ASSESSMENT:
Generally, the apportionment of liability of a general cost among individuals. The act of estimating the value of land for tax purposes or the method by which municipalities raise taxes (property tax assessment).

ASSUMABLE MORTGAGE:
A mortgage that can be taken over ("assumed") by the buyer when a home is sold. If interest rates have risen, an assumable mortgage at a low rate may prove a selling point for the property.

ATTORNEY IN FACT:
A person who holds a POWER OF ATTORNEY for another person, which gives the Attorney the power to act on behalf of that other person and bind that other person.

ATTORNEY'S OPINION OF TITLE:
A statement of a lawyer's conclusions with regard to the state of the legal title of a property, issued after the lawyer has completed the appropriate investigations of title.

B

BACK TITLE LETTER (OR CERTIFICATE):
Notice by a Title Insurance Company to a person searching and certifying title that a previous search has been completed, setting out the status of title of the property as at a given date such that the person searching need only up-date the search.

BALLOON (LOAN) MORTGAGE:
A loan which is repaid by a series of small, periodic payments until a given date, when either the balance comes due in a single, large payment or the amount of the payments rises significantly.

BALLOON PAYMENT:
The single, large payment which pays out the balance due on a balloon mortgage.

BIWEEKLY LOAN OR MORTGAGE:
A loan which features payments equalling one half of the usual monthly payment made every two weeks (to total 26 in a year), thus substantially reducing the life of the mortgage and the interest payable over the life of the mortgage.

BLANKET INSURANCE POLICY:
A single insurance policy that applies to more than one person or property.

BLANKET MORTGAGE:
Where one loan is secured against more than one parcel of land.

BOILER PLATE:
A standard clause or provision in a contract which appears in all similar contracts.

BRIDGE FINANCING:
Also known as a "swing loan", a loan used to fill a gap in financing, often between the purchase of a new home and the sale of the old one. If the purchase closes before the sale, the home owner needs to borrow enough money to pay for the new house for the period of time before the equity in his old house comes available as a result of the completion of the sale.

BUFFER ZONE:
An area of land specifically designed to separate one zoning use from another, such as separating a residential neighborhood from an industrial area.

BUY DOWN (ACCOUNT OR MORTGAGE):
The payment of extra money on a loan now so as to reduce the interest rate over a given period or over the life of the loan. This extra payment may be made by the borrower, by the lender (as an incentive to the borrower to borrow from the lender) or by the vendor/builder (as an incentive to the borrower to buy a certain property).

BUYER'S BROKER:
A real estate broker who contracts to represent the interests of a person wishing to purchase a home. (see also "selling agent", "Purchaser's agent").

C

CANCELLATION CLAUSE:
Provision in a contract that gives one or more parties the right to terminate the contract if a specific event occurs.

CAP:
A limit. In variable rate mortgages, a limit as to how high periodic payments may go or how much the interest may change within a given time period or over the life of the mortgage.

CAP RATE:
Short form for capitalization rate.

CASH-OUT REFINANCE:
When an owner renegotiates or negotiates a new mortgage and the proceeds of the new financing exceed the money required to pay out the old mortgage and any other costs, liens or expenses, leaving money for the borrower.

CAVEAT EMPTOR:
Latin, meaning "Let the Buyer beware". Maxim which applies to real estate transactions where the onus is on the Purchaser to satisfy herself as to the suitability and condition of the property she is considering for purchase. Vendor is not responsible to the Purchaser for the condition of the property and, unless he is specifically asked, does not generally have an obligation to reveal problems to the Purchaser (except where the defect is hidden, serious and could not be discovered by the Purchaser after reasonably prudent inquiries and investigations).

CERTIFICATE OF INSURANCE:
A document, issued by the insurance company, setting out the particulars of the insurance coverage for a particular property.

CERTIFICATE OF OCCUPANCY:
Document issued by the local municipality indicating that a new dwelling is suitable for occupation. Generally confirms that the dwelling complies with local building, safety and health by-laws.

CERTIFICATE OF REASONABLE VALUE (CRV):
Document issued by the Department of Veterans Affairs (VA). Based on an appraisal, sets out market value of a particular property for the purposes of establishing maximum principal amount available for a VA mortgage on the property.

