Mortgage and Buying Property



AACI Accredited Appraiser Canadian Institute

ACAIQ Association des courtiers et agents immobiliers du Québec

AMP Accredited Mortgage Professional

CIMBL Canadian Institute of Mortgage Brokers and Lenders

CMBs Canada Mortgage Bonds

CMHC Canada Mortgage and Housing Corporation

CRA Canadian Residential Appraiser

EFT Electronic Funds Transfer

LTV Loan-to-Value Ration

MBS Mortgage-Backed Securities

NHA National Housing Act

REAVS Real Estate Automated Valuation System

TDS Total Debt Service Ratio



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.

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.

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.

Amending Agreement: an agreement between the lender and borrower by the lender in which the terms of the registered mortgage are changed.

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.

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

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.

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.

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

Assignee: one who takes the rights or title or 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.


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.

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.

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.

Broker: one who acts as a 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 protections 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.


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 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.

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.

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.

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.

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 Extend of title.

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

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.

Closed 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 from 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.

Comparable Properties: properties that contain similar characteristics to the subject property in an appraisal. Appraisals typically require three comparable properties. Comparables should have been 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.

Compound Interest: interest charged not only on the principal sum but also on interest amounts charged, but no paid, in preceding periods that accumulate as new principal.

Condition: a clause or statement in the contract, which must be met to fulfill 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.

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.

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-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.

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.

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 owned.


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 stat that would have existed if the contract had been performed.

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.

Depreciation: the loss of value of an asset over time.

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.

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

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.

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.


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.

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

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

Equity of Redemption: the right of a borrower to repay a loan that was in default and retain possession of the property.

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.

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


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

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.

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.

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 payments, without penalty.


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

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

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 borrow fails to pay or to perform as contracted.


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.

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.


Income Statement: summarizes the findings of calculations between a company’s revenues and expenses. The income statement can be reported annually, quarterly or monthly.

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.

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

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

Interest: an amount, expressed as a percentage, which a borrower agrees to pay on borrowed money, at a certain frequency as per an agreement with the lender.

Interest Accruing Loan: in this type of loan no payments on interest or the principal are paid until the end of the term. Only when the mortgage contract has expired are the payments due.

Interest Adjustment: the process of calculating compound interest payable on the amount borrowed between the day the loan is disbursed and the day the amortization period starts.

Interest Adjustment Date: the date from which interest is calculated at the rate and compounded at the frequency set out in the mortgage contract. It is normally the first day of the month following the closing of the mortgage transaction.

Interest Only Loan: a loan in which the borrower only pays regularly scheduled payments on the interest to the lender and the principal remains the same during the life of the loan. The principal is repaid in full at the end of the loan’s term.

Interest Plus Specified Principal Loan: also known as a straight-line principal reduction loan. In this type of loan an equal amount of principal is repaid at every interest compounding period in addition to the interest that must be paid for that period.

Interest Rate: interest rate is the percentage charged on outstanding loan balances.

Investment Property: property which is rented out to individuals who do not own the property, and pay rent to the owner of that property. The opposite of an owner occupied property.


Joint Tenancy: an ownership of property by two or more people, 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.


Land Titles System: this is a system of land registration under which the registrar, or master of titles, passes on the validity of the mortgage instruments, 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.

Lawyer’s Report (or Opinion) on Title: the Lawyer’s Report outlines the mortgage details, including the results of the title search, tax details, fire insurance and any other related insurance coverage details, verification that title insurance has been obtained (if applicable), and any other relevant facts (i.e. easements, restrictions, liens).

Lease: a contract between landlord (lessor) and tenants (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).

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

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

Liabilities: a business’ or a borrower’s debts and legal obligations.

Lien: a claim on real or personal property for the payment of some undischarged debt or duty.

Limited-Restricted Appraisal: a type of appraisal that provides only an exterior inspection for transactions that are somewhat riskier than standard, e.g., in a new or unknown market, or in mixed use neighbourhoods but not high risk. Also known as a drive-by appraisal.

Listing Agreement: the listing agreement is a contract between a seller and a real estate agent or broker. It sets out the conditions of the listing. A listing agreement generally includes, but is not limited to, the following: the length of the listing period, the desired sales price and the amount of the commission.

