancing funds in accordance with a mortgage commitment.
Letter of Opinion – A brief letter setting out an estimate of value, typically with only limited details concerning the property.
Loan to Value Ratio (LTV) – The ratio of the loan amount to the lending value of the property.
Locational Obsolescence – Depreciation resulting from loss of value due to negative influences from external factors, e.g., railway tracks and commercial uses directly adjacent to residential property.
Lock-In – An option within a variable rate mortgage in which the borrower can lock-in (fix) the interest rate during the mortgage term. Also known as a convertible option.
Marketable Title – A title that may not be completely clear but has only minor objections that a well-informed and prudent buyer of real estate would accept.
Market Value – The highest price which a buyer, willing, but not compelled to buy, would pay, and the lowest a seller, willing, but not compelled to sell, would accept.
Maturity Date – The final day of the term of the mortgage.
Metes and Bounds – A system of land description whereby all boundary lines are set forth by use of terminating points and angles. Metes refers to a limit or limiting mark and bounds refers to the boundary lines.
Mill Rate – A rate which when multiplied by each one thousand dollars of property assessment gives the annual r eal estate taxes.
Moratorium – A period during which a borrower is granted the right to delay fulfillment of an obligation.
Mortgage – Any charge on real property as security for a loan.
Mortgage Assumption – The act of assuming an existing mortgage including obligations, typically subject to mortgagee approval.
Mortgage Averaging – A formula, subject to various limitations, that determines the overall interest rate on two or more mortgages.
Mortgage Banker – One who originates mortgages with the intent to sell them to permanent investors with an agreement that the originator services these loans for the investor.
Mortgage-Backed Securities – An NHA MBS represents an undivided interest in a pool of insured residential first mortgages. As mortgages, these financial instruments are secured by the value of the underlying real estate. NHA MBS carry the CMHC Timely Payment Guarantee and, as such, represent an obligation of the Government of Canada.
Mortgage Bond – In recent years, there has been an increased activity in mortgage bonds, mainly for larger loans. When a very large loan is required, the number of potential lenders is limited. A loan in the category of $50,000,000 for instance, is usually made by the mortgage bond method that is really a device for dividing up the loan. A bond could be issued for an amount as low as $100,000 and sold to various pension funds through investment dealers on a public issue, or more commonly sold as a private placement issue.
Mortgage Broker – An individual or corporation registered under the Mortgage Brokers Act.
Mortgage Clause – See Loss Payable Clause.
Mortgage Commitment – A written confirmation to a prospective borrower regarding terms and conditions under which a mortgage will be granted and funds advanced to that vorrower.
Mortgage Constant – The percentage of the mortgage paid in equal regular payments that provide principal reduction and interest payments over the life of the mortgage. Usually expressed annually.
Mortgagee – The lender or creditor.
Mortgagee in Possession – A mortgagee in control and management of the mortgaged property. A mortgagee goes into possession when he or she deprives the mortgagor of the management and control of the mortgaged property.
Mortgage Impairment Insurance – A master insurance policy carried by mortgage lenders that provides him or her with insurance proceeds in the event of an otherwise uninsured loss of a property securing their debt. Some policies also insure losses resulting from the borrower’s failure to pay real estate taxes.
Mortgage Insurance – Required if you are contributing between 5% and 25% of the value of the property as the down payment. Available through CMHC or GECMIC covering whole or partial losses of principal and interest.
Mortgage Investment Corporation (MIC) – An investment vehicle pursuant to the Income Tax Act.
Mortgage Term – The length of time the interest rate is guaranteed for a mortgage. Mortgage terms normally range from 6 months to 5 years or more, after which time you can repay the balance of the principal owing or re-negotiate the mortgage at current rates.
Mortgaged Out – Situation when the total mortgage debt equals or exceeds the market value or cost of the property.
Mortgage Portfolio – The aggregate of mortgage loans held by an investor.
Mortgage Priority – The legal priority of mortgages determined by time of registration, subject to various exceptions.
Mortgage Servicing – The process of managing the mortgage administrative duties.
Mortgagee – The one to whom property is conveyed as security for the payment of a debt; the lender or creditor.
Mortgagor – The borrower or debtor.
Net Lease – A lease that provides that all expenses attributable to the real estate are paid by the tenant. Local terminology may require some expenses to be paid to the landlord.