CERTIFICATE OF SATISFACTION:
Document registered on title which provides evidence from the lender that a loan instrument (deed of trust, mortgage, other lien) has been paid out and released.

CERTIFICATE OF TITLE:
A written opinion of the quality of a person's ownership of property, issued by a lawyer or a title insurance company after a search of the title records has been conducted. May contain qualifications to the certification regarding defects found or potential defects not investigated.

CERTIFICATE OF VETERAN STATUS:
Document issued by Department of Veteran's Affairs confirming that the person named in the Certificate has served at least 90 days of continuous active duty (including training time) and is eligible for certain VA benefits (such as a VA mortgage).

CHAIN OF TITLE:
A part of a title search. A listing, in chronological order, of successive legal owners of a property, often listing as well the registration particulars of the document by which title is transferred from each owner to his successor in title.

CLEAR TITLE:
Ownership of land which is marketable and free of competing claims, liens, mortgages or other encumbrances.

CLOSING:
The culmination of any transaction in which the interested parties (or their representatives) meet to exchange documents, funds, and property and, if necessary, to register the transfer of title.

CLOSING COSTS:
Moneys expended by a party in completing a transaction, over and above the purchase price, including: legal fees, taxes, mortgage application charges, interest adjustments, registration fees, appraisal fees, etc.

CLOSING DATE:
Also known a Completion Date. The date set in the Agreement of Purchase and Sale upon which the transaction is to be completed, the purchase price paid and the transfer of title registered.

CLOSING STATEMENT:
Also known as HUD-1 statement. A document which sets out the financial agreement between the parties, the costs each must pay, and all other similar information regarding a transaction (may be joint or separate for each party).

COLLATERAL:
Property (real or personal) which is pledged to secure a loan or mortgage. If the debt is not paid, the lender has the right to sell the collateral to recoup the outstanding principal and interest on the loan.

COMMITMENT:
A promise, usually in writing, to provide a mortgage or other loan. May also be used in insurance field. Sets out details of mortgage, insurance. Often referred to as Commitment Letter or Binder.

CONDOMINIUM OWNERS ASSOCIATION:
An organization made up of unit owners in a condominium development established to govern relations between the owners and to administer the rules, by-laws and covenants of the condominium

CONTINGENCY:
An event which may (or may not) happen in the future, a condition that must be fulfilled before a contract becomes firm and binding.

CONTRACT FOR DEED:
Also known as a Land Contract or Land Installment Contract. Transfer of a property where the title remains in the Vendor's name until the Purchaser makes the final payment to the Vendor of the Purchase Price.

CO-OP:
Short for Cooperative, a mode of land ownership where the occupiers of individual units in a building own an interest in the Cooperative Corporation that owns the whole property.

COUNTEROFFER:
An answer to an offer. If a prospective Purchaser presents an offer to purchase a property to the owner of the property, that owner may accept the offer as it stands, reject it outright or respond with a "counteroffer" which changes certain terms of the original offer. Making a counteroffer, at law, entails rejection of the original offer. The Purchaser may then counteroffer back, making changes to the owner's counteroffer. Sometimes, the process of counteroffering is referred to as "signing back" the offer.

CREDIT HISTORY:
A statement of the debts and obligations, whether current or past, of a person which helps a lender to assess the risk of a loan to that person.

CREDIT RATING:
Based on an analysis of a person's credit history, an evaluation of that person's ability to manage a new debt or debts overall.

CREDIT RISK:
The potential for a borrower to fail to live up to her obligations under a loan arrangement.

CUL-DE-SAC:
French term for a "dead-end street". A street which meets another street at one end but is closed at the other, such that little traffic will travel down it and the property owners enjoy excellent privacy.

D

DEED:
The instrument by which title to property is conveyed from one person to another.

DEFAULT:
Failure. In mortgages, the failure to make payments in full, on time or at all or to live up to any other obligations placed on the borrower by the loan agreement.

DEFERRED INTEREST:
Interest which is not paid as it accumulates but which is added, instead, to the loan principle.

DEFERRED INTEREST MORTGAGE:
A technique for reducing the amount of each periodic payment on a mortgage monthly by postponing the payment of a portion of the interest until a certain date in the future (or to when the property is sold), at which time the interest postponed is added to the principle owing.

