Advocacy Agency:
Serving both landlords and tenants, these agencies represent the concerns of renters and property owners to governments and serve as places to go for help or mediators in the case of disputes.

Agreement of Purchase and Sale:
The legal contract a purchaser and a seller enter into. We recommend that you have your offer prepared by a professional realtor that has the knowledge and experience to satisfactorily protect you with the most suitable clauses and conditions.

Amenities:
Extra conveniences such as stores, malls, transit, parking, restaurants, theaters, service outlets, needed from day to day as well as common areas exclusive to owners.

Amortization:
Number of fixed payments or years it takes to repay the entire mortgage loan.

Amortization Period:
The number of years it takes to repay the entire amount of the financing based on a set of fixed payments.

Appraisal:
The process of determining the value of a property.

Appreciation:
A rise in the value of a currency relative to another currency.

Arrears:
As a noun, an unpaid, overdue debt or an unfulfilled obligation. As a verb, the state of being behind in fulfilling obligations.

Arbitrator:
A person selected to settle the issue between parties engaged in a dispute.

Assets:
An item of value that you own. Often used in determining net worth or in securing financing.

Assign:
To transfer the tenant responsible for a rental unit, which will occur when one tenant leaves before a lease expires and the lease is assumed by the incoming tenant. Also see sublet.

Assumption Agreement:
A legal document signed by a home buyer that requires the buyer to assume responsibility for the obligations of a former owner’s mortgage. If someone assumes your mortgage, make sure that you get a release from the mortgage company to ensure that you are no longer liable for the debt.

Bankruptcy:
A financial failure of an individual or business, when current earnings and assets are no longer sufficient to meet financial obligations.

Beacon score:
A credit rating, also referred to as a credit score, used by banks and other lenders, indicating a person’s credit worthiness (poor, fair, good, excellent, etc.) in comparison to others.

Blended Payments:
Equal payments consisting of both an interest and a principal component. Typically, while the payment amount does not change, the principal portion increases, while the interest portion decreases.

Breach:
A violation of a law, contract, or obligation.

Canadian Bank Rate:
The minimum rate at which the Bank of Canada lends overnight funds to the direct-clearing members of the Canadian Payments Association including chartered banks.

Canada Mortgage and Housing Corporation (CMHC):
CMHC is a federal Crown corporation that administers the National Housing Act (NHA). Among other services, they also insure mortgages for lenders that are greater than 80% of the purchase price or value of the home. The cost of that insurance is paid for by the borrower and is generally added to the mortgage amount. These mortgages are often referred to as “Hi-Ratio” mortgages.

Closed Mortgage:
A mortgage that cannot be prepaid, renegotiated or refinanced.

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

Conventional Mortgage:
A mortgage that is up to 80% of the purchase price or the value of the property. A mortgage exceeding 80% is referred to as a “High-Ratio” mortgage and the lender will require insurance for that mortgage.

Collateral:
An asset, such as term deposit, Canada Savings Bond, or automobile, that you offer as security for a loan.

Credit Bureau:
An agency that maintains individual credit files on consumers. There are three credit bureaus in Canada.

Credit check:
A process where a person has his or her credit history reviewed before credit is extended.

Credit file:
A detailed history of money you have borrowed, credit you have used and whether you make bill and debt repayments on time. A credit file may list employment history as well as present and residences.

Credit Rating / Credit Score:
A numerical score calculated using the information in your credit file. The credit rating is often used to determine a borrower’s credit worthiness and is sometimes referred to as a credit score.

Demand Loan:
A loan where the balance must be repaid upon request.

Deposit:
A sum of money deposited in trust by the purchaser on making an offer to purchase. When the offer is accepted by the vendor (seller), the deposit is held in trust by the listing broker, lawyer, or notary until the closing of the sale, at which point it is given to the vendor. If a house does not close because of the purchaser’s failure to comply with the terms set out in the offer, the purchaser forgoes the deposit, and it is given to the vendor as compensation for the breaking of the contract (the offer).

Damage or Security Deposit:
For a rental property – depending on your area – a deposit may be referred to as a damage, security, or rent deposit. In any case, it is money given to the landlord at the start of the rental agreement and returned to the tenant at the end of the tenancy provided all the conditions of the lease have been met. A deposit is not allowed to be collected in Quebec.

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

Default:
Non-payment of instalments due under the terms of a mortgage.

Deflation:
A decline in the general price level.

Deposit Rate:
An interest rate paid for keeping money in a deposit account.

Depreciation:
A decline in the value of a currency relative to another currency.

Discharge:
Removal of all mortgages and financial encumbrances on a property.