Loan Qualification: also known as qualifying the borrower. Loan qualification is the process of analyzing the buyer’s eligibility for financing.

Loan-to-Value Ration (LTV): the amount of the mortgage loan compared to the value of the property. This ratio is calculated by the lender prior to providing the loan. The results of this calculation help to determine whether or not the applicant will qualify for a loan and whether the application, if approved, will be for a conventional loan or a high ratio loan.

Lump Sum Payment Option: a clause that may be included in an open mortgage allowing the borrower to prepay a portion of the principal if desired and in accordance with the specific terms of the contract.


Maturity: the end of the mortgage’s term.

Maturity Date: the final day of the term of the mortgage, on which the balance of the mortgage owing becomes due.

Maximum Loan Amount: the maximum dollar that a lender is wiling to fund. It is expressed as a percentage of the value of the property to be purchased when using the loan to value ratio.

Misrepresentation: a statement of false facts, generally occurring during negotiations prior to contract creation. Misrepresentation typically induces the other party to enter the agreement.

Mortgage: a legal method by which a borrower can pledge property to a lender as security for a debt. In Quebec, this is referred to as a hypothec.

Mortgage Agent: an individual authorized to deal in mortgages on behalf of a mortgage broker.

Mortgage Averaging: a method of determining a weighted mortgage rate. Mortgage averaging is used when calculating an “average” rate for a first and second mortgage, each of which has a different mortgage rate.

Mortgage-Backed Securities (MBS): an 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 represent an obligation of the Government of Canada.

Mortgage Broker: an individual authorized to deal in mortgage and lend money using real estate as a security.

Mortgage Brokers Act: a piece of legislation that regulates the activities of mortgage brokers across Canada. In Ontario, for example, The Mortgage Brokers Act regulates the activities of mortgage brokers in that province.

Mortgage Consultant: see mortgage agent.

Mortgage Creditor Insurance: this type of insurance protects the borrower, by relieving the borrower of the need to make mortgage payments should unforeseen circumstances make it impossible for them to do so (e.g. serious illness or death).

Mortgage Default Insurance: a type of insurance which protects the mortgage lender in case the borrower defaults on the mortgage payments.

Mortgage Fraud: any material misstatement, misrepresentation or omission relied upon by a lender or insurer to underwrite, approve, fund or insure a mortgage loan.

Mortgage Refinancing: the replacement of current mortgage financing with new financing, usually to take advantage of different interest rate or financial conditions or the existing equity in the property.

Mortgage Representative: employees of a financial institution who originate mortgages. Unlike originators operating outside of lending institutions and are regulated provincially, institutional originators, if working for federally incorporated lenders, are governed under the Office of the Superintendent of Financial Institutions (OSFI).

Mortgage Servicing: the process of managing the administrative duties resulting from the mortgage contract.

Mortgage Specialist: see mortgage agent.

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 the borrower can either repay the balance of the principal owing or re-negotiate the mortgage at current rates.

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

Mortgagee: the lender or creditor.

Mortgagor: the borrower or debtor.


National Housing Act (NHA): a federal act, administered by CMHC, which seeks to assist the private market in producing affordable housing to meet the needs of most Canadians.

No Cost Switching of Payment Option: this option allows the borrower to change the payment schedule (to either monthly/semi-monthly/bi-weekly/weekly) in an open mortgage at no charge.

No-Doc: refers to ‘no document necessary’ when confirming past income earnings.

Nominal Interest Rate: also known as the stated rate. This is the interest rate used to calculate interest payments. It differs from the effective interest rate.

Notes to Financial Statements: the part of a financial statement that includes an auditor’s or accountant’s opinion on the statements and other relevant notes pertaining to the company’s operations and the specific methods of accounting used.


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, the offer may be conditional on the buyer arranging mortgage financing or selling a current home.

Offeree: the individual or group who receives an offer to enter into a contract.

Offeror: the individual or group who presents something to another for acceptance or rejection.

Open Mortgage: an open mortgage allows a borrower to repay any amount of the principal at any time without notice or penalty. Mortgages may be partially open, having clauses that allow partial pre-payment at specified times, or in specified ways. For example,

  • Double Up Option – The opportunity to double the schedules principal and interest payments.
  • Lump Sum Payment Options – The choice to prepay a portion of the principal.
  • No Cost Switching of Payment Option – This option allows the borrower to change the payment schedule (monthly/semi-monthly/bi-weekly/weekly).
  • Skip Payment Option – This alternative grants the borrower the ability to skip a monthly payment without the mortgage going into default.

