The Mortgage Dictionary

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

A
Abstract of Title

- Registry System: A condensed history of the title to a parcel of land consisting of a synopsis of every recorded instrument affecting the title to that land arranged in chronological order of recording.
- Land Titles System: A chronological listing of every recorded instrument currently affecting the title to that land.

Acceleration Clause

A clause in a mortgage which provides that where default has occurred in making any payment of moneys due under a mortgage or in the observance of any covenant in a mortgage and under the terms of the mortgage, by reason of such default, all moneys secured thereby become due and payable.

Acceptance

The offeree's consent to enter into a contract and to be bound by the terms of the offer.

Accrued Interest

The interest charged for the period of time that has elapsed since interest was last deducted.

Action for Possession

A legal remedy available to a mortgagee when a mortgage is in default.

Action on the Covenant for Payment

A legal remedy available to a mortgagee when a mortgage is in default.

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Adjustment on Sale

A pro-rated division and distribution of prepaid or accrued taxes, prepaid insurance premiums, prepaid rents and other income and expenses. Apportionment usually occurs when a property is sold, and is the manner of determining the amounts due to and from the parties.

Adverse Possession

The right by which someone occupying a piece of land might acquire title against the real owner, if the occupant's possession has been actual, continuous, hostile, visible, and distinct for a statutory period. Adverse possession is not possible under Land Titles or when Crown property is involved.

Affidavit
A statement or declaration in writing and sworn to or affirmed before some officer who is authorized to administer an oath or affirmation, such as a notary public, or commissioner of oaths.

Agency
An agency is created when one person, called the principal, authorizes another person, called the agent, to act on behalf of and subject to the control of the principal.

Agreement of Purchase and Sale

A written agreement between vendor and purchaser in which the purchaser agrees to buy certain real property and the vendor agrees to sell upon terms and conditions as set forth in that agreement.

Agreement of Sale / Balance of Sale

A method of financing a sale, but different from a mortgage. The buyer does not receive a deed nor does title pass to him or her immediately; rather he or she receives a contractual interest on a time basis. Payments are made directly to the seller who in turn is still responsible for any outstanding mortgage on the property. The seller who still holds title may mortgage their remaining equity.

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Alienation Clause

A type of acceleration clause that demands payment of the entire debt upon sale or other transfer of the title.

Amending Agreement

An agreement between the lender and borrower which may or may not be registered on title by the lender in which the terms of the registered mortgage are changed.

Amortization
Term used to describe the time over which the mortgage is to be paid, assuming equal payments. The life of a loan, e.g. a mortgage with a 25-year amortization period means that if all regular payments were made on time and the terms (payment, interest rate) remained the same, it would take 25 years to reduce the balance to 0.

Amortization Schedule

A table showing the amounts of principal and interest comprising each level payment due at regular intervals and the outstanding principal balance of the loan after each level payment is made.

Amortized Mortgage

A mortgage requiring regular payments which include both principal and interest sufficient to fully repay the loan by maturity.

Anniversary Date

The same date in each calendar year during the term of the mortgage with the first anniversary date taking place one year from the date interest is finally adjusted.

Appointment of a Receiver

A legal remedy available to a mortgagee when a mortgage is in default.

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Appraisal Report

An independent assessment of the property by a qualified individual. A statement giving an opinion of value of an adequately described property, as at a specific date and supported by pertinent data.

Appraiser
An appraiser determines the market value of a house based on its condition and the selling price of comparable houses recently sold in the area.

Appurtenance
A right used with the land for its benefit.

Arm's Length Transaction

A transaction between unrelated parties. A transaction freely arrived at in the open market unaffected by abnormal pressures as might be true in the case of a transaction between related parties.

Arbitration
The determination of a dispute by a disinterested third party.

Assessment (assessed Value)

A value placed upon property (land and buildings) for taxation purposes.

Assessment Roll

An annual list of the assessed values of all properties in a municipality, which includes the name of the property owner or tenant and their address. Assessment rolls are usually delivered to a municipality before the end of the year. The term "roll" comes from ancient times and refers to the way information used to be stored - on paper or parchment, rolled up into cylinders.

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Assignee
One who takes the rights or title of another by assignment.

Assignment of Lease

The absolute or conditional transfer of the rights of either party to a lease.

Assignment of Mortgage

The transfer of ownership of a mortgage from one party to another.

Assignment of Rentals

A contract whereby the mortgagor grants the mortgagee the right to collect future rents on a given occurrence, normally default. Normally taken as additional security on rental loans.

Assignor
One who transfers or assigns the rights or title to another.

Assumption of Mortgage

The act of assuming liability for an existing mortgage on a property by the purchaser of that property. With builders' loans, the assumption is usually evidenced by written agreement.

Attachment
The seizure of property by court order.

Attornment of Rents

The agreement of a tenant to pay rent to a new landlord, especially a mortgagee who has commenced a legal action.

