Canadian Mortgage Glossary

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

Abandonment of Property
To vacate a property with a definite intention never to return.

Abstract of Title
Registry System: A condensed history of the title to a parcel of land. The abstract consists of a synopsis of every recorded instrument affecting the title to that land arranged in chronological order of recording.

Accelerated Weekly Payment
A mortgage repayment plan in which the borrower makes 52 payments per year instead of 48 which would be required if the payment plan called for four payments per month. The extra four payments each year have the effect of “accelerating” the repayment of the mortgage.

Acceleration Clause
A clause in a mortgage which provides that where default has occurred in making any mortgage payment, the outstanding mortgage amount becomes due.

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

Accredited Appraiser Canadian Institute (AACI)
The highest level of designation bestowed by the Appraisal Institute of Canada. It allows the holder to conduct appraisals and consultations on various types of property.

Accredited Mortgage Professional (AMP)
AMP is Canada’s only national designation for mortgage professionals. The AMP designation sets a single national proficiency standard for Canada’s mortgage professionals and is issued by the Canadian Institute of Mortgage Brokers and Lenders (CIMBL).

Accrued Interest
The interest charged for the period of time that has elapsed since the last interest date.

Action for Possession
A legal remedy available to a lender when a mortgage is in default. It allows the lender to take possession of the mortgage property.

Action of Receiver
A legal remedy available to a lender when a mortgage is in default, asking the courts to appoint a receiver who takes possession of the property

Action on the Covenant for Payment
A legal remedy available to a lender when a mortgage is in default. It gives the lender the right to sue the borrower, even if the borrower has since sold the property.

Acquittance
The term for a discharge of mortgage in Québec.

Adjustable Rate Mortgage
See variable rate mortgage.

Adjustment on Sale
A pro-rated division and distribution of prepaid or accrued taxes, prepaid insurance premiums, prepaid rents and other income and expenses. This adjustment 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.

Advertising Standards Canada (ASC)
Advertising Standards Canada (ASC) is the Canadian advertising industry’s self-regulatory body. ASC’s mission is to ensure the integrity and viability of advertising. They administer The Canadian Code of Advertising Standards.

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 relationship 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.

Agent
One who is authorized to represent and act on behalf of another person or business, the principal in transactions involving a third party. Unlike an employee who merely works for the principal, an agent works in place 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 out in that agreement.

Alberta Mortgage Brokers Association (AMBA)
An independent non-profit organization serving the mortgage industry in Alberta.

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 by the lender in which the terms of the registered mortgage are changed. The amending agreement may or may not be not be registered on title.

Amortization
This refers to the process of paying off a mortgage in regular payments composed of both interest and principal.

Amortization Period
The time over which the mortgage is to be completely repaid, assuming equal payments. This means that when looking, for example, at a mortgage with a 25-year amortization period, it would take 25 years to reduce the balance to zero, if all regular payments were made on time and the terms (payment, interest rate) remained the same.

Amortization Schedule
A table showing the amounts of principal and interest which make up each of the periodic level payments 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. The first anniversary date occurs one year from the date interest is adjusted and the periodic repayments begin.

Appointment of a Receiver
A legal remedy available to a lender when a mortgage is in default. The receiver takes possession of the property, collects rents, and pays any expenses as required.

Appraisal
An independent, unbiased report that uses various analysis techniques and market research to determine the realistic value of a property.

Appraisal Institute of Canada (AIC)
The national professional organization that designates and represents professional real estate appraisers. The AIC sets the standards and requirements necessary to earn the designation of Accredited Appraiser Canadian Institute (AACI) and Canadian Residential Appraiser (CRA).

Appraisal Report
An independent assessment of a 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. The licensing requirement for real estate appraisers varies from province to province.

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 the case in a transaction between related parties.

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

Arrears
An overdue payment (in reference to a mortgage for the purposes of this text).

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. The assessment roll includes the name of the property owners or tenants and their addresses. 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.

Assets
Goods of value, either tangible or not, that a borrower or business owns.

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

Assignment
The act of transferring rights held by one party, the assignor, to another party, the assignee.

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 in which the borrower grants the lender the right to collect future rents on a given occurrence, normally default. This assignment is normally taken as additional security on rental loans.