Owner Occupied: the owner of the land also resides in that property. The opposite of an investment property.


Partial Discharge: a release from the mortgage of a definite portion of the mortgaged lands. A partial discharge may be given after the borrower has prepaid a specific portion of the mortgage debt.

Partially Amortized Mortgage: a mortgage that protects both borrowers and lenders from the risk of unexpected interest rate fluctuations. The loan matures on a short term basis, at which time the full amount of the outstanding amount must be either repaid or refinanced at current interest rates.

Partnership: a business co-owned by two or more people. This form of ownership is less common than a sole proprietorship or a corporation. Like a sole proprietorship, a partnership does not exist as a separate legal entity. Each partner is taxed on his or her share of any profits.

Portable Mortgage: a mortgage with an option that allows a buyer to transfer a current mortgage to a new property (typically subject to credit approval and a property appraisal).

Power of Attorney: a written instrument, duly signed and executed by an individual, that authorizes someone to act on his or her behalf, to the extent indicated in the instrument.

Power of Sale: A clause generally inserted in mortgages giving the lender the right and power, on default by the borrower, to sell the mortgaged property by public auction, private contract or tender.

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

Premium: the amount, often stated as a percentage, paid in addition to the face value of a mortgage when a mortgage is being purchased.

Prepayment Clause: a clause inserted in a mortgage that gives the borrower 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 lender may require from a borrower to repay all or part of any outstanding principal in advance.

Prime Rate: the interest rate at which financial institutions lend to their best customers.

Principal: the amount upon which interest is paid.

Principal Risk: a risk to the lender associated with interest only loans. This risk is a result of market fluctuations. If the market value of a property falls, it might be less than the principal amount of the loan due at the end of the mortgage term. The lender might no be able the entire principal.

Private Mortgages: mortgages provided by private corporations and individuals.

Promisee: the person who can enforce the promise in a contract is called the promisee.

Promisor: the person who makes the promise in a contract is called the promisor.


Quantum Meruit: latin meaning “as much as he deserved”. Quantum meruit determines the actual value of the services provided when either no contract exists or when doubt is cast as to the amount due for the work performed, but under situations when payment could be expected.


Real Estate Automated Valuation System (REAVS): a system that provides an estimation of the value of residential property based on sales data and the nature of the property in relation to its neighbourhood.

Real Property: often called “property”, “real estate”, or “land”. Real property is defined as the interests, benefits, and rights inherent in the ownership of physical real estate. It does not include personal property. In civil law, real property is referred to as immovable property.

Reassessment: the process of creating a new base for property taxation by updating assessments to reflect more current values.

Receipt: a document acknowledging the completion of the repayment agreement under the terms of the contract and the release of the lender’s interest in the property.

Receiver (Mortgages): an appointee of a court, requested by a lender when the borrower is in default, to receive and account for the rents and profits from mortgaged premises.

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

Release of Covenant: an agreement by a lender to terminate the personal obligation of a borrower,

  1. usually upon sale of a property to a new purchaser who is acceptable to the lender, and who has signed as assumption agreement or other appropriate legal documents
  2. releasing a guarantor whose covenant is no longer required.

Renewal Agreement: an agreement through which the lender may agree to extend the mortgage loan, possibly on revised terms as to principal repayments and interest rate.

Rent: periodic payments made by the lessee or tenant to the lessor or landlord in exchange for the use of their property.

Replacement Cost (Real Estate): the cost of replacing a subject property with one having exactly the same utility.

Rescission: the act of rescinding; the cancellation of a contract and the return of the parties to the state in which they would have been if the contract had not been made.

Reverse Mortgage: this type of mortgage allows older consumers to convert their home equity into monthly cash payment(s), generally for living expenses. A homeowner’s equity is gradually drawn down by a series of monthly payments from the lender to the homeowner – the borrower. At the end of the loan period, or upon the death of the borrower, the loan balance is due, which is usually settled by the heirs who sell the property to meet the outstanding obligation.

Reversion: a right to future possession retained by an owner at the time of the transfer of his or her interest in real property.


