APR (Annual Percentage Rate)The yearly interest percentage of a mortgage as expressed by the actual rate of interest paid given the term, rate, amount and cost of arrangement.

ARM (Adjustable Rate Mortgage)
A mortgage for which the interest rate is adjusted periodically according to movements in a pre-selected index.

ABSTRACT OF TITLEA written history of the title to a parcel of real estate as recorded in a Land Registry Office.

ACCELERATION CLAUSEA clause in the mortgage document which accelerates the maturity date and states that upon default, the principal sum of the mortgage and accrued interest falls due.

ACCRUED INTERESTInterest which has accumulated unpaid since last payment date.

ADVERSE POSSESSIONWhen an individual, not the owner, takes actual possession of the property, hostile to, and without the consent of, the owner.

ADD-ON INTERESTAn interest amount added to the principal of a debt and made payable as part of the debt , usually in equal periodic instalments (also called Pre-calculated intrest).

AFFIDAVITA statement of declaration in writing and sworn or affirmed before an authorized individual, such as a notary public.

AGENCYA relationship which arises out of a contract, where an agent is authorized by a principal to engage in certain acts, usually in dealing with one or more third party(s).

AGREEMENT OF PURCHASE AND SALEA written contract to buy property in which the purchaser and vendor agree to sell upon terms and conditions as set forth in the agreement.

ALIENATION CLAUSEThis is a clause that enables the mortgagee to demand payment of the outstanding balance including interest upon sale or transfer of title. (also known as a “due on sale” clause)

AMORTIZATIONThe gradual retirement of a debt by means of partial payments of the principal at regular intervals.

AMORTIZATION OF A MORTGAGEThe arrangement for paying off a mortgage by instalments, over a period of time.

AMORTIZATION PERIODThe time period required to completely retire a debt through scheduled payments of principal.

ANNIVERSARY DATEThe occasion of one year from an event pertaining to a mortgage. (Eg. Registration date)

APPRAISED VALUEAn estimate of property value written by a qualified individual (AACI). Appraisals performed for mortgage lending purposes, may not reflect the market value of the property, or the purchase price.

APPURTENANCESomething which is outside the property itself, but belongs to the land and is joined thereto; eg. a road over another’s land providing an access (right-of-way) is an appurtenance.

ARREARSTo be “in arrears” is to be behind in the payments called for under a mortgage agreement.

ASSESSED VALUEAn amount assigned to taxable property, for the purpose of equalizing the burden of taxation.

ASSIGNEEOne who takes the rights or title of another by assignment.

ASSIGNMENT OF MORTGAGEThe assigning of a mortgagee’s interest in the mortgage to a new mortgagee. The legal sale of the mortgage with or without an agreement to repurchase.

ASSIGNMENT OF RENTALSThe enforcable diversion of income from mortgaged property to the Mortgagee.

ASSIGNOROne who transfers or assigns the rights or title to another.

ASSUMPTION AGREEMENTA document which binds someone other than the mortgagor, to perform mortgage obligations.

ASSUMPTION OF MORTGAGEThe action of a purchaser taking responsibility for a mortgage debt by way of a legal agreement. The original covenantor(s) responsibility pursuant to the mortgage obligation remains intact in such arrangement, so long as the existing documentation remains registered.

ATTORNMENT OF RENTThe redirection of rental income to a Mortgagee, usually in the event of default.

AUTHORITYThe legal right given by a principal to an agent to act on the principal’s behalf in performing specific acts or negotiations.

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BALANCE DUE ON COMPLETIONThe amount of money a purchaser will be required to pay to the vendor to complete the purchase, after all adjustments have been made.

BALLOON PAYMENTThis is a final mortgage payment at the end of the term which pays off the outstanding loan in full. The amount of money (principal) required to discharge a mortgage at maturity.

BLANKET MORTGAGEA single registered document which encumbers more than one property.

BLENDED PAYMENTEqual payments consisting of both principal and interest, paid regularly during the term of the mortgage.

BREACH OF CONTRACTFailure to fulfil an obligation under a contract. Breach confers a right of action on the offended party.

BUILDING CODESRegulations established by government providing for structural requirements.

BUYDOWNA payment to the lender from the seller, buyer or third party causing the lender to reduce the interest rate during the term of the mortgage.

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CAPRefers to a maximum interest rate increase for a mortgage.

CAPITALIZED VALUEThe value of a property based on the net income.
 

CAPITALIZATION RATEThe rate of return anticipated by an investor in property.

CAVEAT EMPTOR“Let the buyer beware”. A buyer must examine fully before the purchase is made.

CERTIFICATE OF CHARGEA mortgage document in the Land Titles System.

