Real Estate Terms

(updated January 2024)

This glossary helps you to understand definitions and common real estate terms.

Helpful real estate abbreviations you might see in short forms in a listing or an ad.

ADJUSTABLE-RATE MORTGAGE (A.R.M)
Mortgage with a rate that is variable. It’s usually tied to a prime rate.

AGENCY
Relationship a buyer or seller has with a real estate brokerage company.

AGREEMENT OF PURCHASE AND SALE (or OFFER)
Legal document that outlines the terms of a real estate deal that will be signed by both the buyer and the seller.

AMORTIZATION
Mortgage payment that includes both principal and interest.

AMORTIZATION PERIOD
How long it will take to repay the mortgage.

APPRAISED VALUE
Amount that a professional appraiser thinks what a property is worth. This is usually done to get the value of the house for mortgage purposes.

ASSESSED VALUE
Amount at which a property is valued for taxation purposes.

ASSUMABLE MORTGAGE
Mortgage that can be passed on from a seller to a buyer, should a buyer want a mortgage and qualify.

AVERAGE DOM
This acronym is average number of days on the market for firm transactions entered in TRREB’s MLS® System between the first and last day of the month. Currently, the average days on the market is 21 days for homes and condo sales combined in the GTA. In the downtown core, inventory moves much faster and may sell between 7-10 days.

BLENDED MORTGAGE
Combination of 2 separate mortgages.

BALLOON PAYMENT
One-time payment against the principal paid at the end of certain mortgages.

BI-WEEKLY MORTGAGE
A bi-weekly mortgage payment means a homeowner pays their monthly mortgage payment in 2 monthly installments instead of 1. With a bi-weekly mortgage, you'll make 26 payments per year instead of 12. The result is that you'll pay the equivalent of 13 monthly payments each year lowering interest rates and your principal balance at a faster pace.

BRIDGE LOAN
A bridge loan is a short-term loan a homeowner takes out against their property to finance the purchase of another property. It’s usually taken out for a period of a few weeks to up to 3 years.

BROKER
A broker has passed a broker’s license exam and received education beyond what the province requires of real estate agents. They understand real-estate law, construction, and property management. Real estate agents are required to work under the supervision of a broker.

CANADA MORTGAGE AND HOUSING CORPORATION (CMHC)
Institution whose primary purpose is to administer the National Housing Act and provide lenders with insurance against high-ratio mortgages.

CAP
Maximum amount an interest rate can change.

CHATTELS
Contents of a home belonging to the owner which are not included in the sale of a home unless specifically outlined in an offer.

CLEAR TITLE
A property that has no claims against it.

CLOSED MORTGAGES
Mortgage that cannot be paid out until the end of a mortgage period. Sometimes exceptions are made, but there can be a penalty charged.

CLOSING DATE
Date that the house exchanges hands from a seller to a buyer. A buyer gets the keys, and a seller gets their money.

CLOUD ON TITLE
When a claim is made against the title of a property. Typically, it impacts the value of a property.

COLLATERAL
Tangible asset that is used as a guarantee of payment in a loan. A house acts as collateral on a mortgage.

COMMITMENT
Written agreement that a lender will give a specified amount of funds under certain conditions.

COMMISSION
Real estate commission is generally 5% of the home sale price. It’s split between a buyer’s and seller’s agents and paid by the seller at the time of closing.

COMMON ELEMENTS
Parts of a condo building that are owned by all owners of the building (e.g., walkways, elevators, halls, recreation facilities, etc.).

CONDITION
Clause written into an offer which outlines something that must happen before an agreement becomes binding. Should a condition not be met, the negatively affected party may have an option to terminate the transaction.

CONDITIONAL OFFER
Offer that has one or more contingencies that must be fulfilled for an agreement to become firm and binding upon both parties.

CONDOMINIUM
Form of ownership where an owner has the title to a specific unit and a portion of the common elements of a building.

CONVENTIONAL MORTGAGE
Mortgage from a traditional lender such as a bank where the value of the mortgage does not exceed 75% of the value of a property. Any mortgage greater than 75% is considered high-ratio and must be insured by Canada Mortgage and Housing Corporation (CMHC).

COOPERATIVE
Type of ownership when a building is owned by a company. To be entitled to live in the building you must buy shares. It’s typically difficult to get a mortgage for a co-op without a large down payment and you must be approved by the co-op board of directors.

DEED
Document that officially transfers ownership of a property.

DEFAULT
When a borrower is not able to make a debt payment.

DEPOSIT
Money that is put down after an offer is accepted and is held in trust, usually, by the listing real estate brokerage.

DISBURSEMENTS
Various expenses and costs that a lawyer pays on behalf of a buyer to close the sale.

DISCHARGE
When a mortgage is paid in full, and the title is changed to reflect that.

DISCOUNT POINTS
Fee that is charged when a mortgage interest rate is reduced from the current rate. One-point equals 1% of a mortgage value.