Net Operating Income – In the valuation process, the annual income available after operating expenses and real estate taxes to service the debt and provide the owner with a return on their investment.
Net Yield – The interest rate return on a mortgage after deducting the percentage equivalent of mortgage servicing from the coupon rate of the mortgage.
Net Worth – Total assets less total liabilities.
Nominal Interest Rate – The stated interest rate on a lona.
Non Est Factum – A person is not bound by a fraudulent contract that he or she unsittingly entered into.
Non-Conforming Use – A property that is being used in contravention of current zoning by-laws but is permitted to remain because it pre-dates the enactment of the zoning by-laws.
Non-Disturbance Agreement – An agreement that permits a tenant under a lease to remain in possession despite any action by a mortgagee.
Non-Recourse Mortgage – A mortgage in which the lender can only pursue legal remedies against the property being mortgaged and not against the borrower’s personal covenant in the event of a default.
Notice of Assessment – A summary notice for taxpayers from the Canada Revenue Agency itemizing total and net income, and federal/provincial tax payable for a particular taxation year.
Objective Value – Direct cost of creating, as distinct from the perceived value in the mind of the buyer or seller.
Offer and Acceptance – Mutual agreement of the parties to a contract in adherence with legal requirements, e.g.,unconditional acceptance.
Offer to Purchase – A written contract outlining the terms under which the buyer agrees to purchase the property. There may be conditions attached to the offer, for example: offer being subject to arranging the mortgage or selling a home.
Par – An expression used when a mortgage is sold or purchased for the outstanding balance without premium or discount.
Pari Passu – On an equal basis. When mortgages are syndicated, the lenders participate equally. No one party has preferential access to gains or is able to opt out of losses. In company stock, it refers to equal ranking of a company’s preferred shares.
Partial Discharge – A release from the mortgage of a definite portion of the mortgaged lands usually given after the mortgagor has prepaid a specific portion of the mortgage debt.
Partially Amortized Mortgage – A mortgage in which the amortization period exceeds the term, thereby leaving a balance (balloon payment) payable at the end of the term, e.g., 25 year amortization and a five year term.
Perfecting Title – The elimination of any claims against title.
Performance Bond – A bond issued by a duly incorporated surety company covering the faithful performance of the contract and the payment of all obligations arising under the contract.
Permanent Loan – An amortizing loan on completed property which is intended to remain on that property over the full amortization period. The terms and conditions of the loan usually change during that period.
Personal Liability – The borrower’s assets are pledged or subject to claim in addition to a primary security.
Personal Property – All property, except land and the improvements thereon.
Physical Deterioration – Depreciation resulting from an improvements physical condition due to wear and tear, decay, and structural defects.
Plot Plan – A drawing showing a layout of improvements on a site, including their location, dimensions and landscapes. It is generally a part of the architectural plans.
Plottage – The increase in value of a plot of land created by the assembling of small parcels into one ownership.
Police Power – The right of government to limit property rights without compensation provided the limitation is not specific to one parcel.
Postponement – The deferment of a prior charge on title to another.
Power of Attorney – A written instrument duly signed and executed by an owner of property that authorizes someone to act on behalf of the owner, to the extent indicated in the instrument.
Power of Sale – A clause generally inserted in mortgages giving the mortgagee the right and power, on default by the mortgagor of moneys due, to sell the mortgaged property by public auction, private contract or tender.
Pre-Authorized Cheques – Direct withdrawals of due payments from a borrower’s bank account in accordance with authority granted by the borrower.
Premium – The amount, often stated as a percentage, paid in addition to the face value of a mortgage when the mortgage is being purchased.
Prepayment Clause – A clause inserted in a mortgage that gives the mortgagor the privilege of paying all or part of the mortgage debt in advance of the maturity date.
Prepayment Penalty – The sum of money (usually equal to an amount of interest) a mortgagee may require from a mortgagor to repay all or part of any outstanding principal.
Prime Rate – The rate at which financial institutions lend to their best customers.
Principal Amount –The debt owed, i.e., principal amount of a mortgage, as distinct from interest.
Prior Charge – An encumbrance ranking in priority to the mortgage in question.
Privacy Disclosure – Disclosures pursuant to federal legislation concerning the collection and use of personal information.