DEPRECIATION:
1. The lessening of the value of a property over time.
2. A tax adjustment accounting for the reduction in value of an asset (a building or a piece of machinery) over time.

DISCLOSURE:
Sometimes known as "Vendor's Disclosure", a legal requirement in some jurisdictions in which the Vendor of a property must provide a written statement to a prospective purchaser setting out defects in the property known to the Vendor.

DISCLOSURE STATEMENT:
A document issued by a lender to a borrower in which the lender sets out the terms and conditions of the loan. Often required under legislation.

DOWN PAYMENT:
The amount of money provided by the Purchaser toward the total price of the property (not including legal fees or other acquisition costs). In general, downpayment plus mortgage equals purchase price.

DUAL AGENCY:
A breach of agency rules which must be disclosed to the parties. Where one agent (often a real estate broker or agent) represents both sides in a contract (i.e. the Vendor and the Purchaser) such that the agent has a conflict of interest.

E

EARNEST MONEY DEPOSIT:
A sum of money paid by a potential purchaser as proof of her intention to complete the purchase transaction. Held in trust, usually by the Listing Agent, and credited to Purchaser off purchase price. May be forfeited if Purchaser fails to complete transaction.

EASEMENT:
The right of the owner of one parcel of land to use all or part of the land of another for a specific purpose. Runs with the land. Requires one property to be in dominant position (enjoys the benefit of the easement) and one property to be in servient position (is subject to the right).

EMINENT DOMAIN:
The right of a body of government (often a state) to expropriate private property, while paying appropriate compensation to the owner.

EQUITY:
The difference, in dollars, between the market value of a property and the principal owing on debts secured against the property. The amount of money the owner will be able to keep from a sale transaction once the mortgages are paid out. Also known as "owner's interest".

EQUITY LOAN:
A loan to a home owner secured against the equity the owner enjoys in the property.

ESCAPE CLAUSE:
Any provision in a contract that allows one or more parties to end the contract upon the occurrence of certain events.

ESCROW:
A state wherein consideration, benefits, legal rights, money, documents or other valuables are transferred to another party in advance of that party's legal entitlement to them, on the basis that the legal entitlement will arise at a given point in the future. A form of trust.

ESCROW ACCOUNT:
A form of trust account in which advance payments are held on behalf of the payor until the contract allows their use by the payee or a third party.

F

FAIR MARKET VALUE:
The value of an item as established by a consideration of how much an independent buyer would pay to an independent seller in a completely free transaction for the item.

FEDERAL HOUSING ADMINISTRATION (FHA):
Division of the Department of Housing and Urban Development, sets standards for the underwriting of private mortgages. Also insures residential mortgages made by private lenders.

FIDUCIARY:
A person charged by law and equity with a higher duty of care for another person. A person who, as a result of a relationship with another person, is required by law to place the other person's interests equal to or ahead of his own in all dealings involving that other person. The relationship is often created when the other person approaches the fiduciary to use the fiduciary's special skills and knowledge, for a fee, to benefit the other person. Real estate agents, lawyers, trustees, investment brokers etc. are often fiduciaries.

FIDUCIARY RELATIONSHIP:
A relationship of trust and confidence between two people in which one person (the fiduciary) holds much more power, knowledge or skill than the other and is, therefore, held by the law to a higher standard of conduct.

FIXED RATE MORTGAGE (FRM):
A loan registered on title to the property against which it is secured which charges an interest rate that does not change over the term of the mortgage.

FNMA (FANNIE MAE):
The largest single lender on residential properties in the United States, generally purchases mortgages from primary lenders.

FORECLOSURE:
An enforcement process in which the lender under a defaulted mortgage takes title to the property for the purposes of selling it to recoup moneys owed under the mortgage

FREDDIE MAC (FHLMC):
Federal Home Loan Mortgage Corporation. A US agency which purchases first mortgages on residences.

G

GENERAL WARRANTY DEED:
Instrument which transfers legal title to property in which the Grantor warrants clear title to the Grantee.

GINNIE MAC (GNMA):
Government National Mortgage Association. Assistance in obtaining purchase mortgages.

GOOD AND MARKETABLE TITLE:
Ownership of a property which is free of competing claims and interests.