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

Association des courtiers et agents immobiliers du Québec (ACAIQ)
ACAIQ is responsible for administering the Real Estate Brokerage Act and regulations in Québec.

Assumable Mortgage
An existing mortgage that can be taken over (assumed) by the buyer of a property when that property is sold.

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
A legal action available upon default of a mortgage. As a result, tenants are directed to pay their rents to the lender.

Automated Valuation Models (AVM)
Computer programs that provide real estate market analysis and estimates of value based on specific attributes of a property as well as sales information.

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Balance Sheet
Also known as the Statement of Financial Position or Statement of Assets and Liabilities. The Balance Sheet is a listing of the assets, liabilities (debts), 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
Any payment of principal over and above the regular payment.

Bank Act
The Canadian Bank Act regulates all Canadian banking activity conducted through a federally chartered institution. This includes banks, trust companies, loan companies, and insurance companies.

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.

Beacon Score
The name given to the credit score published by Equifax. See also Empirica Score.

Binder Insurance
A temporary agreement where one party agrees to insure another party while awaiting receipt of, and final action on, 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, or blending, interest and principal components in one constant payment.

Blended Rate

The rate that results from the blending of an existing mortgage and a new mortgage with differing interest rates into one consolidated mortgage. The calculation to determine the final rate takes into account both the interest rates and the amount of principal for each of the component loans.

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

Bonus

A sum paid by the borrower, or retained by the lender, from the advance of mortgage money as part of the consideration for the making of the loan.
A sum paid by the borrower to the lender as consideration for prepayment of all or part of the principle outstanding.

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

Book Value of a Mortgage
The mortgage amount outstanding on a mortgage at any given point in time. The book value is determined by deducting the amount of principal repayment from the original principal amount.

Borrowing By-laws
A document providing proof 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 borrowers to provide financing for purchase, pending closing of the sale of their existing property.

Bridge Loan
A bridge loan is a short-term, high interest loan intended to offset financial hardship until a long-term loan is secured.

Brokerage
The aspect of business concerned with bringing parties together for the transaction of business and the execution of contracts. Brokerage involves sales, exchanges and rentals.

Broker
One who acts as an intermediary between parties in a transaction. A broker, for a fee or other consideration, arranges a transaction (a sale) by a seller to the buyer.

Builder’s Loan
A loan designed for borrowers who need financing for construction projects. These differ from normal loans as the funds are received in stages (also known as draws) during the building process to protect the lender from construction abandonment.

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.

Building Scheme
A group of restrictive covenants attached to two or more lots. These covenants are set by a vendor or landlord. They detail restrictions for use and are agreed to by the purchasers or tenants as part of the purchase or lease.

Bundle of Rights
Legal rights with respect to real estate ownership 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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Canada Mortgage and Housing Corporation (CMHC)
A Crown Corporation which was initially created to administer the National Housing Act and is Canada’s only public sector mortgage insurer. CMHC is charged with administering government housing initiatives and works with community organizations, the private sector, non-profit agencies and all levels of government to help create innovative solutions to today’s housing challenges.

Canada Mortgage Bonds
Canada Mortgage Bonds (CMBs) are similar to Mortgage Backed Securities (MBS) in that Canada Mortgage and Housing Corporation guarantees the timely payment of interest and principal. However, an MBS has a disadvantage to investors since borrowers of the underlying mortgages can make partial or full prepayments of their mortgage principal. While consumers (borrowers) like this flexibility, investors do not like this unpredictability. The Canada Mortgage Bond program eliminates this cash flow uncertainty to investors, as CMHC guarantees both semi-annual interest payments, and the repayment of principal on a specified maturity date.

Canadian and British Insurance Company Act
The federal statute that governs federally incorporated insurance companies.

Canadian Code of Advertising Standards
These are administered by Advertising Standards Canada. The goal of the standards is to promote the professional practice of advertising, by setting criteria for what is or is not acceptable practice.

Canadian Institute of Mortgage Brokers and Lenders (CIMBL)
CIMBL is the only national organization representing Canada’s mortgage industry and administers the Accredited Mortgage Professional (AMP) designation.

CIMBL’s Code of Ethics
A code of conduct for CIMBL members designed to increase professionalism and decrease the likelihood of fraud.

Caisses Populaires
Credit unions as they are known in Québec. See credit union.

