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Adjustments: Property taxes and/or utility bills and condominium common expenses, if any, that have been prepaid by the vendor are pro-rated and paid by the purchaser to the vendor on closing.

Amortization: Number of years it takes to repay the entire amount of the mortgage.

Anniversary Period: Your anniversary period is the 12 month period that starts each year on your mortgage interest adjustment date or, if you have renewed or amended your mortgage, the effective date of your renewal or amendment.

Appraisal: A process undertaken by an independent appraiser hired by the bank to determine the value of the property and whether it meets lending criteria. This value may or may not match the purchase price of the home.

Blended Payments: Equal payments consisting of both a principal and an interest component, paid each month during the term of the mortgage. The principal portion increases each month while the interest portion decreases. The monthly payment does not change during the term.

Closed Mortgage: A mortgage which cannot be prepaid, renegotiated or refinanced prior to the expiry of the term, except with compensation or an early payout penalty.

Closing: A closing is an appointment on possession day at the builder's head office where the homeowner's keys are turned over and any funds owing are paid to the builder.

Closing Costs: Costs which are payable when the sale is closed. Standard closing costs include adjustments for prepayments of taxes, utilities and condominium common expenses, if any, made by the vendor; property land transfer taxes; property insurance; and legal/notarial fees.

Completion Certificate: A document signed by you acknowledging that the work has been completed to your satisfaction and releasing the contractor from any further responsibility, except normal warranty coverage.

Conditional Offer: An offer to purchase subject to specified conditions. These conditions could include the arranging of satisfactory mortgage financing or the selling of a present home. A time limit in which the specified conditions must be met should be stipulated in the offer to purchase.

Conventional Mortgage: A first mortgage - the principal amount of which cannot exceed 75% of the lesser of the appraised value of the property or the purchase price for the property.

Convertible Mortgage: A fixed-rate mortgage which offers the same security as a closed mortgage, but which can be converted to a longer, closed mortgage at any time without penalty.

Certificate of Title: The document prepared by a lawyer or notary containing a detailed description of the property which transfers ownership from the vendor to the purchaser. This document is then registered at Land Titles as evidence of ownership.

Default: Non-payment by the borrower of installments due under the loan agreement as they become due, or failure to fulfill any other term or condition of the agreement.

Deposit: A sum of money paid by the purchaser on making an offer.

Early Payout Penalty: A sum of money paid to compensate the lender for the prepayment of a closed mortgage in part or in full prior to maturity of the term.

Easement: The right acquired for access to or over another person's property for a specific purpose, such as for a driveway or public utilities.

Equity: The interest the owner holds in a property over and above all claims to the property. It is usually the difference between any outstanding mortgages and the market value of the property.

Fixed-rate Mortgage: The interest rate on a fixed-rate mortgage is set for a pre-determined term - usually between 6 months and 25 years - and cannot be renegotiated, except upon payment of breakage costs. Interest is calculated semi-annually, not in advance.

Foreclosure: A legal procedure whereby the lender obtains ownership of the property following default by the borrower by terminating all of the borrower's rights in the property covered by the mortgage.

Gross Debt Service Ratio: The percentage of the borrower's gross income that will be used for monthly payments of principal, interest, taxes, utilities and a percentage of condominium fees, if applicable.

Interest Adjustment Date: The date from when the lender will start collecting interest. Your regular payments will commence one payment period after this date. For example, if you have chosen to make monthly payments, your first payment will come due a month after the Interest Adjustment Date. When you sign your mortgage papers the bank will collect from you an "Interest Adjustment" which is a calculation of interest from the Completion/Possession Date to the Interest Adjustment Date.

Interest Rate: The rate of return the lender receives for permitting the borrower to use the mortgage money for a specified term. The interest rate is usually expressed as an annual percentage rate, calculated semi-annually, not in advance.

Lender: The individual, party or financial institution from whom money is borrowed. Also known as the mortgagee, in the case of a mortgage loan.