GRACE PERIOD:
The time a borrower is allowed after a payment is due to make that payment without incurring penalties.

GRADUATED PAYMENT MORTGAGE (GPM):
A land loan in which the periodic payments increase at a stated rate over a stated period of time before levelling off for the remainder of the term of the loan.

GRANDFATHER CLAUSE:
A provision in a law that ensures that the law is not retroactive, that it does not render a previously legal thing illegal. For example, a new zoning by-law requiring all houses to be at least five feet from the side lot line would not render illegal a 20-year-old house that stands three feet from the side lot line. The property would be described as "legal non-conforming".

H

HAZARD INSURANCE:
A type of insurance designed to cover damage caused by a peril specified in the policy of insurance (i.e. fire, flood, etc.).

HOME EQUITY LINE OF CREDIT:
A special kind of loan (also known as a "revolving loan") which is secured against a property and allows the owner to borrow and repay money at her leisure. Periodic payments of at least accumulated interest are required but the loan is fully open: may be paid out in whole or in part at any time and, if there is still money available under the loan ceiling, the borrower may take more money for her use.

HOME OWNER ASSOCIATION:
A cooperative effort by property owners in a given neighborhood aimed at improving quality of life, providing a unified political voice or combatting identified ills.

HUD I SETTLEMENT STATEMENT:
The form in which the costs of purchasing a home are itemized.

I

INDEX:
Any rate published by an independent third party (the government, the federal bank, etc.) which serves as the base for calculating a variable item in a contract. (A Variable or Adjustable Rate Mortgage may use the Federal Bank's monthly prime interest rate as the index for the interest charged under that mortgage).

INSTITUTIONAL LENDER:
An accredited financial organization (i.e. a bank, trust company, credit union, etc.) which offers loans.

INSURANCE BINDER:
Written evidence that insurance is in effect with regard to the property and the risks set out in the binder. Temporary in nature, the binder assures coverage until permanent coverage can be arranged.

INTEREST RATE CAP:
A clause in an Adjustable or Variable Rate Mortgage which limits the change in the interest rate charged. May limit change within a single adjustment period or over the life of the mortgage.

J

JOINT TENANCY:
A way in which two or more people may hold title to property together. Owning as joint tenants means each owner has an equal right to the entire property, that none of the owners may sell, bequeath or encumber their portion of the property without the consent of the other owners and that, in the event of the death of one of the owners, the surviving owners automatically retain title to the entire property by "Right of Survivorship". Compare with "tenants in common".

JUMBO LOAN (MORTGAGE):
A loan for more money than the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation will fund under its mandate.

K

KICKER:
Additional compensation for a lender or investor, the right to share in the income from the property in addition to payments of principal and interest. Also known as "equity kicker" or "lender participation".

L

LANDLOCKED:
A term describing a property that does not border on any public road.

LEGAL DESCRIPTION:
A description of a piece of real estate that is drafted according to legal requirements and which clearly and adequately establishes the identity of the property so described. Found in most instruments for registration on title to land.

LEGAL TITLE:
The bundle of rights of ownership that a person acquires in purchasing a piece of property, which may be defended against competing interests.

LENDER'S TITLE INSURANCE:
A policy of Title Insurance which covers the interest of a lender on a mortgage registered on title to a property.

LOCK OR LOCK IN:
Obtain a commitment from a lender to guarantee a certain interest rate or other loan feature for a set period of time.

LOCK PERIOD:
The time span over which the lender guarantees a feature of a loan.

LOT LINE:
The legal perimeter of a parcel of property, often shown on a survey of the property.

LOW-BALL OFFER:
A slang term for an offer to purchase a property with an offered purchase price much lower than that asked for. An attempt to take advantage of pressures on the vendor to sell by asking him to accept much less than the property may be worth.

M

MARKETABLE TITLE:
Ownership of land that is without competing claims or other defects, such that it could be sold without complication.

MATERIAL FACT:
An important fact about one or more of the issues involved in the contract which, if known to all parties, may result in a different contract or no contract at all.

MEETING OF THE MINDS:
In order for a contract to be enforceable, the parties to it must come to a common understanding of the terms of their agreement. If no such common understanding has occurred with regard to a material clause in the contract, the contract may be voidable. This common understanding is referred to at common law as a "meeting of the minds".