Sales Date Report: a quick, no-inspection based appraisal that estimates a value for good quality real estate in low risk neighbourhoods. It provides important information but lacks in-depth details that other appraisals provide. The value estimate is based on MLS sales and listing data.

Schedule I, II and III Banks: schedule I Banks, as defined by the Bank Act, have shares that are widely held. Schedule II banks are more closely held. Schedule III banks are foreign bank branches of foreign institutions.

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

Secondary Financing: financing real estate with a loan, or loans, subordinate to a first mortgage.

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

Simple Interest: the cost of borrowing money, calculated by applying the interest rate to the original principal amount only. In contrast to compound interest, interest is not charged on interest.

Skip Payment Option: this is an example of a mortgage clause that may be added to an open mortgage. If this clause is part of the mortgage agreement, the borrower has the ability to skip a monthly payment without the mortgage going into default.

Sole Proprietorship: a business owned by a single person and not registered as a corporation. The sole proprietorship has unlimited liability.

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

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

Step Mortgage: a mortgage product that attaches a mortgage loan to a line of credit in one package.

Subprime Transactions: classification of lending based on the payment risk that the lender faces. Subprime deals (also known as B and C deals) face a higher risk that the amount of money lent will not be repaid, compared to prime deals (Also known as A deals).

Subscription Policy (Insurance): a single insurance policy that states that two or more insurance companies are sharing the risk.

Survey: a survey sets out the legal description of a mortgaged property, allowing confirmation that any building sits within the described boundaries of the land. Land boundaries, areas and improvements are determined and plotted on the survey. Surveys are also used for identifying easements.

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. Such certificates are not longer available in Ontario.


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.

Tenants in Common: an ownership of property by two or more people, each of whom has an interest in the property. Tenants in common may have different shares in the property. Unlike the case in joint tenancy, a tenancy in common does not end because one party chooses to sell his or her interest. Instead, the purchaser simply becomes the new tenant in common.

Term: in a mortgage, term is the actual length of time for which the money is loaned. The term is usually shorter than the amortization period. At the end of the term the outstanding debt must either be refinanced at current market rates or paid off in full.

Term Mortgage: a non-amortizing mortgage under which the principal is paid in its entirety at the maturity date. A term mortgage is sometimes called a straight loan.

Third Mortgage: a mortgage placed on real property which is already encumbered with a first and second mortgage. Determination of first, second, and third or subsequent mortgage is by priority of registration (time and date).

Title: the legal evidence that shows the rightful owner of land.

Title Fraud: a range of fraudulent activity regarding the ownership of property. One form of title fraud involves taking out a mortgage against a home that the fraudster does not own. The fraudster assumes the homeowner’s name and credit history, but absconds with the loan proceeds.

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 insured defects to title of a property, for which the insured has an interest as purchaser, lender or otherwise.

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

Total Debt Service Ratio (TDS): one of the ratios used to determine whether or not a borrower is able to carry the debt load for a mortgage. The ratio is calculated as the percentage of annual income required to cover housing costs (GDS) plus any other loans that an individual has, such as those resulting in credit card and car payments. There is a maximum amount associated with this ratio to ensure that borrowers can afford to carry the debt.

Transfer of Charge: assignment of a mortgage.

Trust Company: a commercial bank or other corporation that manages, holds, or invests assets for the benefit of others.

Trustee: an individual who is given legal responsibility to hold property in the best interest of or “for the benefit of” another.


Unities: in common law, unities are the four conditions required to create and maintain joint tenancy. They are time, title, interest and possession.

  • Title – All joint tenants must obtain their interest from the same document.
  • Time – All joint tenants must receive their interest at the same time.
  • Possession – Each interest is an undivided interest in the whole of the property.
  • Interest – All joint tenants must have the same interest (extent, nature, duration) in the land.


Valuation Date: the date used for establishing the assessed value for all properties in a jurisdiction; formerly called a “base year”.

Variable Rate Mortgage: this type of mortgage, also referred to as adjustable rate mortgage, is the opposite of a fixed rate mortgage. The interest rate on this loan may change during the term of the mortgage reflecting changes in the current market rates.

Vendor Take-Back Mortgage (or Seller Take-Back Mortgage): a mortgage in which the vendor uses his or her own equity to provide some or all of the mortgage financing in order to sell the property.