Automated Valuation Model (AVM)

AVM stands for Automated Valuation Model. The AVM Product is a highly sophisticated valuation model and methodology developed to render a monthly "real-time" estimate of market value for essentially all residential properties in the province of Ontario.

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Balance Sheet
Also know as the Statement of Financial Position or Statement of Assets and Liabilities is a listing of the assets, liabilities, and owners' equity of a business enterprise at a specific point in time. The assets must equal the liabilities plus the owners' equity.

Balloon Payment
The payment of the principal balance of a mortgage loan outstanding on maturity of the term. A balloon mortgage is one that does not fully amortize over its term to maturity.

Bank Rate
The rate at which the Bank of Canada charges loans to the chartered banks. This is the rate on which lending institutions base their prime lending rate.

Basis Point
One one-hundredth of one percent. Used to describe the amount of change in yield in money debt instruments, including mortgages.

Basket Clause
A provision in a governing act which allows trust and loan corporations to make investments and loans not authorized, but not specifically prohibited, on up to usually about 7% of assets.

Benchmark
A durable post, block or other device established by surveyors to indicate a definite point from which elevations are set.

Binder Insurance
A temporary agreement whereby one party agrees to insure another party pending receipt of, and final action upon, the application for insurance.

Blanket Mortgage
A single mortgage registered against two or more individual parcels of real property.

Blended Payments
Regular equal mortgage payments combining interest and principal components.

Blended Rate
A new interest rate on an increased mortgage loan which is derived from a formula which takes into account the interest rate and remaining term on the existing loan and the derived rate and term on the new funds being advanced.

Bona Fide
In good faith, with valuable consideration and with absence of notice of any problems.

Bonus
1. A sum paid by the mortgagor, or retained by the mortgagee from the advance of mortgage money, as part of the consideration for the making of the loan.
2. A sum paid by the mortgagor to the mortgagee as consideration for prepayment of all or part of the principle outstanding.

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Book Value
The capital amount at which property is shown on the books of an account. Usually it is the original cost, less reserves for depreciation plus additions to capital.

Borrowing By-laws
A document evidencing that a corporation has the power to borrow under its company charter.

Breach of Contract
Failure without legal reason to perform any promise that forms the whole or part of the agreed terms contained in the contract.

Bridge Financing
A loan provided to the borrower to provide financing for purchase, pending closing of the sale of their existing property.

Builder's Risk Insurance
Fire and extended coverage insurance for a building under construction. Coverage increases automatically as the construction progresses and terminates at completion.

Building Code
A set of minimum regulations respecting the safety of buildings with reference to public health, fire protection and structural sufficiency.

Bundle of Rights
Legal rights which real estate ownership embraces which include the right to use, sell, lease, enter, or to give away the property, plus the right to refuse to take any of these actions.

Buy Down
A lump sum payment as consideration for the reduction in the interest charged on a loan from that which would normally be charged.

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C

Canada Housing Trust
A special purpose vehicle (SPV) created to issue Canada Mortgage Bonds (CMB) and utilize the proceeds to purchase mortgages packaged in newly issued NHA Mortgage Backed Securities.

Canada Mortgage Bonds
A bullet pay type of bond investment. Issued by Canada Housing Trust and guaranteed as to full and timely payment by CMHC, these bonds feature semi-annual interest payments and principal at maturity.

Capital Cost Allowance
A deduction from rental income of such part of the capital cost of property as is allowed by regulation under the Income Tax Act.

Capitalization
1. In the appraisal process, the conversion of earnings anticipated from the typical operation of a property into a sum of present worth (capital value).
2. In mortgaging, the addition of interest owed and/or other charges onto a principal balance and the subsequent amortization of that sum with interest.

Caution
A notice registered on title by a person claiming to have a proprietary interest (i.e. a right to call for or receive a transfer of charge) in land or in a charge of which he or she is not the registered owner to protect their interest. The registered owner of the land or charge cannot deal with the land or charge without consent of the cautioner.

Caveat Emptor
"Let the buyer beware". The buyer must examine the goods or property he or she is buying and he or she, therefore, buys at their own risk.

Central Bank
A body established by a national government to regulate currency and monetary policy on a national / international level. In Canada, it is the Bank of Canada; in the United States, the Federal Reserve Board; in the U.K., the Bank of England.

Certificate of Charge
A mortgage document in the Land Titles System.

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Certificate of Occupancy (Permit)
A certificate provided by the municipality that a property has been constructed under the authority of the issued building permit and may be occupied.

Cessation of Charge
A discharge of a mortgage registered under the Land Titles Act.

Chain of Title
Chain of title is uncovered through the lawyer's search, revealing any factors affecting ownership of land.

Charge
The name given to a mortgage document when title is registered under the Land Titles System.

Chattels
Movable possessions, personal property (generally items that may be removed without injury to the freehold estate).

