Glossary

Amortization The period of time required to reduce a debt to zero when payments are made regularly.
Appraisal For mortgage lending purposes it is a process whereby the (lending) value of the property is determined. The lending value may or may not match the purchase price of the home. An appraisal done for mortgage lending purposes is carried out for the benefit of the lender or the mortgage insurer. For homeowners, an appraisal is performed by a trained professional to determine what a house is worth.
Bridge Financing/Construction Loan Interim financing to bridge the time gap between the closing date on the purchase of the new home and the closing date on the sale of the current home. It also refers to financing during the construction phase of home.
Building Permit
A certificate that must be obtained from the regional corporation by the property owner or contractor before a building can be erected or repaired.
Closing Date In most cases, the date on which the sale of a property becomes final and the new owner takes possession.
Collateral Mortgage A mortgage which secures a loan by way of a promissory note. The money, which is borrowed, can be used to buy a property or for another purpose such as home renovation, a vacation and so on.
Covenant A clause in a legal document which, in the case of a mortgage, gives the parties to the mortgage a right or an obligation. For example, a covenant can impose the obligation on a borrower to make mortgage payments in certain amounts on certain dates. A mortgage document actually consists of covenants agreed to by the borrower and the Lender.
Default Failure to abide by the terms of a mortgage loan agreement.
Easement A right acquired for access to or over and perhaps use of, another person’s land for a specific purpose such as a driveway or public utilities.
Encumbrance A registered claim for debt against a property, such as a mortgage.
Equity (owner) The difference between the price for which a home could be sold and the total debts registered against the home. Owner equity usually increases as the outstanding principal of the mortgage is reduced through regular payments. Market values and improvements to the property also affect equity.
Foreclosure A legal procedure whereby the lender obtains ownership of the property following default by the borrower.
Gross Debt Service Ratio (GDS) The percentage of the borrower’s gross income that will be used for monthly payments of principal and interest.
Holdback An amount of money withheld by the lender during the progress of construction of a house to ensure that construction is satisfactory at every stage. (See bridge financing).
Mortgage A mortgage is security for a loan on the property that you own. It provides for your personal guarantee to repay the loan as well as a pledge of the property as security for the loan.
Mortgage Indemnity Insurance This insurance is required by the mortgagee on a loan to protect the Lender against default. Thus, it is a form of protection that is used to safeguard the investment by the Lender.
Mortgage Indemnity Fund This is a fund established by The Home Mortgage Bank for the purpose of ensuring that all claims against borrower default by its Approved Lenders can be adequately settled. This fund will be reviewed by independent actuaries to ensure soundness and adequacy.
Mortgagee The lender who provides the mortgage loan.
Mortgagor The borrower who pledges his property as security for the loan.
Offer to Purchase A written contract setting out the terms under which the buyer agrees to buy. Upon acceptance by the seller, it forms a legally-binding contract subject to the terms and conditions stated in the document.
Option Agreement
A document stipulating that, in exchange for a deposit, a specified individual is to be given the first chance
of buying a property at or within a specified period of time. If the option holder does not buy at or within the specified period, he or she loses the deposit and the agreement is cancelled.
Principal The amount of money actually borrowed.
Term The length of time in which you have to pay (amortize) the mortgage.
Title (Freehold or Leasehold) A freehold title is evidence of ownership of land and buildings for an indefinite period of time. A leasehold title is evidence of a right to use and occupy land and buildings for a defined period time. In a leasehold arrangement, actual ownership of the land (and perhaps buildings) remains with the landlord.
Total Debt Service Ratio (TDS) The percentage of gross annual income required to cover all payments for housing and all other debts such as car payments.

Type of House
These definitions apply to the different types of housing on the market.

Single family detached
It is free-standing on its own lot and is occupied by one family.

Semi-detached
One of two single-family houses joined by a common wall.

Duplex
Two dwelling units, one above the other. Often the owner lives in one unit and rents the other.

Townhouse
One of several single-family homes joined by common walls.

High-rise-buildings
Multi-storey residential buildings containing apartments for rent or condominium units.

Note: A condominium is not a type of house. It is a type of ownership. Condominiums are most often in high-rise buildings or in row house arrangements.