CESSATION OF CHARGEA discharge of a mortgage in the Land Titles System.

CHAIN OF TITLEThe sequence of conveyances and encumbrances affecting a title to land from the time that the original patent was granted or as far back as records are available.

CHARGEThe name given to a mortgage document when title is registered under the Land Titles Act.

CHATTELSMoveable possessions and personal property that may be removed without damage to the property, (eg. appliances).

CHATTEL MORTGAGEAn encumbrance against moveable possessions, or personal property that may be removed without damage to the property, (e.g. appliances).

CLOSED MORTGAGEA referance to the absence of the privilege to accellerate repayment during the term of a mortgage either by bulk payment(s) or increase to scheduled remittances.

CLOSINGSee “Date of Completion”

CLOUD ON TITLEAny encumbrance or claim that affects title to property.

CMHCThe Canada Mortgage and Housing Corporation a Canadian Crown Corporation which administers the National Housing Act. CMHC services include the insuring of high ratio mortgage loans for lenders.

COLLATERAL MORTGAGEA mortgage which secures a loan given by way of a promissory note.

COLLATERAL SECURITYAn additional form of security, pledged to reduce the risk of a mortgagee.

COMMITMENTA written notice from a lender who advises of approval to advance a specified amount of funds under certain conditions.

COMMON LAWThat part of the law formulated, developed and administered by the old common law courts, based originally on unwritten common customs.

COMPLETION LOANA mortgage loan dispursed following the satisfactory completion of construction.

COMPOUND INTERESTInterest on both the principal and on interest that has accrued.

COMPONENT FINANCINGA device by which lending is split into separate parts and treated individually.

CONDITION PRECEDENTAn event or action necessary before an agreement becomes binding.

CONDITION SUBSEQUENTA condition referring to a future event upon the happening of which the contract becomes no longer binding on the parties.

CONDOMINIUMThe ownership of a separate amount of space in a multiple dwelling or other multiple-ownership of common elements used jointly with other owners.

CONSIDERATIONSomething of value given to make a promise of repayment enforceable.

CONSTANT ANNUAL PERCENTThe percentage required to pay the principal and interest to amortize the loan.

CONSTANT PAYMENT MORTGAGEA mortgage which is paid by equal periodic amounts consisting of principal and interest payments. It may be self-liquidating, which means the mortgage is entirely paid off at maturity (fully amortized), partially amortized, at the end of which there remains a principal balance due at maturity (also known as balloon mortgage).

CONTRACTAn agreement between two or more parties given receipt of lawful consideration to do or refrain from doing some act.

CONSTRUCTION ADVANCEMoneys advanced to the borrower under a construction loan.

CONSTRUCTION LIENA claim against property pursuant to labour, services, or materials supplied.

CONSTRUCTION LOANA short term loan made to a builder for construction of buildings, usually to be paid out by another mortgage upon final completion. Also, a description used in reference to a mortgage which is advanced in pre-determined stages, according to the amount of work completed.

CONSTRUCTION LOAN AGREEMENTAn agreement between a lender and a builder setting out terms of an agreement – loan amount, rate, method of drawing funds, conditions for advancing.

CONVENTIONAL MORTGAGEA mortgage loan which does not exceed 75% of the lending value of the property. Mortgages that exceed this limit must be insured by CMHC (or similar insurance provider).

CONVEYANCEThe transfer of property ownership. Also, the written instrument whereby such transfer is effected. Conveyance includes a mortgage, charge, and lease, etc.

CO-OPERATIVEThe ownership of a separate amount of space in a multiple dwelling or multiple-occupancy building with proportioned tenancy in common ownership of common elements. Used jointly with other owners, however, the owner does not have clear title to a specific unit, but becomes a shareholder of the corporation which owns all the property and occupies by way of a tenancy agreement subject to shareholders agreement administered by an elected board of directors.

COVENANTAn agreement contained in an instrument creating an obligation. It may be positive, stipulating the performance of some act. It may be negative or restrictive, forbidding the commission of some act.

CROSS-COLLATERALIZATIONA reference to security involving various liens held in support of one or more advances made by a lender to a borrower.

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DAMAGESCompensation or indemnity for loss owing to breach of contract.

DATE OF COMPLETIONThe date specified by an agreement of purchase and sale, when the purchaser is to deliver the balance of money due and the vendor to deliver a duly executed deed.

DEBT SERVICEThe amount of principal and interest payments made under a mortgage.

DEEDA document signed by the seller and purchaser transferring ownership. This document is then registered against the property

DEED RESTRICTIONA restriction in a deed to limit or govern the use of the land.