Equity:
The difference between the market value of the property and any outstanding mortgages registered against the property. This difference belongs to the owner of that property.

Eviction:
To put out or force out a tenant using the proper legal process. This process is different for each province and territory (see the Provincial and Territorial Fact sheets for information related to a specific province or territory).

Equity Take Out:
When the owner takes out a mortgage on an existing property to use for other purposes such as investments or for renovations.

FICO® score:
A specific credit rating score provided directly by Equifax to individuals. The rating provided is a three digit number indicating a person’s credit worthiness (poor, fair, good, excellent, etc.) in comparison to others.

First Mortgage:
A debt registered against a property that has first call on that property.

Fixed-Rate Mortgage:
A mortgage for which the interest is set for the term of the mortgage.

Foreclosure:
A legal procedure whereby the lender obtains ownership of the property following default by the borrower.

Freehold:
In English Law, ownership of a substantial interest in land (or land and a building) for an indefinite period of time.

Gross Debt Service (GDS.) Ratio:
It is one of the mathematical calculations used by lenders to determine a borrower’s capacity to repay a mortgage. It takes into account the mortgage payments, property taxes, approximate heating costs, and 50% of any maintenance fees, and this sum is then divided by the gross income of the applicants. Ratios up to 32 % are acceptable.

Guarantor:
A person with an established credit rating and sufficient earnings who guarantees to repay the loan for the borrower if the borrower does not.

Hi-Ratio Mortgage:
A mortgage that exceeds 80% of the purchase price or appraised value of the property. This type of mortgage must be insured. To avoid the cost of the insurance, a 1’st mortgage up to 80% is arranged and a 2’nd mortgage for the balance (up to 90% of the purchase price).

Home Equity Line of Credit:
A personal line of credit secured against the borrower’s property. Generally, up to 80% of the purchase price or appraised value of the property is allowed to be borrowed with this product.

Inflation:
A sustained rate of increase in prices.

Interest Adjustment Date (IAD):
The date on which the mortgage term will begin. This date is usually the first day of the month following the closing. The interest cost for those days from the closing date to the first of the month are usually paid at closing. That is why it is always better to close your deal towards the end of the month.

Interest-Only Mortgage:
A mortgage on which only the monthly interest cost is paid each month. The full principal remains outstanding. The payment is lower than an amortized mortgage since once is not paying any principal.

Landlord:
A person who rents or leases a premises he/she owns to another party. Landlords of residential premises typically own an apartment building, condominium, townhouse or house.

Lease:
As a noun, a contract or agreement between a landlord and a tenant. As a verb, to rent a premises (apartment, house, etc.) for a specific period of time.

Legally binding:
A legal agreement enforceable by an authority.

Liable:
Legally obligated or responsible.

Month-to-month:
Refers to a periodic tenancy that is not bound to a specific lease period, such as a year, but renews each month. Notice periods to end this type of tenancy vary amongst the provinces and territories.

Mortgage:
A mortgage is a loan that uses a piece of real estate as a security. Once that loan is paid-off, the lender provides a discharge for that mortgage.

Mortgagee:
The financial institution or person (lender) who is lending the money using a mortgage.

Mortgage Insurance Premium:
A premium added to the mortgage and paid by the borrower over the life of the mortgage. The mortgage insurance insures the lender against loss in case of default by the borrower.

Mortgage Rate:
The rate of interest charged by a bank on funds that are used for the purchase of real estate.

Mortgage Life Insurance:
A form of reducing term insurance recommended for the borrower. In the event of the death of an owner, the insurance pays out the balance of the mortgage. The intent is to protect survivors from losing their home.

Mortgagor:
The person who borrows the money using a mortgage.

Multiple Listing Service (MLS):
The Multiple Listing Service keeps an inventory of homes for sale.

Normal wear and tear:
Damage to an apartment or house resulting from normal use by the tenants. The landlord is responsible for normal wear and tear repairs.

NSF cheque:
Often called a “bounced cheque,” when the bank does not transfer funds from the cheque issuer to the recipient because there are insufficient funds to cover the amount of the cheque. NSF stands for “not sufficient funds”.

Open Mortgage:
A mortgage that can be repaid at any time during the term without any penalty. For this convenience, the interest rate is between 0.75-1.00% higher than a closed mortgage. A good option if you are planning to sell your property or pay-off the mortgage entirely.

P.I. (Principal and Interest):
Principal, and interest due on a mortgage.

P.I.T. (Principal, Interest and Taxes):
Principal, interest, and property tax due on a mortgage. If your down payment is greater than 25% of the purchase price or appraised value, the lender will allow you to make your own property tax payments.

Penalty:
A sum of money paid to a lender for the privilege of prepaying a mortgage in part or in full.