MONTHLY DEBT SERVICE:
The periodic payments required to remain current on all outstanding loans

MORTGAGE:
A loan which is secured against property (i.e. registered on title as a claim or encumbrance on the property). Often used to purchase the property itself.

MORTGAGE BANKER:
A firm that offers mortgages for property purchases but, at times, may require financial support from larger institutions to help cover the outlay of cash.

MORTGAGE BROKER:
A middleman who serves to bring borrowers together with lenders. Offers the service of doing the shopping for the borrower while often collecting a fee from the chosen lender rather than from the borrower.

MORTGAGE INSURANCE:
A policy of insurance which promises to pay out the amount owing in the event that the borrower defaults.

MORTGAGE LOAN UNDERWRITING:
The action of reviewing an application for a loan and then advising the lender as to the risk factor in making the loan.

N

NEGATIVE AMORTIZATION:
When the periodic payments on a loan are not sufficient to pay the interest which has accumulated during the previous period resulting in an increase rather than a decrease in the amount owing on the mortgage.

NEGATIVE AMORTIZATION CAP:
A limit, expressed as a percentage of the principal, of the negative amortization allowed under a variable or adjustable rate mortgage.

NEGATIVE CASH FLOW:
When a business or property generates less money in a given period than the cost of operating and maintaining it.

NON-CONFORMING USE:
The occupation and use of a property in a fashion which is contrary to the zoning regulations for the property. A Legal Non-conforming Use is one where the non-conforming use predates the zoning by-law such that, as long as it is continued, it is legal.

NOTE:
A written instrument of indebtedness, promising to pay a certain person a particular sum of money upon stated terms.

NULL AND VOID:
Unenforceable, no longer of any effect. A contract for which a condition precedent has failed is considered "null and void".

O

OFFER AND ACCEPTANCE:
Components of a contract, applicable to the real estate situation where a Purchaser may make an offer on a property and the Vendor may accept that offer.

OPEN END MORTGAGE:
A loan which is specifically drafted to allow the borrower to borrow further funds at a later date without requiring the preparation and registration of new mortgage documentation.

P

PARTIALLY AMORTIZED MORTGAGE:
A very common form of mortgage in which the term is less than the amortization period such that, at the maturity date, the mortgage is not fully paid out and either refinancing or a large balloon payment is required.

PAYMENT PENALTY:
Also known as "prepayment penalty" or "early payment penalty", the fee paid by a borrower when she pays out some or all of the principal of a loan at a time when such a payment is not allowed under the terms of the loan.

PERC TEST (PERCOLATION):
A method of determining the ability of the soil of a property to absorb liquids, used in construction projects and for septic systems

POINT:
Equal to 1% of the principal of a mortgage, a charge levied on the borrower by the lender for originating the mortgage as prepaid interest. Also known as "loan discount points".

PRE-APPROVED MORTGAGE:
A commitment from a lender to provide a mortgage loan on stated terms to a borrower before the borrower has found a property to buy. The pre-approved mortgage allows the borrower to make a firm, cash offer on the property of choice.

PREPAYMENT:
Payment of all or part of the principal of a mortgage or loan before it comes due.

PREPAYMENT CLAUSE:
A term in a mortgage that establishes the rules regarding extra payments toward principal.

PREPAYMENT PENALTY:
A fee charged to a borrower for paying out all or part of the principal of the mortgage or loan before it comes due

PRE-QUALIFICATION:
The act of going through the mortgage application process before the borrower is ready to borrow, to establish how much money the borrower could obtain under a loan.

PRIME RATE:
The best rate charged on loans, usually saved for the best clients of the lenders. May also be set by a national institution as a benchmark or index for other lenders.
PRINCIPAL:
1. The amount of money borrowed or still owed on a loan, without including interest.
2. The person on whose behalf an agent acts.

PRINCIPAL AND INTEREST PAYMENT (P&I):
A blended, periodic payment that is enough to pay off accumulated interest and a portion of the principal.

PRINCIPAL BALANCE:
The outstanding amount owing on a mortgage without including accumulated interest.

PRINCIPAL, INTEREST, TAXES AND INSURANCE (PITI):
The four parts of many periodic loan payments.