Canadian Residential Appraiser (CRA)
This designation is awarded by the Appraisal Institute of Canada and grants those with the designation the right to valuate individual, undeveloped residential sites.

Capacity (5 Cs of Credit)
The ability of a borrower to repay a loan.

Capital (5 Cs of Credit)
The amount of money the borrower has invested into the property.

Capital Reserve Requirements
Specified amount of capital that is necessary for lenders to hold to back up the loans they grant. The amount is determined by government regulations.

Capped Rate Variable Mortgage
A variable rate mortgage on which the lender has set a limit to interest rate increases or decreases.

Cash Back
A mortgage feature that provides the borrower with cash back, as a percentage of the mortgage principal. It is generally used to cover closing costs.

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 (mortgage) of which he or she is not the registered owner. Cautions are registered to protect their interests. As a result, 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”. Buyers must examine the goods or property they are buying since they buy 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 Occupancy (Permit)
A certificate provided by the municipality that a property has been constructed under the authority of the issued building permit, has met the requirements of the building code, and is now suitable to be occupied.

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

Chain of Title
Chain of title refers to who has owned the land in the past. It is uncovered through the lawyer’s search. See extent of title.

Character (5 Cs of Credit)
The overall opinion on a borrower’s credibility to repay a loan; the borrower’s length of employment is a key measurement.

Charge
The name given to a mortgage document when title is registered under the Land Titles System. Also known as Certificate of Charge.

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

Chattel Mortgage
A mortgage given on chattels. This type of mortgage is usually given as collateral security to a mortgage on real estate. As an example, there may be a chattel mortgage on refrigerators and stoves in an apartment building.

Closed Mortgage
A mortgage agreement that cannot be repaid, refinanced or renegotiated until maturity, unless otherwise stated in its terms.

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

Closing Process
The procedure of finalizing the sale, once the lender receives an accepted commitment.

Co-Applicant
One of two or more people applying together 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 (5 Cs of Credit)
Guaranteed support for a loan, generally consisting of funds or real estate, that ensures added security to the lender. Collateral can also take the form of guarantees provided by third parties, i.e. guarantors.

Collateral Mortgage
The mortgage registered to document collateral security.

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

Commercial Properties
Properties that are utilized for commerce or trade (e.g. stores, office buildings).

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. The commitment may have conditions attached to it which must be met before the contract can be finalized.

Common Law
A legal system of principles and rules of action based on customs and common usages. It forms a major part of the law in many countries, especially those with a history as British territories, such as Canada. Common law developed from rulings by judges based on tradition, custom and precedent, with the idea being that there was a legal framework common to all cultures throughout time.

Common Mistake
Both parties make the same mistake in a term of the contract.

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

Comparable Properties
Properties that contain similar characteristics to the subject property in an appraisal. Appraisals typically require three comparable properties. Comparables should have sold recently, be from the same or similar neighbourhood, be of the same style/age/condition, be of similar size and on similar lots. See Comparative Method of Appraisal.

Comparative Method of Appraisal
A method of appraisal that bases the value of the property on that of comparable properties.

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.

Condition
A clause or statement in the contract, which must be met to fulfil an obligation in the agreement.

Condition Precedent
Clause in a contract that lays down factors and/or events that must occur for the agreement to be binding.

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

Consideration
Consideration means “some right, benefit or profit accruing to the promisor or some forbearance, detriment, loss or responsibility suffered by the promissee”. In other words, when dealing with contracts, the party trying to enforce the contract must have provided some benefit in return for the promise to complete the contract.

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

Contract of purchase and sale
A contract involving the sale of a property that outlines the complete duties of the promisor and the promissee in the real estate transaction.

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

Conventional Mortgage
A loan based on the credit of the borrower and on the collateral for the mortgage. A conventional mortgage does not exceed 75% of the market value of the property. This means that the borrower must have 25% or more available for the down payment.

Convertible Rate
Mortgages with a convertible rate feature allow borrowers to fix the rate of their variable rate mortgage at any time with no penalty.

Co-Operative
A form of multiple ownership of real estate in which a corporation or business trust 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 a property (present or future) can be held at the same time by several persons. The most common types of co-ownership are joint tenancy and tenancy-in-common.