DOWN PAYMENT
Amount that a buyer puts down on a property in cash: this is the difference between the purchase price and the mortgage amount.

DUAL AGENCY
(See multiple representation)

EASEMENT
Legal right to use someone else’s land for a specified purpose. This right is tied to the land, not the individual, so it passes from a seller to a buyer.

ENCROACHMENT
When the boundaries of some part of one property impedes over the boundaries of a neighbouring property.

EQUITY
Value of a property minus any outstanding debt.

FIDUCIARY DUTY
Legal relationship between a buyer or seller and their realtor.

FIRST MORTGAGE
First mortgage on a property. It has the first claim on the property should there be a default.

FIXED-RATE MORTGAGE
Mortgage that has a fixed amount of interest paid over a specific amount of time.

FORECLOSE
When a lender takes legal ownership over a property due to a borrower defaulting on a loan.

FOR SALE BY OWNER (FSOB)
Homes listed as FSOB are being sold without the help of a real estate agent. Benefit to a seller is they don’t pay commission fees, but there may be little benefits to a buyer.

GROSS DEBT SERVICE RATIO (G.D.S)
G.D.S is typically used as an indicator that tells you if you can afford a certain mortgage payment. All costs associated with housing (mortgage, taxes, heating, and 50% of condominium fees, if applicable) should not exceed 32% of your gross annual income (income before tax).

HIGH-RATIO MORTGAGES
Mortgage that exceeds 75%. These mortgages must be insured by the Canada Mortgage and Housing Corporation (CMHC).

HOLD BACK
When money is held back by a lender until a condition is satisfied.

HOMEOWNER’S INSURANCE
Protects homeowners against damage to their home caused by fire, smoke, wind, hail, vandalism, and slips/falls.

HOME INSPECTION
Objective evaluation of a house by a home inspector. At the end of an evaluation a detailed document is provided outlining the condition of the house.

HOME WARRANTY PLAN
Insures against the failure of the operating systems of a home. It may cover things such as the heating system, central air, electrical, plumbing, and large appliances.

INTEREST ADJUSTMENT
Portion of interest that is paid if a closing date of a transaction does not coincide with a mortgage payment date. For example: if mortgage payments are made on the 15th of the month but the sale closes on the 10th, there will be an interest adjustment for 5 days.

INTEREST-ONLY MORTGAGE
The interest is paid on a regular basis and the principal is paid at the end of the term.

IRREVOCABLE PERIOD
A period when an offer expires. Agreements for the purchase and sale, typically provide for an irrevocable date by either a buyer or a seller until a specific time on the specified date, after which time, if an offer is not accepted it becomes null and void and the deposit is returned to a buyer in full without deduction. Irrevocable dates also apply in the case of counter offers.

JOINT TENANCY
Situation where 2 people share an equal ownership share of a property. If one dies, their share is transferred to the remaining person instead of to the beneficiaries of the estate of the deceased.

LAND TRANSFER TAX
Tax paid to transfer a property.

LEASEHOLD MORTGAGE
Home mortgage when the house is on leased land.

LEGAL FEES
Amount charged by a lawyer to execute a purchase or sale of a property.

LIABILITIES
Debts.

LIEN
Legal claim against real estate to guarantee payment of a debt.

LISTING AGREEMENT
Formal agreement between a seller of a property and a real estate brokerage company authorizing the brokerage to offer a particular piece of real estate for sale.

LISTING BROKER
The real estate brokerage company that represents a seller.

LOAN COMMITMENT
Document that demonstrates a lender is willing to lend a certain amount of money with certain conditions to a borrower.

LOCK-IN
Occurs when a buyer tells a lender that they accept a certain interest rate for a certain amount of time.

MLS® (MULTIPLE LISTING SYSTEM)
MLS® is a suite of regional databases containing their own listings. Each database has its own listings, requires agents to pay dues for access, and allows agents to share listings across regions, without paying dues to each one. It's widely considered the most comprehensive listing service available.

MAINTENANCE FEE
Amount of money a condo owner pays each month towards upkeep on common areas of a building.

MATURITY DATE
End date of a mortgage.

MORTGAGE
An agreement between a lender and a borrower where the borrower puts up a piece of real estate as collateral for a loan to purchase that property.

MORTGAGE BROKER
A professional who brings together borrowers and lenders. Usually, their fee is paid by a lending institution.

MORTGAGE INSURANCE
Also referred to as mortgage loan insurance or mortgage default insurance, this is offered through the Canada Mortgage and Housing Corporation (CMHC) and covers a lender when a borrower has less than 25% down payment.

MORTGAGE LIFE INSURANCE
Mortgage life insurance covers the mortgage value in the event of a death of the mortgage holder.

MORTGAGEE
Lender.

MORTGAGOR
Borrower.

MULTIPLE REPRESENTATION
Occurs when a brokerage represents more than one client in a single transaction. For example, the buying client of Forest Hill Real Estate Inc., Brokerage buys a property that is also listed with Forest Hill Real Estate Inc., Brokerage.

