Most seasoned buyers and sellers are probably already familiar with the terminology involved in a real estate transaction… but some buyers, who are first time buyers or novices are not familiar with this terminology, so I’ve compiled a list for everyone!
Glossary Of Key Real Estate Terms
There are a great deal of phrases and terminologies unique to real estate. Listed below are just a sample of the common terms you will encounter in the process of buying or selling a home. Take a moment to familiarize yourself with them so you will know where to look if you need a definition.
Amortization Period: The actual number of years it will take to pay back your mortgage loan.
Appraised Value: An estimate of the value of the property. Conducted for the purpose of mortgage lending by a certified appraiser. This appraisal is not to be confused with a building inspection.
Assumability: Allows the buyer to take over the seller’s mortgage on the property.
Chattels: Personal property which is tangible and moveable, such as electrical appliances, blinds, etc.
Closed Mortgage: A mortgage that locks you into a specific payment schedule. A penalty usually applies if you repay the loan in full before the end of a closed term.
Condominium Fee: A common payment among owners which is allocated to pay expenses.
Conventional Mortgage: A mortgage loan issued for up to 75% of the property’s appraised value or purchase price, whichever is less.
Deed: An instrument in writing, duly executed and delivered, that conveys title or interest in real property.
Down Payment: The buyer’s cash payment toward the property. The difference between the purchase price and the amount of the mortgage loan.
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.
Equity: The difference between the home’s selling value and the debts against it.
Fiduciary Duties: The duties required by an agent (the brokerage firm and its representatives) acting for the principle in an agency relationship. They include loyalty, disclosure, confidentiality, diligence, accounting and obedience.
High Ratio Mtge.: A mortgage that exceeds 75% of the home appraised value. These mortgages must be insured for payment.
Interest Rate: The value charged by the lender for the use of the lender’s money. Expressed as a percentage.
Irrevocable: Incapable of being recalled or revoked. Unchangeable, unalterable.
Land Transfer: A fee paid to the municipal and/or provincial government
Deed Tax: An instrument in writing duly executed and delivered for the transferring of property from seller to buyer.
Maturity Date: The end the term, at which time you can pay off the mortgage or renew it.
Mortgagee: The person or the financial institution that lends the money.
Mortgage Insurance: Applies to high-ratio mortgages. It protects the lender against loss if the borrower is unable to repay the mortgage.
Mtge. Life Insurance: Pays off the mortgage if the borrower dies.
Mortgagor: The borrower.
Open Mortgage: Allows partial or full payment of the principal at any time, without penalty.
Portability: A mortgage option that enables borrowers to take their current mortgage with them to another property, without penalty.
Pre-approved Mtge.: Qualifies you for a mortgage before you start shopping. You know exactly how much you can spend and are free to make a “firm” offer when you find the right home.
Prepayment Privileges: Voluntary payments in addition to regular mortgage payments.
Principal: The amount borrowed or still owing on a mortgage loan. Interest is paid on the principal amount.
Refinancing: Paying off the existing mortgage and arranging a new one or re-negotiating the terms and conditions of an existing mortgage.
Renewal: Re-negotiation of a mortgage loan at the end of a term for a new term.
2nd Mortgage: Additional financing. Usually has a shorter term and higher interest rate than the first mortgage.
Survey: The accurate mathematical measurement of land and buildings thereon, made with the aid of instruments.
Term: The length of time the interest rate is fixed. It also indicates when the principal balance becomes due and payable to the lender.
Title: Legal ownership in a property.
Variable Mtge.: A mortgage with fixed payments, but fluctuates with interest rates. The changing interest rate determines how much of the payment goes towards the principal.
Vendor Take Back Mortgage: When the seller provides some or all of the mortgage financing in order to sell their property.