Corporation
A separate legal entity which exists apart from a person but has the rights and liabilities of an individual.

Cost of Goods Sold (Income Statement)
The costs of purchasing or producing and manufacturing items sold.

Counter Offer
A new offer made in response to an offer received. This has the effect of rejecting the original offer and placing the counter offer on the table for consideration.

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.

Credit (5 Cs of Credit)
The repayment history of the borrower.

Credit Report
A detailed description of the applicant’s credit records. This includes information provided by lenders concerning credit card payments and loans repayment history.

Credit Score
A single number that represents the information found in a borrower’s credit history. Equifax’s credit score is known as the Beacon Score, while TransUnion’s score is called the Empirica Score.

Credit Unions
Credit unions are lending institutions owned by their members. Membership is often based on a common bond of association such as employment or ethnic background.

Creditor
One to whom a debt is owed.

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 Assets
Goods that can easily be turned into cash, sold or consumed within a year’s time.

Current Liabilities
Debts and obligations that are expected to be paid within a year, e.g. account payable, expenses, taxes.

Current Ratio
A measure that shows the ability of a firm to pay its current liabilities. It is calculated by dividing current assets by current liabilities.

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Damages
A financial solution determined by a court to compensate one party for injury by another party. Damages are intended to restore the parties to the state that would have existed if the contract had been performed.

Debt Service Ratios
Ratios that are used to compare borrowers’ debts to their incomes to determine if they can afford loans

Debt-to-Assets Ratio
This ratio identifies how much of a company’s operations are funded through borrowing. It is calculated by dividing total liabilities by the total assets.

Debt-to-Equity Ratio
Another ratio (see debt-to-assets) which assesses how much of a company’s operations are funded through borrowing, compared to the amount of money provided by the owners. It is calculated by dividing total liability by owners’ equity.

Debtor
One who owes a debt.

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 when the net proceeds under a Power of Sale or Judicial Sale is less than the lender’s total claim.

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

Demographic
Characteristics of a population such as size, growth, age, etc.

Depreciation
The loss of value of an asset over time.

Direct Comparison
This type of appraisal, also referred to as the market data approach, bases property value on the current selling prices of similar properties.

Discharge Document
Once the receipt (acknowledging the completion of payment) has been processed and registered to the title, it becomes the discharge document.

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

Disclose Defects
To make known current or past imperfections. Failure to disclose defects will not affect consent, but will have the same effect as a misrepresentation.

Disclosure Statement
A written statement disclosing information about a specific loan and potential conflicts of interest required under various consumer protection acts.

Doctrine of Estates
It is the concept that specifies the various rights to land ownership in common law countries.

Doctrine of Privity
Also known as the “third party rule”. The doctrine of privity states that only parties to a contract are entitled to enforce a contract; third party beneficiaries do not have the right to take action.

Dollar Adjustments
These are estimates of the dollar amount allocated to each factor being compared to the subject property in an appraisal. For example a dollar adjustment would reflect how much extra a buyer would pay for a home with a finished basement compared to one with an unfinished basement. See percentage adjustment.

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

Double Up Option
A clause that may be included as part of an open mortgage contract, giving the borrower the opportunity to double the scheduled principal and interest payments.

Draft Mortgage Document
The foundation of the document is to specify all terms and conditions of the agreement. A lawyer must ensure its contents accurately list loan amounts, interest rates, proper legal descriptions, repayment contract and other factors that affect the loan agreement. The draft mortgage document is a last check on the mortgage required by some lenders.

Draws
The stages in which the borrower receives a partial loan disbursement in a builder’s loan.

Duress
The threat of force, false imprisonment or threats upon individuals to result in action or lack of action contrary to their wishes or interests. If duress is used to enter a contract, courts may find the agreement void and null.

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

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

Economic Obsolescence
A loss of value over time resulting from external determinants such as heavy traffic, crime and unfavourable non-residential land uses.

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

Effective Interest Rate (for Mortgages)
The actual rate that the borrower must pay on a loan after the effects of compounding are considered. It is also known as the true rate. It differs from the nominal interest rate.

Egress
Going out (access to exit).

Electronic Funds Transfer (EFT)
The automatic transfer of funds from one account to another. Mortgage repayments can be made electronically directly to the lender.

emili by CMHC
The automated mortgage insurance evaluation system of the Canada Mortgage and Housing Corporation (CMHC).