Chattel Mortgage
A mortgage given on chattels. Usually given as collateral security to a mortgage on real estate. As an example, a chattel mortgage on refrigerators and stoves in an apartment building.

Closing Date
The date on which the sale becomes final, the new owner takes possession of the property, and funds are transferred from the purchaser to the vendor.

Cloud on Title
Any encumbrance or claim that affects title to real property.

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Co-Applicant
A person applying with another for a loan.

Co-Insurance
A sharing of risk between insurer and insured which depends on the relationship of the amount of the insurance carried versus the amount of insurance required at the time of the loss.

Collateral Mortgage
The mortgage registered to document collateral security.

Collateral Security
In mortgaging, security given in addition to the direct security and subordinate to it.

Commitment
A letter / document issued by a lender reciting the basic terms of a loan which when accepted by the borrower forms a binding contract.

Completion Loan
The single disbursement of the total loan following satisfactory completion of the property.

Compound Interest
Interest charged not only on the principal sum but also on interest amounts charged but not paid in preceding periods that accumulate as new principal.

Conditional Sales Agreement
An agreement by which it is provided that the title to the goods being sold remain in the name of the seller until payment in full of the purchase price, possession being given forthwith and the price usually being payable in installments.

Condominium
Ownership of property whereby the owners hold negotiable title to their own unit and, at the same time, share with fellow owners the title and cost of operation of the balance of the property (common elements) constituting the condominium.

Consideration
Consideration means "some right, benefit or profit accruing to the promissor or some forbearance, detriment, loss or responsibility suffered by the promissee." In other words, the party trying to enforce the contract must have paid something in return for the promise.

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Construction Loan
A claim against the estate or interest of the owner in a property for labour, services, or material supplied to it and not paid for and it must be registered on title to the property in question to be perfected.

Contract
A contract is a legally binding agreement between two or more capable persons for consideration or value, to do or not to do some lawful and genuinely intended act.

Conveyance
The transfer of an interest in property from one person to another.

Co-Operative
A form of multiple ownership of real estate in which a corporation or business trust entity holds title to a property. Individual unit holders have the exclusive right to occupy their unit by lease but their investment in the corporation is by way of shares.

Co-Ownership
The idea that an estate (present or future) can be simultaneously held by several persons. The most common types of co-ownership are joint tenancy and tenants-in-common.

Correspondents
A company that originates, possesses, and administers mortgage loans or other real estate investments on a continuing basis for investors.

Covenant
An agreement in writing (in Common Law must be under seal) contained in a deed and creating an obligation. It may be positive, stipulating the performance of some action. It may be negative or restrictive, forbidding the commission of some act.

Creditor
One to whom a debt is owing.

Cross Default Clause
Mutual clauses in two or more mortgages which state that a default under one mortgage constitutes a default under the other(s).

Current Value Assessment (CVA)
Refers to the amount of money a property would realize if sold at arm's length by a willing seller to a willing buyer.

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D

Debt Coverage Ratio
The percentage of the borrower's income used for monthly payments of principal, interest, taxes, heating costs and condo fees (if applicable).

Declaration of Trust
An acknowledgement by one holding title to property (mortgage) that he or she holds it in trust for the benefit of someone else.

Dedication
The granting of land by the owner for some public use and its acceptance for such use by authorized public officials.

Deed
A legal document in writing, duly executed and delivered, that conveys title or an interest in real property.

Default
Failure to fulfill contractual obligations.

Deficiency Judgement
A court order to pay the balance owed on a loan or mortgage if the proceeds from the sale of the security are insufficient to pay off the loan.

Deficiency Settlement
A monetary settlement by a mortgage lender or insurer where the net proceeds under a Power of Sale or Judicial Sale is less than the mortgagee's total claim.

Demand Letter
A letter sent by the mortgagee to the mortgagor demanding immediate payment of all arrears, together with costs.

Discharge of Mortgage / Charge
A legal document executed by the mortgagee, and given to the mortgagor when a mortgage loan has been repaid in full releasing him or her from all obligations and covenants contained in the mortgage.

Disclosure Statement
A written statement by lenders disclosing information about a specific loan as may be required under various consumer protection acts.

Discount
1. The sale of a mortgage for less than the principal balance thereby affecting an increase in the percentage of interest paid on the investment.
2. In appraising, the valuation of the present worth of an income stream at a specific interest rate.

Dominant Tenement
The estate which derives benefit from an easement over a servient tenement, as in a Right-of-way.

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E

Easement
A right enjoyed by one landowner over the land of another.

Economic Life
The estimated period over which it is anticipated that a property may profitably be utilized.

Effective Gross Income (Income Property)
The annual income from a property if fully leased, less an annual allowance for vacancies and bad debts.

Egress
Going out (access to exit).

Eminent Domain
The right reserved by government to take by expropriation private property for public benefit provided it pays just compensation.

Encroachment
An improvement that intrudes illegally upon another's property.

