Glossary

A

Agreement of Purchase and Sale  – A legal agreement that offers a certain price for a home. The offer may be firm (no conditions attached), or conditional (certain conditions must be fulfilled before the deal can be closed).

Amortization Period  – The time over which all regular payments would pay off the mortgage. This is usually 25 years for a new mortgage, however, it can be greater, up to a maximum of 30 years. Appraisal  – The process of determining the value of the property, usually for lending purposes. This value may or may not be the same as the purchase price of the home.

Appraisal Value  – An estimate of the market value of the property.

B

Blended Payments  – Payments consisting of both a principal and an interest component, paid on a regular basis (e.g. weekly, biweekly, monthly) during the term of the mortgage. The principal portion of payment increases, while the interest portion decreases over the term of the mortgage, but the total regular payment usually does not change.

Bank Maximum Lending Value  – The Bank will finance up to 75% of the market value of the property for Equity mortgages

Bridging Finance  – A special type of financing, ensuring that funds are made available in a timely manner during the construction phase.

Builder’s Estimate  – A builder’s estimate is a clear outline of the associated costs and stages of the building process. Associated timelines are also included as well as methods of payment.

C

Certificate of completion  – A document issued by an architect, engineer, or other qualified inspector attesting that the project has been completed in conformity with all plans and specifications; usually required before the construction lender will fund the final payment due under a construction loan

Certificate of Location or Survey  – A document specifying the exact location of the building on the property and describing the type and size of the building including additions, if any.Certificate of title  – 

Certificates of Title – documents that may be used to establish the current owner of a piece of property. 

Certificate of Search or Abstract of Title  – A document setting out instruments registered against the title to the property, e.g. deed, mortgages, etc.

Closed Mortgage  – A mortgage agreement that cannot be paid, renegotiated or refinanced before maturity, except according to its terms.

Closing Costs  – Various expenses associated with purchasing a home. These costs can include but are not limited to, legal/notary fees and disbursements, property land transfer taxes, as well as adjustments for prepaid property taxes or condominium common expenses, if any.

Closing Date  – The date on which the sale of a property becomes final and the new owner usually takes possession.

Conditional Offer  – An offer to purchase subject to conditions. These conditions may relate to financing or the sale of an existing home. Usually, a time limit in which the specified conditions must be satisfied is stipulated.

Conventional Mortgage  – A mortgage that does not exceed 80% of the purchase price of the home. Mortgages that exceed this limit must be insured against default, and are referred to as high-ratio mortgages (see below).

D

Debit-Service Ratio  – The percentage of the borrower’s gross income that will be used for monthly payments of principal, interest, taxes, heating costs and condominium fees.

Deed (Certificate of Ownership)  – The document signed by the seller transferring ownership of the home to the purchaser. This document is then registered against the title to the property as evidence of the purchaser’s ownership of the property.

Deed of conveyance  – A legal document signed, sealed and delivered to effect a transfer of property and to show the legal right to possess it.

Deposit  – A sum of money deposited in trust by the purchaser when making an offer to be held in trust by the vendor’s agent, broker, lawyer or notary until the closing of the transaction.

Draw Downs  – Based on the builder’s estimate, the Bank will release funds in stages, foundation, decking, plastering, ceiling, roof, etc.

E

Equity  –  The interest of the owner in a property over and above all claims against the property. It is usually the difference between the market value of the property and any outstanding encumbrances.

F

Facility Letter  – Also known as a loan or credit facility agreement or facility letter. An agreement or letter in which the bank or other sets out the terms and conditions on which it is prepared to make a loan facility available to a borrower.

Fire Insurance  – Before a mortgage can be advanced, the purchaser must have arranged fire insurance. A certificate or binder from the insurance company may be required on closing.

Firm Offer  – An offer to buy the property as outlined in the offer to purchase with no conditions attached.Fixed-Rate Mortgage  – A mortgage for which the rate of interest is fixed for a specific period of time (the term).Foreclosure  – A legal procedure whereby the lender eventually obtains ownership of the property after the borrower has defaulted on payments.

L

Lease  – A contract granting use or occupation of property during a specified period in exchange for a specified rent.

M

Mortgage Indemnity  – The mortgage indemnity premium is an insurance policy for the mortgage lender in case they default on their mortgage. Mortgage indemnity premium is charged to a buyer by the mortgage lender typically for people buying a property with only 10% or less cash as a deposit.

Mortgage Market Reference Rate (MMRR)  –  The Mortgage Market Reference Rate is an interest rate benchmark against which mortgages are to be priced and re-priced. It is computed by the Central Bank based on information on commercial banks’ funding costs and yields on ten-year treasury bonds.

P

Purchase Agreement  – A legal agreement detailing a sale of property, including price and terms.

S

Stamp Duty  – A tax placed on legal documents upon transfer

Statutory Approvals  – The necessary approvals needed from various Local Authority bodies before commencing a project, town and country, WASA, T&TEC for example.

Switch Mortgage  – A legal transfer of the mortgage on a property from the originating Financial Institution to another Financial Institution.

V

Valuation Report  – A report for a property evaluates the property in question. The report helps a buyer as well as the seller in assessing the value of the property

Vendor  – A person or agency that is selling the property