Profit a Prendre – The right to enter and take something from the land.
Promissee – The person who can enforce the promise in a contract is called the promissee.
Promissor – The person who makes the promise in a contract is called the promissory.
Probate – Letters probate are issued by the Surrogate Court or the Court of Probate certifying that the Will has been approved and that the executor has been duly appointed
Progress Advance Loan – A loan made, usually to a builder, where moneys are advanced from time to time as construction progresses.
Purchase Financing – Mortgage financing obtained specifically for the acquisition of real estate, as distinct from switch financing (at point of renewal) or equity take outs (refinancing).
Quiet Enjoyment – The right of a lessee (tenant) to use the leased property without interference from the lessor (owner).
Quiet Possession – The right granted by a mortgagee to the mortgagor to use the property without interference by the mortgagee until there is default. Also vice versa.
Quit Claim Deed – In conveyancing, to release or relinquish a claim. In mortgages, a form of title transfer of ownership from the owner to the mortgagee. A default remedy.
Real Estate – The physical land and appurtenances including structures affixed thereto.
Real Estate Investment Trust (REIT) – An investment trust that specializes in investing in real estate related investments, including mortgages, construction loans and real property in varying combinations.
Real Property – The interests, benefits, and rights inherent in the ownership of the physical real estate. It is the bundle of rights with which the ownership of real estate is endowed, with limitations, and does not include personal property. Often called “property”, “real estate”, or “land”.
Reassessment – The process of creating a new base for property taxation by updating assessments to reflect more current values. Ontario had its first province-wide reassessment in 1997, its second in 2000, and its third in 2002.
Realty – Real property.
Recasting – Any increase in loan based in part or in total on unforeseen increased costs incurred during construction.
Receiver – In connection with mortgage actions, an appointee of a court, requested by a mortgagee, to receive and account for the rents and profits from the mortgaged premises.
Reconciliation – One of several steps in the appraisal process by which the appraiser arrives at a final value estimate.
Redemption – The duty of the mortgagee, on being paid the principal, interest and costs due by the mortgagor, to hand to the mortgagor the title deeds together with an executed reconveyance of the mortgage property.
Registry System – The system of land registration where all interests in land are recorded in chronological order. The registrar assumes no responsibility for the legal effect of the document.
Release of Covenant – An agreement by a lender to terminate the personal obligation of a mortgagor,
- a. usually upon sale of a property to a new purchaser who is acceptable to the mortgagee, and
who has signed an assumption agreement or other appropriate legal documents.
- b. releasing a guarantor whose covenant is no longer required.
Renewal Agreement – An agreement whereby the lender may agree to extend the mortgage loan but possibly on revised terms as to principal repayments and interest rate.
Rent Roll – A statement listing the tenants in occupancy, the area or unit occupied by each, their lease expiry date and rent payable and other leasing details that may be required.
Replacement Cost – Cost of replacing the subject property new with one having exactly the same utility.
Replacement Reserve – A cash reserve for the future replacement of fixed assets.
Reproduction Cost – The cost of reproducing a new replica property on the basis of current prices with the same or closely similar materials.
Request to Redeem – A notice filed under a foreclosure action allowing the mortgagor 60 days to redeem the property, otherwise the mortgagor is foreclosed.
Restrictive Covenant – A contract between neighbouring landowners restricting the use of one of the parcels. It must be negative in nature.
Rests – The periodical balancing of an account made for the purpose of converting interest into principal, and charging the party liable therein with compound interest, e.g. half-yearly.
Return on Equity – The percentage that the annual cash flow after debt service is of the equity in the property.
Reverse Mortgage – A mortgage that facilitates equity conversion into cash or an invome stream.
Right –An interest in property.
RRSP Mortgage – A non arm’s length mortgage in which the RRSP Plan holder lends himself or herself funds in accordance with regulations established by the Revenue Canada Agency.
Return on Investment – The percentage that the annual cash flow after debt service is of the cash investment in the property.
Reversion – A right to future possession retained by an owner at the time of a transfer of an owner’s interest in real property.
Right of Survivorship – The distinguishing feature of joint tenancies and tenancies by the entirety which provide that, where land is held in undivided portions by co-owners, upon death of any joint owner, their interest in the land will pass to the surviving co-owner, rather than to their heirs or devisees.