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.

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Equity
In mortgaging, the difference between lending value and indebtedness.

Equity Financing (Lending)
The investment in the equity in leveraged or unleveraged real estate by investors. These investors are usually institutional and may or may not have provided the mortgage financing.

Equity of Redemption
The right of the mortgagor to have title to their property restored to him or her when he or she has repaid the mortgage in full.

Equitable Mortgage
A mortgage which has a claim solely on the equity of redemption and not to the title of the property itself.

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

Escalation Clause
Lease provisions whereby the tenant pays for increases in certain expenses over a specified base. Usually these expenses are maintenance, insurance premiums and real estate taxes. The base is usually those expenses incurred by the landlord in a specified year.

Escrow
Securities, instruments, money, or other property deposited by two or more persons with a third person, to be delivered on performance of a certain event.

Estoppel Certificate
Legal certificate usually issued by a condominium corporation indicating details of the project and given to the lender / purchaser or tenant. Delivery of the certificate prevents one from claiming a different set of facts at a later date.

Expropriation
Taking private property for public use, with fair compensation to the owner, through the exercise of the right of eminent domain.

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Extended Coverage Endorsement
An endorsement that may be attached to fire insurance policies. It generally includes coverage against the peril of windstorm, hail, explosion, riot, civil commotion, damage by aircraft or vehicles and smoke.

Extension Agreement
An agreement extending a loan past the original maturity date.

Exculpatory Clause
A clause in a contract holding one party harmless in the event of some default.

F

Face Rate
The contractual interest rate stated in a mortgage document or other financial instrument.

Face Value
The face value of the loan is the amount of money the borrower promises to repay (at the contract rate of interest).

Fee
An inheritable estate in land. The right of ownership of a property.

Fee Simple
The highest estate or absolute right in real property.

Fiduciary
An individual or a trust institution charged with the duty of acting for the benefit of another party as to matters coming within the scope of the relationship between him or her. The relationship between a trustee and a beneficiary is an example of a fiduciary relationship.

Final Order of Foreclosure
A judgement which extinguishes the mortgagor's (defendant's) equity of redemption and beneficial title goes over to the mortgagee. With an equitable mortgage, the equitable estate is forfeited and transferred to the mortgagee.

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Finder's Fee
A fee or commission paid by a lender to a mortgage professional for referring a mortgage loan.

First Mortgage
A mortgage registered before all others on title.

Fiscal Policy
The policy pursued by the Federal Government to direct the economy through taxation and the level and allocation of public spending.

Fiscal Year
A corporation's fiscal year. Some companies do not use the calendar year for their bookkeeping.

Fixed Assets
Fixed Assets are typically long term in nature. The value of fixed assets to a company lies in their use in producing goods and services, rather than in their sale value. Fixed assets wear out over time or otherwise lose their usefulness.

Fixture
Chattels that have been attached to the land or building so as to lose their character as chattels.

Forbearance
The waiving of a covenant in a mortgage document.

Foreclosure
A legal remedy available to a mortgagee where there is default under any of the covenants in the mortgage. It deprives the mortgagor of their equitable right to redeem.

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Freehold Estate
An estate in land or real property of uncertain duration that is either of inheritance or for the life of the tenant. There are three (3) freehold estates: fee simple, fee tail and life estate.

Front-end Money
Funds required to start a development and generally advanced by the developer or equity owner as a capital contribution to the project.

G

Gale Date
In mortgaging, the date on which interest is charged or compounded on the loan.

Garnishment
The legal attachment by creditors of a debtor's wages, cashflow or assets. The party served with notice must comply with the Garnishee Order and forward funds to the creditor(s) named.

Grant
Technical term used in deeds of conveyance to indicate a transfer of an interest or estate in land.

Grantee
The party to whom an interest in real property is conveyed (the buyer).

Grantor
The person who conveys an interest in real estate by deed (the seller).

Gross Area
The total floor area of a building, measured from the outside of the exterior walls.

Gross Income (Single Family)
The total annual personal income before deductions used in the calculation of an applicant's debt service ratios

Gross Lease
A lease that provides that all expenses attributable to the real estate are paid by the landlord. According to local terminology, leases may require some expense to be paid by the tenant.

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Gross Leasable Area
The total floor area designed for tenant occupancy and exclusive use and that area on which tenants pay rent. As adopted by the shopping centre industry, it is measured from the centre line of joint partitions and from outside wall faces. This will not include common areas.

Ground Lease
Contract for the rental of land usually for a long term.

Guarantor
One who promises to pay a debt or perform an obligation contracted by another in the event the original obligor fails to pay or to perform as contracted.

H

Holdback
The withholding of or non-advancement of a portion of a mortgage loan to maintain adequate security,
1. pending achievement of a performance requirement, or
2. as protection against liens.

Home Inspection
A visual inspection of the major components of a home, by a qualified individual, giving the homebuyer a true and unbiased picture of the home's condition.