DEFAULTFailure to fulfil an obligation

DEFERRED INCOMEAn accounting method of dealing with income that is received but not included in a statement of earnings as normal earnings.

DEFICIENCYAn insufficient payment, often relating to an amount recovered under a power of sale or foreclosure action.

DELAYED PARTICIPATION LOANWhere a lender disposes of a loan to several other participants putting up their respective shares later.

DEMAND NOTEPayment is made on demand, usually within a few days notice to the borrower.

DEPOSITPayment of money or other valuable consideration as pledge for fulfilment of contract.

DEPRECIATIONA loss in value due to any cause.

DEPRECIATED REPRODUCTION COSTAppraisal method by which the cost of replacing a structure, minus depreciation, gives the depreciation reproduction costs.

DISCHARGE OF MORTGAGEA document executed by the mortgagee, and given to the mortgagor when a mortgage loan has been repaid in full before, at, or after the maturity date.

DISCLOSURE STATEMENTA statement contained in a consumer credit transaction in order to disclose complete credit terms and interest rates.

DISCOUNTReduction in product price or cost of a service. A discount if the difference between the nominal face value of a loan and actual cash received by the borrower because interest is paid at the beginning of a loan based on the sum to be repaid at maturity.

DISCOUNTED CASHFLOW ANALYSISThis is a method of analysis that calculates the true value of an investment in terms of the present value, i.e. what the investment ifs worth now, although it is spread over a number of years. To compensate for future earnings a discount factor is added in so that a real comparison can be made between an investment with quick return and one that is placed over a number of years.

DISCOUNTED LOANThe face value of the loan minus the interest or discount charged by the lender is the amount actually advanced to a borrower.

DOMINANT TENEMENTThe estate which derives benefit from an easement over a subservient estate, as in a Right-of-Way.

DOWER INTERESTA wife’s interest in the lands of her husband accruing to her by virtue of the marriage.

DOWNSIDE LEVERAGEOccurs where the debt service on a mortgage exceeds the yield on an investors’ property, thereby reducing cash flow.

DRAWEEThe person, bank, or corporation on whom a bill, note or cheque is drawn from and from whom payment is expected by the payee or his assignee.

DRAWERThe person or corporation who writes a cheque or note for payment to a third party. In the case of a bill of exchange, the drawer is the creditor and is usually te payee.

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EASEMENTThe right acquired for access over another person’s land for a specific purpose, such as for a driveway or public utilities.

ECONOMIC DEPRECIATIONLoss in value of property due to eternal influences related to the property or not controlled by the owner.

EFFECTIVE GROSS INCOMEThe estimated gross income less allowances for vacancies and rent losses.

EFFECTIVE INTEREST RATEThe actual interest rate on investment where a debt or loan was bought at discount or at a premium.

ENCROACHMENTA fixture, such as a wall or fence, which illegally intrudes into or invades on public or private property diminishing the size and value of the invaded property.

ENCUMBRANCEOutstanding claim or lien recorded against property, or any legal right to the use of the property by another person who is not the owner

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END LOANThe mortgage loan to the final customer, such as a purchaser of a condominium unit.

EQUITYThe value of real estate over and above the mortgage(s) against it.

EQUITABLE MORTGAGEThe transfer of equity in property as security for a debt. Any mortgage registered after the first mortgage.

EQUITY OF REDEMPTIONThe right of the mortgagor to reclaim clear title to the real property upon full repayment of the debt.

ESCROW ACCOUNTAn account held by an agent on behalf of his principal for the payment of money due to a third party on the event of specified incidents, e.g. a vendor’s solicitor will hold funds on his behalf until title dees to property have been delivered and property registered and the keys delivered to the purchaser; or an account maintained by a mortgagee for the payment of property taxes or life insurance premiums.

ESCHEATThe reversion of property to the state in event the owner thereof dies leaving no will and having no legally qualified heir to whom the property may pass by lawful descent.

ESTATEThe degree, quantity, nature and extent of interest which a person has in real property.

ESTOPPEL CERTIFICATEA written statement or certificate which states certain facts upon which the receiver of the statement or a third party may rely, eg. Lender’s estoppel statement as to a purchaser or property. The lender cannot later deny the truth of these statements because a third party has relied and acted upon them.

EXACT DAY INTERESTInterest calculated on the basis of 365 days per year or 366 days in a leap year.

EXCULPATORY CLAUSEA clause which excuses one party from personal liability in the event of a default.

EXPROPRIATIONThe act of forcefully taking private property for public use.

EXTENSION AGREEMENTThe lengthening of a term on a contract to extent the maturity date; or to permit more time for the performance of an obligation or condition; or the extension of the coverage of a lien to include more property.