Right-of-way – The right to pass over another’s land, more or less frequently, according to the nature of the easement.
Sale Holdback – A percentage of the principal amount of the mortgage held back by the mortgage until the property in question has been sold to a party satisfactory to the mortgagee who has assumed the responsibility of the mortgage by the appropriate legal document.
Sale Leaseback – A technique in which a seller deeds property to a buyer and the buyer simultaneously leases the property back to the seller, usually on a long- term basis.
Seasonal Deficiencies – Work necessary to finish a property that cannot be completed immediately because of seasonal or climatic conditions.
Secondary Financing – Financing real estate with a loan, or loans, that is subordinate to a first mortgage.
Secondary Mortgage Market – A market where existing mortgages are bought and sold.
Second Mortgage – A mortgage placed on real property which is already encumbered with one mortgage. Determination of first, second, third mortgage is by priority or registration (time and date).
Seller Selling Under Power of Sale – An OREA schedule to be attached to the agreement of purchase and sale attesting to the seller’s authority to sell the property under power of sale.
Seller Take Back – A mortgage taken back by the seller typically to facilitate the sale and/or further the seller’s investment objectives.
Servicing Agreement – A written agreement between an investor and mortgage loan correspondent stipulating the rights and obligations of each party regarding the origination and continuing administration of the loans.
Servient Tenement – The parcel of land over or through which an easement runs.
Severance – The subdivision of a parcel of land.
Shareholder’s Equity – The difference between the assets and liabilities of a corporation, sometimes called net worth. Refers to ownership interest in common and preferred shareholders in a company.
Sheriff’s Certificate – A signed statement from the sheriff’s office certifying that there are no Writs of Execution in the sheriff’s hands against specific land and that he or she has not sold the land within a specified period.
Simple Interest – Interest charged for a specific period with no compounding.
Sole Proprietor – An unincorporated business owned by an individual.
Spread – The difference between the cost of money and the yield on the investment.
Specific Performance – An equitable remedy to compel performance of a real estate or mortgage contract according to the specific terms of the contract.
Standby Commitment – An agreement by a lender to provide a certain amount of takeout mortgage financing on specific terms in the future. This commitment enables the borrower to arrange construction financing from other sources. The commitment is issued for a fee and the lender is willing to disburse the committed funds in the event that a permanent loan on more favourable terms is not obtained.
Standard Charge Terms – Mortgage terms/provisions set out by separate schedule and filed in the land registration office and included by way of numerical reference in a Charge/Mortgage of Land document.
Standby Fee – A sum of money given by the borrowers to the lender to hold a mortgage commitment for a certain period of time. The fee is normally non-refundable.
Standby Loan – A pre-construction loan commitment obtained prior to securing permanent financing.
Standing Mortgage – A mortgage that provides for equal, regular lump-sum payments of principal, usually quarterly, plus accrued interest.
Statement of Claim – A statement setting out the mortgagee’s claim in a foreclosure action including specifics regarding the defaulted mortgage and amounts due.
Statement of Mortgage – A prescribed form under the Mortgage Brokers Act that must be provided by a mortgage broker to every prospective borrower.
Statutory Power of Sale – Power of Sale proceedings based on statutory provisions set out in Part II of the Mortgages Act, as distinct from contractual statutory provisions detailed in the mortgage document.
Straw Buyer – A buyerwho purchases a property for another, thereby concealing the real buyer’s identity.
Subordinate – Subject to, or junior to.
Subordination – The act of a party acknowledging by written recorded instrument that a debt due is inferior to the interest to another in the same property. Subordination may apply not only to mortgages but also to leases, real estate rights, and any other type of debt instrument.
Subrogation – A doctrine adopted in favour of the insurer in order to prevent the insured from recovering more than a full indemnity.
Subscription Policy – An insurance policy that states two or more insurance companies are sharing the risk.
Sue for Payment – A legal remedy available to the mortgagee upon the mortgagor’s default, typically combined with other actions, e.g., payment, possession and foreclosure.
Sue for Possession – A legal remedy available to the mortgagee upon the mortgagor’s default, typically combined with other actions, e.g., payment, possession and foreclosure.
Surety – The guarantee given for the performance of someone else.
Survey – A property survey is a process by which land boundaries and areas are determined and defined and improvements may be plotted thereon. Surveys are also used for locating and identifying property lines, improvements on the land and easements on the land.