I

Income Property
Real property that is used, or is capable of being use in the normal market, primarily for the production of annual income through leasing of the property.

Indefeasible
That which cannot be forfeited or done away with.

Indemnity
Protection of exemption from loss or damage.

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Ingress
Going in; right of entrance.

Injunction
An order of a court of equity prohibiting an act or compelling an act to be done.

Instrument
A formal written legal document.

Insurable Interest
An interest of such a nature that the occurrence of the event insured against would cause financial loss to the insured. Such interests, for example, may be that of an owner, a mortgagee, a lessee or a trustee.

Insurable Value
The term is used conventionally to designate the amount of insurance that may be carried, on destructible portions of a property to indemnify the owner in the event of loss.

Interest Adjustment Date
The date one month prior to commencement of amortization when accrued interest computed on the moneys advanced becomes due.

Interest Factor
The decimal equivalent for an interest rate on a unit amount for a certain period of time. Computed by interest rate divided by number of days in basic year, times the number of days accrued.

Interest Rate
Interest Rate is the percentage charged on outstanding loan balances.

Interim Financing (Construction Financing)
Interim loans are used to provide construction financing until the permanent loan can be funded.

Internal Rate of Return
That rate at which the present worth of all present and future investment costs equals the present worth of all present and future investment benefits.

Irrevocable
Unalterable.

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J

Joint Tenancy
An ownership of property by two or more persons each of whom has an undivided interest subject to the right of survivorship.

Joint Venture
An arrangement under which two or more people or businesses go into a single venture as partners. Priority is determined solely by date of registration.

Judgement
The official and authentic decision of a court of justices upon the respective rights and claims of the parties to an action or suit therein litigated and submitted to its determination.

Judicial Sale
A legal remedy available to a mortgagee when a mortgage is in default.

Junior Mortgage
A mortgage that is subsequent to the claims of the holder of a prior (senior) mortgage.

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L

Land
Includes not only the ground or soil, but also everything that is attached to the earth, whether by course of nature as trees and herbage, or by the hand of man, as houses and other buildings. It includes not only the surface of the earth but everything under it and over it. Condominium Acts divide land horizontally thereby limiting the vertical ownership.

It includes dwellings, tenements (rents), hereditaments (property that can be inherited) whether corporeal (tangible) or incorporeal (intangible) and any undivided share in land.

Land Titles System
This is a system of land registration under which the registrar or master of titles passes on the validity of the instrument, determines its legal effect, and the Government guarantees title.

Late Charge
An additional charge a borrower is required to pay as penalty for failure to pay a regular instalment when due.

Lead Lender
A financial institution that heads up a financial consortium or syndicate of two or more lenders to provide funds for a mortgage.

Lease
A contract between landlord (lessor) and tenant (lessee) for the occupation or use of the landlord's interest in a property by the tenant for a specified period of time and for a specified consideration (rent).

Lease Guarantee Insurance
Insurance that protects the owner of leased commercial and industrial real estate loss of rental income through the failure of a tenant to make rental payments.

Leasehold
An estate or interest in an estate in real property held by virtue of a lease for a term of years. A leasehold is considered personal property.

Leasehold Mortgage
A mortgage given by a lessee on the security of their leasehold interests in the land.

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Legal Description
The written geographical (metes and bonds) description of a property as described in the land register.

Legal Mortgage
A mortgage which results from the law alone, e.g. legal mortgage of minors, interdicted persons, or the crown.

Lending Value
The property value for mortgage purposes. Usually, the lesser of appraised value or sale price.

Lessee
Tenant.

M

Marketable Title
A title that may not be completely clear but has only minor objections that a well-informed and prudent buyer of real estate would accept.

Market Value
The highest price which a buyer, willing, but not compelled to buy, would pay, and the lowest a seller, willing, but not compelled to sell, would accept.

Maturity Date
The final day of the term of the mortgage.

Metes and Bounds
A system of land description whereby all boundary lines are set forth by use of terminating points and angles. Metes refers to a limit or limiting mark and bounds refers to the boundary lines.

Mill Rate
A rate which when multiplied by each one thousand dollars of property assessment gives the annual real estate taxes.

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Moratorium
A period during which a borrower is granted the right to delay fulfillment of an obligation.

Mortgage
Any charge on real property as security for a loan.

Mortgage Banker
One who originates mortgages with the intent to sell them to permanent investors with an agreement that the originator service these loans for the investor.

Mortgage-Backed Securities
An NHA MBS represents an undivided interest in a pool of insured residential first mortgages. As mortgages, these financial instruments are secured by the value of the underlying real estate. NHA MBS carry the CMHC Timely Payment Guarantee and, as such, represent an obligation of the Government of Canada.

