Agreement of Purchase & Sale
Real Estate Terms
The legal contract a purchaser and seller get into. We recommend that you have
your offer prepared by a professional realtor that has the knowledge and
experience to satisfactory protect you with the most suitable clauses and
Number of years designated to repay the mortgage loan based on a set of
The process of determining the value of property, usually for lending purposes.
This value may or may not be the same as the purchase price of the home.
What you own or can call upon. Often used in determining net worth or in
A score which is an indicator of how likely a consumer is to pay a loan or
credit card as agreed. A beacon score is based solely on information in a
credit file maintained by the credit reporting agencies.
Equal Payments consisting of both a principal and an interest component, paid
on a regular basis (i.e. weekly, bi-weekly, monthly) during the term of the
mortgage. The principal portion increases, while the interest portion decreases
over the term of the mortgage, but the total regular payment usually does not
change over the term of the mortgage.
Canada Mortgage and Housing Corporation (CMHC)
The National Housing Act (NHA) authorized Canada Mortgage and Housing
Corporation (CMHC) to operate a Mortgage Insurance Fund which protects NHA
Approved Lenders from losses resulting from borrower default. Premium is paid
The date on which the new owner takes possession of the property and the sale
An asset, such as a term deposit, Canada Savings Bond, or automobile, that you
offer as security for a loan.
A mortgage agreement that cannot be prepaid, renegotiated or refinanced before
maturity, except upon payment of a prepayment penalty.
A mortgage that does not exceed 75% of the appraised value or purchase price of
the property, whichever is less. Mortgage loan insurance is usually not
required for this type of mortgage.
The percentage of the borrower's gross income that will be used for monthly
payments of principal, interest, taxes, heating costs and condominium fees.
Deed (Certificate of Ownership)
The document signed by the seller transferring ownership of the home to the
purchaser. This document is then registered against the title to the property
as evidence of the purchaser's ownership of the property.
A sum of money deposited in trust by the purchaser when making an offer to be
held in trust by the seller's agent, broker, lawyer or notary until the closing
of the transaction.
The interest of the owner in a property over and above all claims against the
property. It is usually the difference between the market value of the property
and any outstanding encumbrances.
Before a mortgage can be advanced, the purchaser must have arranged fire
insurance. A certificate or binder from the insurance company may be required
on closing. Fire insurance should be effective as of closing date, not
Fixed Rate Mortgage
A mortgage for which the rate of interest is fixed for a specific period of
time (the term).
A legal procedure whereby the lender eventually obtains ownership of the
property after the borrower has defaulted on payments.
Gross Debt Service (GDS) Ratio
The percentage of gross income required to cover monthly payments associated
with housing costs. Most lenders recommend that the GDS ratio be no more than
32% of your gross (before tax) monthly income.
A person with an established credit rating and sufficient earnings who
guarantees to repay the loan for the borrower if the borrower does not.
High Ratio Mortgage
If you don't have 25% of the lesser of the purchase price or appraised value of
the property, your mortgage must be insured against payment default by a
Mortgage Insurer, such as CMHC.
An amount of money required to be withheld by law by the lender during the
construction or renovation of a house to ensure that construction is
satisfactorily completed at every stage.
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.
Last day of the term of the mortgage agreement.
The financial institution or person (lender) who is lending the money using a
The person who borrows the money using a mortgage
Mortgage Life Insurance
A form of reducing term insurance recommended for all mortgagors. In the event
of the death, accidental dismemberment or terminal illness of the owner or one
of the owners, the insurance can pay the balance owing on the mortgage. The
intent is to protect survivors from loss of their home.
Mortgage Critical Illness Insurance
Mortgage Critical Illness Insurance is available as an enhancement to Mortgage
Life Insurance. Mortgage Critical Illness Insurance is underwritten by the
Canada Life Assurance Company. Complete details of benefits, exclusions and
limitations are contained in the Certificate of Insurance. It is recommended
for all mortgagors. It can pay off your TD Canada Trust mortgage - up to
$300,000 - if you are diagnosed with life-threatening Cancer, Heart Attack or
A mortgage which can be prepaid at anytime, without penalty.
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.
Preliminary qualification by the lender of the borrower's application for a
mortgage to a certain maximum amount and rate. Generally issued for a limited
time only. Subject to limitations and final approval.
A fee charged by the lender when the borrower prepays all or part of a closed
mortgage more quickly than as set out in the mortgage agreement.
The original amount of a loan before interest.
The lowest rate a financial institution charges its best customers.
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.
Renegotiating your existing mortgage agreement. May include increasing the
principal or paying out the mortgage in full.
At the end of a mortgage term, the mortgage is up for renewal. If the mortgage
is in good standing, new renewal terms are usually offered by the mortgage
lender. The mortgage can also be transferred to another lender at no cost.
The right to prepay all or a portion of the principal balance. Prepayment
charges may be incurred on the exercise of prepayment options.
This is usually at a higher interest rate and represents the difference between
the appraised value of the house and first mortgage financing plus the down
In the case of mortgages, real estate offered as collateral for the loan.
A legal document specifying the exact location of the building on the property
and describing the type and size of the building including additions, if any.
The period of time the financing agreement covers. The terms available are: 6
month, 1,2,3,4,5,6,7 and 10 year terms, and the interest rates will be fixed
for whatever term one chooses.
A document setting out instruments registered against the title to the property
- e.g. deed, mortgages, etc.
Total Debt Service (TDS) Ratio
The percentage of gross income needed to cover monthly payments for housing and
all other debts and financing obligations. The total should generally not
exceed 37% of gross monthly income.
A Mortgage for which the interest rate fluctuates based on changes in prime.
What my clients have to say about me:
"When we first called Tony we were very apprehensive of working with an other
community guy. But Tony removed all our fears in the very first meeting and
took care of everything from A to Z. We are lucky to have him."
Samir Naguib and Lucy Debelois
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