Empirica Score
The name given to the credit score published by TransUnion. See also Beacon Score.

Encroachment
An improvement such as a wall, fence, or building 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 a person who is not the owner.

Equity (for Mortgages)
The difference between lending value (the purchase price or market value) and indebtedness.

Equity
A court system that applied the principle of equity to decisions, emphasizing fairness and de-emphasizing technicalities.

Equity Financing (Lending)
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 a borrower to repay a loan that was in default and retain possession of the property.

Error and Omissions Insurance
Insurance for professionals with respect to claims regarding mistakes and absences that occur when acting on behalf of a consumer.

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

Estates
An abstract legal right. Estates are interests and rights of ownership.

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

Excel by Genworth Financial Canada
The automated mortgage insurance evaluation system of Genworth Financial Canada.

Existing Mortgage
A mortgage loan that is already in-place when the property is being sold. The buyer may have the option of taking over assuming the mortgage or taking out a new one, depending on whether or not the mortgage is assumable.

Expandability
This is a feature available in some mortgages. It allows the borrower to increase or expand the principal on a first mortgage at the lender’s agreed upon interest rate.

Expert Software
This software, offered by Filogix, dominates the electronic mortgage delivery system market in Canada.

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

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.

Extent of Title
The quantitative factors that determine and affect ownership of land. They include boundaries, improvements, area of land, etc. See chain of title.

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

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Face Rate
The contractual interest rate stated in a mortgage document or other financial instrument. Also known as the nominal rate.

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

Fair Market Value
Fair market value, also known as market value, is the highest price reasonably expected for an interest in land when sold by a willing seller to a willing buyer after adequate time and exposure to the market.

Fee
The right of ownership of a property. In real estate, this is an inheritable estate in land.

Fee Simple
The highest estate or absolute right in real property. In common practice, fee simple is thought of as absolute ownership.

Fellow of the Real Estate Institute (Appraisal Specialist)
Awarded by the Real Estate Institute, the FRI(A) signifies quality and experience in appraisals and valuation of properties up to triplexes.

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 them. The relationship between a trustee and a beneficiary is an example of a fiduciary relationship. The implication in this type of relationship is that the fiduciary must act solely for the other person’s benefit, because of the trust placed in him or her.

Final Order of Foreclosure
A judgement which extinguishes the borrower’s (defendant’s) equity of redemption and beneficial title goes over to the lender.

Financial Institutions Commission of British Columbia (FICOM)
An agency of the British Columbia provincial government that administers the Real Estate and Mortgage Brokers Department, the Credit Unions and Trust Companies Department, the Insurance Department and the Pensions Department.

Financial Services Commission of Ontario (FSCO)
FSCO regulates insurance, pensions, credit unions, caisses populaires, cooperatives, mortgage brokers and loan & trust companies in Ontario.

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 Year
A business’ operating year. Some companies do not use the calendar year for their bookkeeping but run over a 12 month cycle, beginning and ending at another point in the year.

Five Cs of Credit
The ability and willingness of a borrower to pay is determined by five criteria:

Capacity - The ability of a borrower to repay a loan
Capital - The amount of money the borrower has invested into the property
Character - The overall feeling regarding a borrower’s credibility to repay a loan; the borrower’s length of employment is a key measurement
Collateral - Guaranteed support for a loan, generally consisting of funds or real estate, that ensures added security to the lender. Collateral can also take the form of guarantees provided by third parties, i.e. guarantors.
Credit - The repayment history of the borrower

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.

Fixed Rate Mortgage
In a fixed rate mortgage the interest is determined and is set for the term of the mortgage. Fixed rate mortgages are most desirable when current interest rates are low.

Fixtures
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 lender when there is default under any of the covenants in the mortgage. It deprives the borrowers of their equitable right to redeem.

Foreigners
In law, a foreigner refers to an individual who cannot read or speak the language of the contract. Foreigners are bound to agreements if they understand the nature of them. However, if an agreement is fraudulently interpreted by another party, then the contract is void.

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

Frustration
When unexpected events occur that render the contract impossible to be performed, the frustrated party is allowed to rescind the contract without penalty.

Full Review
The most comprehensive type of appraisal, it includes a review of both the internal and external features of the property as well as an assessment of neighbourhood factors.