Mortgage Bond
In recent years, there has been an increased activity in mortgage bonds, mainly for larger loans. When a very large loan is required, the number of potential lenders is limited. A loan in the category of $50,000,000 for instance, is usually made by the mortgage bond method that is really a device for dividing up the loan. A bond could be issued for an amount as low as $100,000 and sold to various pension funds through investment dealers on a public issue, or more commonly sold as a private placement issue.

Mortgage Clause
See Loss Payable Clause.

Mortgage Constant
The percentage of the mortgage paid in equal regular payments that provide principal reduction and interest payments over the life of the mortgage. Usually expressed annually.

Mortgagee
The lender or creditor.

A mortgagee goes into possession when he or she deprives the mortgagor of the management and control of the mortgaged property.

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Mortgage Impairment Insurance
A master insurance policy carried by mortgage lenders that provides him or her with insurance proceeds in the event of an otherwise uninsured loss of a property securing their debt. Some policies also insure losses resulting from the borrower's failure to pay real estate taxes.

Mortgage Insurance
Required if you are contributing between 5% and 25% of the value of the property as the down payment. Available through CMHC or GECMIC covering whole or partial losses of principal and interest.

Mortgage Investment Corporation (MIC)
An investment vehicle pursuant to the Income Tax Act.

Mortgage Term

The length of time the interest rate is guaranteed for a mortgage. Mortgage terms normally range from 6 months to 5 years or more, after which time you can repay the balance of the principal owing or re-negotiate the mortgage at current rates.

Mortgaged Out
Situation when the total mortgage debt equals or exceeds the market value or cost of the property.

Mortgage Portfolio

The aggregate of mortgage loans held by an investor.

Mortgage Servicing

The process of managing the mortgage administrative duties.

Mortgagor

The borrower or debtor.

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N

Net Lease
A lease that provides that all expenses attributable to the real estate are paid by the tenant. Local terminology may require some expenses to be paid to the landlord.

Net Operating Income
In the valuation process, the annual income available after operating expenses and real estate taxes to service the debt and provide the owner with a return on their investment.

Net Yield
The interest rate return on a mortgage after deducting the percentage equivalent of mortgage servicing from the coupon rate of the mortgage.

Non-Conforming Use
A property that is being used in contravention of current zoning by-laws but is permitted to remain because it pre-dates the enactment of the zoning by-laws.

Non-Disturbance Agreement
An agreement that permits a tenant under a lease to remain in possession despite any action by a mortgagee.

O

Offer to Purchase
A written contract outlining the terms under which the buyer agrees to purchase the property. There may be conditions attached to the offer, for example: offer being subject to arranging the mortgage or selling a home.

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P

Par
An expression used when a mortgage is sold or purchased for the outstanding balance without premium or discount.

Pari Passu
On an equal basis. When mortgages are syndicated, the lenders participate equally. No one party has preferential access to gains or is able to opt out of losses. In company stock, it refers to equal ranking of a company's preferred shares.

Partial Discharge
A release from the mortgage of a definite portion of the mortgaged lands usually given after the mortgagor has prepaid a specific portion of the mortgage debt.

Participation
Income Participation: The lender's right to share in the annual income produced by the property over the term of the mortgage, in addition to receiving debt service on the mortgage.

Equity Participation: Partial ownership of income or investment property given by the owner to the lender as part of the consideration for making the loan. It may have an indefinite term and may endure beyond the maturity of the loan. It need not involve any equity investment by the lender beyond the amount of the mortgage loan.

Perfecting Title

The elimination of any claims against title.

Performance Bond

A bond issued by a duly incorporated surety company covering the faithful performance of the contract and the payment of all obligations arising under the contract.

Permanent Loan

An amortizing loan on completed property which is intended to remain on that property over the full amortization period. The terms and conditions of the loan usually change during that period.

Personal Liability

The borrower's assets are pledged or subject to claim in addition to a primary security.

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Plot Plan

A drawing showing a layout of improvements on a site, including their location, dimensions and landscapes. It is generally a part of the architectural plans.

Plottage

The increase in value of a plot of land created by the assembling of small parcels into one ownership.

Police Power

The right of government to limit property rights without compensation provided the limitation is not specific to one parcel.

Postponement

The deferment of a prior charge on title to another.

Power of Attorney

A written instrument duly signed and executed by an owner of property that authorizes someone to act on behalf of the owner, to the extent indicated in the instrument.

Power of Sale

A clause generally inserted in mortgages giving the mortgagee the right and power, on default by the mortgagor of moneys due, to sell the mortgaged property by public auction, private contract or tender.

Pre-Authorized Cheques
Direct withdrawals of due payments from a borrower's bank account in accordance with authority granted by the borrower.

Premium

1. The amount, often stated as a percentage, paid in addition to the face value of a mortgage when the mortgage is being purchased.
2. The charge for insurance coverage.

Prepayment Clause

A clause inserted in a mortgage that gives the mortgagor the privilege of paying all or part of the mortgage debt in advance of the maturity date.