NEW LISTINGS
A simple one. This is defined as brand new listings entered in TRREB’s (MLS®) System between the first and last day of the month. Consider this to be fresh, spanking new inventory hitting the market that month. In December 2023, we had less new “stock” hitting the market than we did last year. This means buyers have less to select from, making the competition more fierce.

OPEN MORTGAGE
Type of mortgage where a borrower can pay a debt at any time.

ORIGINATION FEE
Fee a lender gets for processing a loan application.

PER DIEM
Per diem or “per day” fees are charged if a loan isn’t approved by the date the loan was scheduled to be completed. These charges are payable to a lender during closing.

PENALTY
Amount of money paid to a lender so that a borrower can prepay a portion of the mortgage.

PIT
Principle, interest, and taxes.

PITH
Principal, interest, taxes, and heating.

PITI
PITI stands for principal, interest, taxes, and insurance, and refers to the sum of each of these charges, typically quoted on a monthly basis. These costs are calculated and compared to a borrower’s monthly gross income when approving for a mortgage loan. A borrower's PITI should generally be less than or equal to 28% of their gross monthly income.

POSSESSION
Control (ownership) of a property.

POWER OF ATTORNEY
A legal agreement where a person grants another person the legal authorization to represent them and make decisions on their behalf.

PRE-APPROVAL FOR A MORTGAGE
A written commitment from a lending institution. Before submitting an offer on a home (or even engaging with a real estate agent) you’ll likely need to get pre-approved. This means a lender has checked your credit, verified your information, and approved you for up to a specific loan amount for a period of up to 90 days.

PRE-QUALIFICATION
Unlike pre-approval, pre-qualification is more of an estimate of how much you can afford to spend on a home.

PRE-PAYMENT PRIVILEGE
The right of a borrower to prepay some principal without having to pay a penalty.

PRINCIPAL
This is the base amount of money borrowed.

REAL ESTATE AGENT (BROKER)
The brokerage company that represents either a buyer or a seller in the process of buying or selling real estate.

REALTOR
A registered real estate sales representative, real estate agent or broker.

RE-FINANCE
When a new mortgage is obtained and used to pay off an existing mortgage.

RENEWAL AGREEMENT
An agreement to extend a mortgage for another term once an initial term is reached.

RESERVE FUND
Bank account established by a condo corporation to cover major repairs for common elements. The fund is paid into from a portion of a monthly maintenance fee.

SALES
The terms sales, dollar volume, average sale prices and median sale prices are based on firm transactions entered into TRREB's MLS® System between the first and last day of the month being reported. Sales account for the purchase or sale itself and are often confused with price. For example, there were 65,982 home sales reported through TRREB’s MLS® System in 2023.

SELLER TAKE-BACK
Mortgage where a seller personally gives some financing to a buyer.

SETBACK
The distance back from the property line beyond which you must get approval for any improvements.

STATEMENT OF ADJUSTMENTS
Amount of money owed at the time of closing. The amount is calculated by a lawyer and an adjustment can be a difference between a deposit and down payment subject to various credits and debits.

SELLING BROKER/COOPERATING BROKER
The realtor who represents a seller or a buyer in an Agreement of Purchase and Sale.

SPECIAL ASSESSMENT
Special charge a condo owner pays for a capital improvement or unforeseen expense.

STATUS CERTIFICATE
Document that outlines financial and legal status of a condo corporation.

SURVEY
Document that outlines the property line on a piece of real estate as well as the location of any fences and buildings on the property.

TENANCY IN COMMON
When a property is jointly owned by a group of individuals, not necessarily in equal shares, and each owner has a right to sell their portion.

TERM
Amount of time a lender lends funds to a borrower.

TITLE
Legal certificate outlining who owns a property.

TITLE INSURANCE
Insurance that covers a piece of land. This gives assurance that the real property remains the property of a buyer if a claim against the property is processed.

TITLE SEARCH
The process of checking records to make sure a seller has the legal right to sell a property.

TOTAL DEBT SERVICE RATIO (T.D.S)
T.D.S. is typically used as an indicator that tells you if you can afford to take on more debt. Your T.D.S should not exceed 40% of your gross annual income (income before tax). This includes any mortgage debt, car loans, etc.

TRUST ACCOUNT
Bank account used by brokers to keep deposit funds separate from other funds.

UNDERWRITING
Calculation of risk involved for a lender.

VARIABLE-RATE MORTGAGE
Mortgage that has fixed payments but where the interest rate is adjusted to market levels. If rates go up, a larger portion of that month payment goes to interest, but the actual amount of the payment does not change.

WAIVER
Document normally signed by a buyer which relieves a seller from obligation to a particular condition in an offer.

WARRANTY
Legally binding commitment that a seller gives to a buyer to guarantee that a property is in good condition.

ZONING REGULATION
Criteria that regulate how a property may be used, typically established by a municipality. A property could be zoned for many different uses including residential or commercial.

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