Surveyor’s Certificate – A formal statement signed, certified, and dated by a surveyor giving the pertinent facts about a particular property and any easements or encroachments affecting it. These are no longer available in Ontario.
Switch Financing – The transfer of an existing mortgage balance from one mortgagee to another.
Syndication – A group of lenders that share in the principal disbursement of a loan to spread risk or to comply with statutory restrictions on a loan size.
Take-out Loan – A first mortgage loan that is committed and expected to be made upon completion of a property with the loan proceeds to be used to repay an interim or construction loan.
Tax Certificate – A certificate from the appropriate taxing authority giving the status of real estate taxes or other assessments affecting the property.
Tenants in Common – An ownership of property by two or more persons, each of who has an undivided possessory interest, which may be voluntarily transferred by alienation device or descent and is not subject to any rights of survivorship.
Tenure – The manner or system of holding lands or tenements in subordination to some superior right, which in the feudal ages was the leading characteristic of real property ownership.
Teranet – A company responsible for the automation fo property records in Ontario.
Tereview – A software package providing an electronic gateway to automated property records in Ontario.
Term – In a mortgage, term is the actual length of time for which the money is loaned.
Term Mortgage – A non-amortizing mortgage under which the principal is paid in its entirety upon the maturity date. Sometimes called a straight loan.
Title – The means of evidence by which the owner of land has lawful ownership thereof.
Title Insurance Policy – A contract by which the insurer, usually a title insurance company, agrees to pay the insured a specific amount for any loss caused by defects of title to real estate, wherein the insured has an interest as purchaser, mortgagee or otherwise.
Title Search – An examination of public records to determine the state of title.
Torrens System – The Land Titles System as originated in Australia by a Mr Torrens in 1858.
Tort – A breach of duty involving a civil wrong (other than a breach of contract) that can lead to common law action for damages.
Total Debt Service Ratio (Single Family) – The ratio of an amount equal to the annual mortgage charges and acceptable installment account payments to an amount equal to the effective gross annual income of the borrower.
Transfer of Charge – Assignment of a mortgage.
TransUnion – One of two national credit reporting bureaus, the other being Equifax.
Trust – Assets such as real estate are held in trust by a trustee for the ultimate use and benefit of named beneficiaries.
Trust Deed – A written instrument duly executed, sealed, and delivered, conveying or transferring property to a trustee, usually but not necessarily covering real property.
Unenforceable – That which cannot be imposed, e.g., not enforceable by the court.
Usury Rate – The maximum legal rate for interest, discounts, or other fees that may be charged for the use of money.
Valuation Date – The date used for establishing the assessed value for all properties in the Province. The valuation date for 2001 and 2002 taxation years is June 30, 1999. Formerly called a “base year”.
Variable Rate Mortgage – One of two types of blended mortgages in which interest fluctuates according to the prime rate or a selected index with corresponding adjustments to payments or amortization to reflect those changes. The other type of blended mortgage payment is referred to as a fixed rate mortgage.
Vendor’s Lien – A notice registered on title by the vendor, protecting the vendor for the unpaid balance of the purchase price. It is usually collaterally secured by a mortgage.
Void – Of no legal effect; a nullity.
Voidable – One party to a contract is entitled to rescind the contract at his or her option.
Waiver – The relinquishment of some right. More specifically, a wording within an agreement providing that the party may waive a condition at his/her sole option.
Warehousing – The temporary advancement of a trust company’s own funds in disbursing mortgage loans pending sale to investor clients for whom the loans were originated.
Waste – Any destructive act which permanently reduces the value of the security.
Writ – A form of written command in the name of sovereign, state, court, etc. issued to an official or other person and directing him or her to act or abstain from acting in some way.
We currently have no definitions beginning with “X”.
Yield to Maturity – A percent returned each year to the lender on actual funds borrowed, considering that the loan will be paid in full at the end of maturity.
Zero Lot Line – The positioning of a structure on a lot so that one side rests directly on the lot’s boundary line.
Zoning – The uses to which property may be put in specific areas, as specified by municipal authorities.
Duhaime’s Law Dictionary
Researched, written in plain language and provided free of charge by lawyer Lloyde Duhaime. A great place to find additional Legal Term definitions.