Lien Laws: Provincial laws which allow a contractor's unpaid suppliers and workers to make claims against your property for payments that are outstanding to them with respect to work or materials related to your project.

Line of Credit: A type of credit which offers an individual immediate access to any portion or all of a pre-determined amount of cash upon demand. A line of credit may be either unsecured or secured with personal assets such as bonds, term deposits or equity on a home. A secured line of credit results in lower risk to the financial institution and a lower rate of interest to the individual.

Mortgage Default Insurance: This insurance is available in all urban areas and is mandatory for borrowers with a down payment of less than 25%. The minimum permissible down payment is 5%.

Mortgage Life Insurance: Insurance under which the benefits are used to pay off the balance due on a mortgage upon the death of the insured borrower.

Mortgagee: A lender who advances a mortgage to a borrower, where repayment of the loan is secured by a charge on real property.

Mortgagor: A borrower who gives title to, or a charge on, real property to a mortgagee to secure repayment of a mortgage loan.

Offer to Purchase: A written contract setting forth the terms under which the buyer agrees to purchase a property. Upon acceptance by the seller, it forms a contract which determines the rights and obligations of the buyer and seller concerning the purchase and sale. It includes the legal and/or municipal description (this may consist of lot numbers as well as street address), purchase price, closing date, mortgage and terms of repayment, and lists specific items included or excluded from the sale.

Open Mortgage: A mortgage which can be prepaid at any time prior to maturity, without a payout penalty.

Permits: Formal authorization, usually from the municipality, that allows for building and renovations.

Plans: The technical drawings or blueprints of the project and should include the specifications.

Prepayment Option: The right to pay specified amounts of the principal balance prior to the maturity date of the mortgage. Breakage costs may be payable when a prepayment option is exercised under a closed mortgage.

Principal: The amount of the loan owed to the lender at any specified time, not including interest.

Property Insurance: Before closing date, the purchaser must have fire and property insurance arranged and in effect. Evidence of the insurance is required by the mortgage lender prior to advancing mortgage funds. For condominium owners, insurance for common property, managed property and the building exterior is placed by the Condominium Corporation. The homeowner only requires contents insurance and should contact an Insurance Agent to arrange for this prior to possession date.

Real Estate Agent: A licensed agent employed to negotiate the third party purchase and sale transaction between the buyer and the seller.

Real Property Report: A document prepared by a qualified surveyor specifying the exact size and location of the property and describing the type and size of the building(s), including additions, and the exact location of the building(s) on the property.

Servitude: See Easement.

Specifications: A detailed description of the scope of the work and the quality and quantity of materials to be used. The specifications should also clearly indicate how the work will be carried out and what the final appearance will be. The specifications should form part of the contract.

Subcontractor: A tradesperson hired to do specific work such as plumbing, wiring or electrical work. The subcontractor takes instructions from, is paid by, and is responsible to the contractor.

Term: The length of time during which the specific mortgage agreement is effective. When the term expires, the balance of the principal is either repaid in full or the mortgage is renegotiated at then-current market rates and conditions.

Total Debt Service Ratio: The percentage of the borrower's gross income that will be used for monthly payments of principal, interest, taxes, heating and other outstanding loans and debts.

Variable-rate Mortgage: Also know as a Floating Rate Mortgage. A mortgage in which payments are fixed for a period of one to two years although interest rates may fluctuate from month to month depending on market conditions. If interest rates go down, more of the payment goes towards reducing the principal; if rates go up, a larger portion of the monthly payment goes towards covering the interest. Most variable-rate mortgages allow prepayment of any amount (with certain minimums) on any monthly payment date and usually without breakage costs. RateCapper is a variable-rate mortgage with a built-in safety net. It's designed to offer you the flexibility of a variable-rate mortgage plus security and protection from increased rates for a five-year term.

Zoning Laws: Municipal laws prescribing the use of land for specific purposes, and the use to which buildings on the land may be put.

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