Glossary of Financial Terms

Amortization: The number of years it takes to repay the entire amount of mortgage.

Appraisal:  An estimate of a property’s market value, used by lenders in determining the amount of the mortgage.

Assumable Mortgage: A mortgage held on a property by the seller that can be taken over by the buyer, who then accepts responsibility for making the mortgage payment.

Broker: A real estate professional licensed by Ontario to facilitate the sale, lease or exchange of a property.

C.M.H.C.:  Canada Mortgage and Housing Corporation.

Closing:  The real estate transaction’s completion, when the parties involved agree that all legal and financial obligations have been met, and the deed to the property is transferred from the seller to the buyer.

Commitment: A document given by a lender outlining the terms of an approved mortgage, sometimes requiring acceptance by the purchaser.

Deed:  A legal document that conveys ownership of a property to the lawyer.

Discharge of Mortgage:A document executed by a mortgagee and given to the mortgagor when a mortgage loan has been repaid in full.  Also referred to as a Cessation of Charge.

Down Payment: The difference between a property’s purchase price, and the amount financed. Minimum 5%, but also 10% and 25% are common. 

Equity:  The difference between the price for which a property can be sold, and the mortgage on the property.  Equity is the owner’s stake in a property.

Estoppel Certificate: A written statement of a condominium unit’s current financial, and legal status. Has been replaced recently by the Condominium Certificate.

Fixture:   Permanent improvements to a property, which should not be removed upon sale. 

Guarantor:  A co-signer of a mortgage debt who agrees to make payment should the mortgagors fail to do so.  Guarantors must also qualify to carry the mortgage debt just as the purchaser must.

Joint Tenancy: A form of ownership in which two or more individuals have an equal share in the ownership of a property.  In the event of one owner’s death, his or her share is automatically transferred to the surviving owner, apart from the deceased’s will.

Land Transfer Tax: Payment to the provincial government for transferring property from the vendor to the buyer.

Lien:  Any legal claim against a property, filed to ensure payment of a debt.

Listing Agreement:  The contract between the listing broker and an owner, authorizing the Realtor to facilitate the sale or lease of a property.

Listing Broker:The Realtor who signs a contract with an owner to sell the property.

Maintenance Fee: A monthly fee paid by condominium owners for maintaining the development’s common areas.

M.L.S. : see Multiple Listing Service. 

Mortgage:  A contract between a borrower and a lender.  The borrower pledges a property as security to guarantee repayment of the mortgage debt.

Mortgagee: The lender.

Mortgage Broker: A licensed person who, for a fee, brings together a borrower in search of a mortgage, and a lender willing to issue that mortgage.

Mortgage Term: The length of time a lender will loan mortgage funds to a borrower.  Most mortgage terms run from six months to five years, after which the borrower can either repay the remaining principle of the mortgage, or renegotiate the mortgage for another term.

Mortgagor: The borrower.

Multiple Listing System: Also known as the M.L.S.  A system for relaying information to Realtors about properties for sale.  Only Realtors have access to the M.L.S. system.

N.H.A.:  National Housing Act.  The federal act under which C.M.H.C. insures mortgages.

Power of Sale: The right of a mortgagee to force a sale of a property should default of mortgage payments occur.

Principal: The mortgage amount initially borrowed, or the portion still owing on the mortgage.  Interest is calculated on the principal amount.

Realtor:  A real estate professional who is a member of a local real estate board, and the Canadian Real Estate Association.  Only these professionals call themselves REALTORS.

Selling Broker: The Realtor who actually finds the buyer.

Survey:  The accurate mathematical measurement of land and buildings with the aid of instruments prepared by someone licensed to do so (an Ontario Land Surveyor).

Title:  The legal evidence of ownership in a property.

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

Vendor:The seller in a real estate transaction.