Prepayment Penalty

The sum of money (usually equal to an amount of interest) a mortgagee may require from a mortgagor to repay all or part of any outstanding principal.

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Prime Rate

The rate at which financial institutions lend to their best customers.

Prior Charge

An encumbrance ranking in priority to the mortgage in question.

Promissee

The person who can enforce the promise in a contract is called the promissee.

Promissor

The person who makes the promise in a contract is called the promissor.

Probate

Letters probate are issued by the Surrogate Court or the Court of Probate certifying that the Will has been approve and that the executor has been duly appointed.

Progress Advance Loan
A loan made, usually to a builder, where moneys are advanced from time to time as construction progresses.

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Q

Quiet Enjoyment
The right of a lessee (tenant) to use the leased property without interference from the lessor (owner).

Quiet Possession
The right granted by a mortgagee to the mortgagor to use the property without interference by the mortgagee until there is default. Also vice versa.

Quit Claim
In conveyancing, to release or relinquish a claim. In mortgages, a form of title transfer of ownership from the owner to the mortgagee. A default remedy.

R

Real Estate
The physical land and appurtenances including structures affixed thereto.

Real Estate Investment Trust (REIT)
An investment trust that specializes in investing in real estate related investments, including mortgages, construction loans and real property in varying combinations.

Real Property
The interests, benefits, and rights inherent in the ownership of the physical real estate. It is the bundle of rights with which the ownership of real estate is endowed, with limitations, and does not include personal property. Often called "property", "real estate", or "land".

Reassessment
The process of creating a new base for property taxation by updating assessments to reflect more current values. Ontario had its first province-wide reassessment in 1997, its second in 2000, and its third in 2002.

Realty
Real property.

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Recasting
Any increase in loan based in part or in total on unforeseen increased costs incurred during construction.

Receiver
In connection with mortgage actions, an appointee of a court, requested by a mortgagee, to receive and account for the rents and profits from the mortgaged premises.

Redemption
The duty of a mortgagee, on being paid the principal, interest and costs due by the mortgagor, to hand to the mortgagor the title deeds together with an executed reconveyance of the mortgage property.

Registry System
The system of land registration where all interests in land are recorded in chronological order. The registrar assumes no responsibility for the legal effect of the document.

Release of Covenant
An agreement by a lender to terminate the personal obligation of a mortgagor,
a. usually upon sale of a property to a new purchaser who is acceptable to the mortgagee, and who has signed an assumption agreement or other appropriate legal documents
b. releasing a guarantor whose covenant is no longer required.

Renewal Agreement
An agreement whereby the lender may agree to extend the mortgage loan but possibly on revised terms as to principal repayments and interest rate.

Rent Roll
A statement listing the tenants in occupancy, the area or unit occupied by each, their lease expiry date and rent payable and other leasing details that may be required.

Replacement Cost
Cost of replacing the subject property new with one having exactly the same utility.

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Replacement Reserve
A cash reserve for the future replacement of fixed assets.

Reproduction Cost
The cost of reproducing a new replica property on the basis of current prices with the same or closely similar materials.

Restrictive Covenant
A contract between neighbouring landowners restricting the use of one of the parcels. It must be negative in nature.

Rests
The periodical balancing of an account made for the purpose of converting interest into principal, and charging the party liable therein with compound interest, e.g. half-yearly.

Return on Equity
The percentage that the annual cash flow after debt service is of the equity in the property.
Annual Cash Flow - Debt Service
Equity

Return on Investment
The percentage that the annual cash flow after debt service is of the cash investment in the property.

Reversion
A right to future possession retained by an owner at the time of a transfer of an owner's interest in real property.

Right of Survivorship
The distinguishing feature of joint tenancies and tenancies by the entirety which provide that, where land is held in undivided portions by co-owners, upon death of any joint owner, their interest in the land will pass to the surviving co-owner, rather than to their heirs or devisees.

Right-of-way
The right to pass over another's land, more or less frequently, according to the nature of the easement.

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S

Sale Holdback
A percentage of the principal amount of the mortgage held back by the mortgagee until the property in question has been sold to a party satisfactory to the mortgagee who has assumed the responsibility of the mortgage by the appropriate legal document.

Sale Leaseback
A technique in which a seller deeds property to a buyer and the buyer simultaneously leases the property back to the seller, usually on a long-term basis.

Seasonal Deficiencies
Work necessary to finish a property that cannot be completed immediately because of seasonal or climatic conditions.

Secondary Financing
Financing real estate with a loan, or loans, that is subordinate to a first mortgage.

Secondary Mortgage Market
A market where existing mortgages are bought and sold.

Second Mortgage
A mortgage placed on real property which is already encumbered with one mortgage. Determination of first, second, third mortgage is by priority or registration (time and date).

Servicing Agreement
A written agreement between an investor and mortgage loan correspondent stipulating the rights and obligations of each party regarding the origination and continuing administration of the loans.