Post-dated cheque:
A cheque made out with the date after the current date. The cheque cannot be cashed until on or after the date on the cheque. Many landlords and tenants find this to be a convenient way to collect and pay rent, provided they adhere to provincial requirements regarding the use of post-dated cheques.

Portable Mortgage:
An existing mortgage that can be transferred to a new property. One would want to port their mortgage in order to avoid any penalties, or if the interest rate is much lower than the current rates.

Premises:
Land and the buildings on it, or a building or part of a building. In the Guide this term is often used as a broad term covering the various types of rental premises, from farms and houses to single condominium and apartment units.

Prepayment Option:
The right to prepay specified amounts of the principal balance. Penalty interest may be incurred on prepayment options.

Prepayment Penalty:
A fee charged a borrower by the lender when the borrower prepays all or part of a mortgage over and above the amount agreed upon. Although there is no law as to how a lender can charge you the penalty, a usual charge is the greater of the Interest Rate Differential (IRD) or 3 months interest.

Prime (or Prime Rate):
The Prime Rate is the interest rate charged by banks to their most creditworthy customers (i.e. the most prominent or stable). The rate is usually consistent amongst the major banks.

Principal:
The original amount of a loan, before interest.

Property:
Can refer to a section of land, or to designate ownership.

Rate:
The return the lender receives for loaning you the money for the mortgage.

Rate Commitment:
The number of days the lender will guarantee the mortgage rate on a mortgage approval. This can vary from lender to lender anywhere from 30 to 120 days.

Renewal:
When the mortgage term has concluded, your mortgage is up for renewal. It is open at this time for prepayment in part or in full, then renew with same lender or transfer to another lender at no cost (we can arrange).

Rent:
As a verb, to obtain occupancy or use of another’s property in return for regular payments. Or, as a noun, payment made by a tenant at specified intervals in return for the right to occupy or use the property of another.

Rental:
Refers to any rented property.

Rental agreement:
A legally binding agreement to rent a premises, either written or oral, between a landlord and tenant.

Rental application:
Filled out by a prospective tenant and often including an authorization to conduct a credit check, a landlord uses the application to determine the suitably of renting a unit to the individual. Questions on the rental application cannot violate the applicant’s rights.

Rental property:
referring to lands and/or buildings and/or units and/or rooms available for or being rented.

Roll-Over Mortgage:
A mortgage loan whose interest rate is established for a specific term. At the end of this term, the mortgage is said to “roll over” and the borrower and lender may agree to extend the loan. If satisfactory terms cannot be agreed upon, the lender is entitled to be repaid in full. In this case, the borrower may seek alternative financing.

Second Mortgage:
A debt registered against a property that is secured by a second charge on the property.

Sublet:
To rent property you lease to another person while still maintaining your responsibility to your landlord under your rental agreement. You are responsible for the actions of your sublessee. This is not the same as assigning, where you transfer the responsibility of your agreement to the new tenant. See assign.

Sublessee:
One who sublets from a current tenant.

Switch:
To transfer an existing mortgage from one financial institution to another. We can have this arranged for you at no cost to you.

Term:
The period of time the financing agreement covers. The terms available are: 6 month, 1,2,3,4,5,6,7,10 year terms, and the interest rates will be fixed for whatever term one chooses. When the term expires, you can either repay the balance of the principal or renegotiate the mortgage at current rates and conditions.

Total Debt Service (TDS) Ratio:
It is the other mathematical calculations used by lenders to determine a borrower’s capacity to repay a mortgage. It takes into account the mortgage payments, property taxes, approximate heating costs, and 50% of any maintenance fees, and any other monthly obligations (i.e. personal loans, car payments, lines of credit, credit card debts, other mortgages, etc.), and this sum is then divided by the gross income of the applicants. Ratios up to 40 % are acceptable.

Utilities:
Services such as heat, water and electricity that may or may not be included in the amount of rent paid. Cable and telephone services are usually not included.

Unit:
The premises rented under one tenancy agreement, usually an apartment within a complex with a group of units (apartment buildings, condominiums, townhouse complexes, etc.).

Underwriting Fees:
A sum of money collected by some lenders to offset expenses incurred in the lending transaction.

Variable-Rate Mortgage:
A mortgage for which the interest rate fluctuates based on changes in the prime rate. If interest rates go down, the monthly principal is reduced; if rates go up, the monthly payments might not cover the interest owing and payments may be increased for the next term. Most variable rate mortgages allow prepayment of any amount (with certain minimums) on any monthly payment date and usually without penalty.

Vendor Take Back (VTB) mortgage:
A mortgage provided by the vendor (seller) to the buyer.