PRIVATE MORTGAGE INSURANCE (PMI):
A policy of insurance issued by a non-governmental entity which protects a lender against the default of the borrower.

Q

QUALIFICATION REQUIREMENTS:
Those guidelines set by lenders to be used when deciding whether or not an applicant will be given a loan.

QUALIFIED ACCEPTANCE:
Also known as "conditional acceptance". Agreeing to enter a contract provided certain conditions are met.

QUALIFIED BUYER:
A purchaser who has been pre-approved for financing.

R

RADON:
A radioactive gas which may cause health problems for occupants of some buildings.

RECORDING:
The act of entering title instruments in the public records, thus giving notice to any interested parties of the existence of the instrument.

REGISTRAR:
The person who has the task of collecting, recording, and maintaining instruments related to title of land. May also have responsibility of ruling on the acceptability of documents submitted for registration and for making decisions as to how to correct title defects.

REGULATION Z:
A federal rule which requires lenders to provide borrowers with full disclosure of the terms of a loan.

S

SATISFACTION OF MORTGAGE:
Written evidence from the lender that a loan has been paid out in full and the borrower released from any obligation to the lender.

SECOND MORTGAGE:
A mortgage loan which is registered on title after another mortgage (the first mortgage) and, therefore, is behind the first mortgage in priority. In the event of default and sale of the property, the second mortgagee will only be paid if there are funds left after the payment of the first mortgagee.

SIMPLE INTEREST:
A charge for the use of money which is calculated on a periodic basis as a percentage of the principal borrowed. No further interest is charged on interest accumulated in earlier periods.

SPECIAL ASSESSMENT:
The levying of an additional tax on a property for a specific purpose (i.e. to apportion the cost of infrastructure upgrades among area land owners).

SWING LOAN:
A short-term loan designed to bridge the borrower's finances between two events. For example, a person who buys a new home in April but cannot sell her old home until June may require a swing loan to carry both homes for the interim period until the old home may be sold and the proceeds used to pay out the swing loan. Also known as "bridge financing".

T

TAX LIEN:
A claim registered against a property by a government authority for non-payment of assessed taxes.

TEASER RATE:
A lower interest rate charged on an adjustable or variable rate mortgage for a brief, introductory period as an inducement to the borrower to accept the loan from the lender.

TERM, AMORTIZATION:
Term: The period of time during which the loan contract is active, during which the borrower makes periodic payments to the lender and at the end of which the balance of the loan becomes due and payable.
Amortization: The period of time after which, if all periodic payments are made on time and in full, the loan will be paid out. Term may not be the same as amortization: a normal mortgage may be amortized over 25 years with just a five year term at which time the borrower has to re-finance.

TITLE INSURANCE POLICY:
A form of insurance contract which guarantees to indemnify an owner or mortgagee of property for damages suffered as a result of undiscovered title defects which arise later.

TITLE SEARCH OR EXAMINATION:
The act of examining in detail the public records relating to ownership of a parcel of land to ensure that the current owner has clear title, free of any liens, claims, mortgages or competing and adverse interests. Usually performed by a lawyer, qualified title searcher, or title insurance company on behalf of a proposed purchaser or mortgagee.

TORRENS SYSTEM:
Developed in Australia, a system of the registration of interests in land in which documents are closely regulated, monitored and examined by the recording authority to ensure that they are correct and that title is transferred without flaw. Property may not be transferred if uncorrected title defects exist

U

UTILITIES:
Services, such as gas, electricity, water, sewers, which are required in any dwelling and for which the owner must pay separately. In some jurisdictions, arrears in payment of charges for utilities may form a lien on the property.

V

VA LOAN:
A loan on below market terms guaranteed by the Department of Veterans Affairs, given to former members of the armed forces.

VARIABLE INTEREST RATE:
An interest rate that may change according to change in the index rate. See "adjustable interest rate".

W

WRAPAROUND MORTGAGE:
A secondary financing option in which new money borrowed is blended with money already owed and registered on title to the property. A second mortgage is registered as security for the new money but the old mortgage remains in existence and the rate of interest is a blend of the rate chargeable on the old mortgage and the rate chargeable on the newly borrowed money. 

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