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Servient Tenement
The parcel of land over or through which an easement runs.

Severance
The subdivision of a parcel of land.

Shareholder's Equity
The difference between the assets and liabilities of a corporation, sometimes called net worth. Refers to ownership interest in common and preferred shareholders in a company.

Sheriff's Certificate
A signed statement from the sheriff's office certifying that there are no Writs of Execution in the sheriff's hands against specific land and that he or she has not sold the land within a specified period.

Spread
The difference between the cost of money and the yield on the investment.

Specific Performance
An equitable remedy to compel performance of a real estate or mortgage contract according to the specific terms of the contract.

Standby Commitment
An agreement by a lender to provide a certain amount of takeout mortgage financing on specific terms in the future. This commitment enables the borrower to arrange construction financing from other sources. The commitment is issued for a fee and the lender is willing to disburse the committed funds in the event that a permanent loan on more favourable terms is not obtained.

Standby Fee
A sum of money given by the borrowers to the lender to hold a mortgage commitment for a certain period of time. The fee is normally non-refundable.

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Standing Mortgage
A mortgage that provides for equal, regular lump-sum payments of principal, usually quarterly, plus accrued interest.

Subordinate
Subject to, or junior to.

Subordination
The act of a party acknowledging by written recorded instrument that a debt due is inferior to the interest to another in the same property. Subordination may apply not only to mortgages but also to leases, real estate rights, and any other type of debt instrument.

Subrogation
A doctrine adopted in favour of the insurer in order to prevent the insured from recovering more than a full indemnity.

Subscription Policy
An insurance policy that states two or more insurance companies are sharing the risk.

Surety
The guarantee given for the performance of someone else.

Survey
A property survey is a process by which land boundaries and areas are determined and defined and improvements may be plotted thereon. Surveys are also used for locating and identifying property lines, improvements on the land and easements on the land.

Surveyor's Certificate
A formal statement signed, certified, and dated by a surveyor giving the pertinent facts about a particular property and any easements or encroachments affecting it. These are no longer available in Ontario.

Syndication
A group of lenders that share in the principal disbursement of a loan to spread risk or to comply with statutory restrictions on loan size.

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T

Take-out Loan
A first mortgage loan that is committed and expected to be made upon completion of a property with the loan proceeds to be used to repay an interim or construction loan.

Tax Certificate
A certificate from the appropriate taxing authority giving the status of real estate taxes or other assessments affecting the property.

Tenants in Common
An ownership of property by two or more persons, each of whom has an undivided possessory interest, which may be voluntarily transferred by alienation device or descent and is not subject to any rights of survivorship.

Tenure
The manner or system of holding lands or tenements in subordination to some superior right, which in the feudal ages was the leading characteristic of real property ownership.

Term
In a mortgage, term is the actual length of time for which the money is loaned.

Term Mortgage
A non-amortizing mortgage under which the principal is paid in its entirety upon the maturity date. Sometimes called a straight loan.

Title
The means of evidence by which the owner of land has lawful ownership thereof.

Title Insurance Policy
A contract by which the insurer, usually a title insurance company, agrees to pay the insured a specific amount for any loss caused by defects of title to real estate, wherein the insured has an interest as purchaser, mortgagee or otherwise.

Title Search
An examination of public records to determine the state of title.

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Torrens System
The Land Titles System as originated in Australia by a Mr. Torrens in 1858.

Total Debt Service Ratio (Single Family)
The ratio of an amount equal to the annual mortgage charges and acceptable installment account payments to an amount equal to the effective gross annual income of the borrower.

Transfer of Charge
Assignment of a mortgage.

Trust Deed
A written instrument duly executed, sealed, and delivered, conveying or transferring property to a trustee, usually but not necessarily covering real property.

U

Usury Rate
The maximum legal rate for interest, discounts, or other fees that may be charged for the use of money.

V

Valuation Date
The date used for establishing the assessed value for all properties in the Province. The valuation date for 2001 and 2002 taxation years is June 30, 1999. Formerly called a "base year".

Vendor's Lien
A notice registered on title by the vendor, protecting the vendor for the unpaid balance of the purchase price. It is usually collaterally secured by a mortgage.

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W

Warehousing
The temporary advancement of a trust company's own funds in disbursing mortgage loans pending sale to investor clients for whom the loans were originated.

Waste
Any destructive act which permanently reduces the value of the security.

Writ
A form of written command in the name of sovereign, state, court, etc. issued to an official or other person and directing him or her to act or abstain from acting in some way.

Y

Yield to Maturity
A percent returned each year to the lender on actual funds borrowed, considering that the loan will be paid in full at the end of maturity.

Z

Zero Lot Line
The positioning of a structure on a lot so that one side rests directly on the lot's boundary line.

Zoning
The uses to which property may be put in specific areas, as specified by municipal authorities.

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