Fully Amortized Mortgages
A mortgage that requires the constant regular payments, including both principal and interest components, for the life of the mortgage.

Fully Open Mortgage
An open mortgage that allows principal payments to be made in any amount, at any time, in addition to regular mortgage payment, without penalty.

Functional Obsolescence (in Real Estate)
A loss of value over time due to some characteristic(s) of a building becoming less valuable as styles change. A building with no central air conditioning will suffer from functional obsolescence as air conditioning becomes “the norm” for new buildings.

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Gale Date (for Mortgages)
The date on which interest is charged or compounded on the loan.

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

Genuine Consent
For genuine consent both parties must have a clear understanding of the details of the contract in question. Lack of genuine consent can void an agreement.

Good Title
A proof of ownership that is free of any legal holds or claims.

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 Debt Service Ratio (GDS)
The percentage of the borrower’s income that is needed to make all payments for costs associated with housing. There is a maximum amount associated with this ratio to ensure that borrowers can afford to carry the debt.

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

Gross Leasable Area
The total floor area designed for tenant occupancy and exclusive use and that area on which tenants pay rent. This does not include common areas.

Gross Profit (Income Statement)
Total revenue of a business minus the cost of goods it sold.

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

Group Insurance
A type of insurance plan in which premiums are set for a large group as a whole, as opposed to individual premiums set on personal characteristics. All mortgage creditor insurance plans are group insurance plans.

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

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High Ratio Mortgage
A mortgage is considered high ratio when the loan-to-value is 75% or more. This occurs when the borrower’s down payment is 25% or less of the property value.

Highest and Best Use
This is the most probable, legally allowable, financially feasible use for the property in question. The appraiser includes an opinion on this as part of the appraisal report.

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 Equity Financing
A type of mortgage refinancing in which the mortgage amount is increased to take advantage of the increased equity in a home.

Household Formation
Looks at how individuals group together to create a household. A household can be made up of an individual, a couple, or either one of these with children. Generally mirrors growth, aging, and divorce/separation patterns of the general population.

Hypothec
The appropriate civil law term that corresponds to the common law concept of ‘mortgage’.

ICI Properties
Investment, commercial, and industrial properties.

Illegal Contract
A contract that requires criminal acts and is thus void. The parties involved have no standing in court.

Illiterates
In law, an illiterate refers to an individual who cannot read or speak English. Illiterate individuals are bound to an agreement if they understand its nature. However, if it is fraudulently interpreted by another party, then the contract is void. See foreigner.

Immigration
To enter and settle in a country or area in which one is not native.

Immovable Property
The term used for real property (as opposed to personal property) in civil law.

Incapacity
Refers to the inability of people to make or engage in certain binding dispositions of their rights, such as entering into contracts.

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

Income Statement
Summarizes the findings of calculations between a company’s revenues and expenses. The income statement can be reported annually, quarterly or monthly. The income statement is generally broken down as follows:

Revenue or Sales - Earnings from day-to-day operations of the business
Cost of Goods Sold -The costs of production and manufacturing
Gross Profit - Total revenue of a business minus the cost of goods it sold
Operating Expenses -The total costs of the day-to-day operations
Net Income from Operations - The amount that is remaining when you subtract all costs and taxes from total sales

Incorporated Companies
A form of business ownership in which the business is set up as a separate legal entity under the laws of the jurisdiction it operates in (provincial and/or federal). When an incorporated company is a party to a contract it is important to determine if the company exists, and if it has the capacity to become a party to the contract.

Indefeasible
That which cannot be forfeited or done away with.

Independent Mortgage Brokers Association of Ontario (IMBA)
A volunteer-based organization serving independent mortgage professionals in Ontario.

Industrial Property
Property that contains units that are designed for manufacturing, production and warehousing.

Infant
A person younger than the age of majority (varies among provinces and territories).

Inflation
A general increase in the price level of goods and services.

Ingress
Going in; right of entrance.

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

Insanity
Categorized as a form of Incapacity which means that such individuals cannot engage in contractual agreements. If insanity occurs after entering a binding agreement, contracts can be cancelled or, if sanity is regained, a reasonable time is allowed to rescind a contract.

Instrument
A formal written legal document.

Insurabl