Adjustment Date: The day you become responsible for the fees or cost associated with the property. Your lawyer will prepare a statement of adjustments pro-rating any pre-paid taxes, monthly maintenance fees if applicable and any other costs that may have been paid in advance or owing.
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 (CMHC).
For consumers an appraisal is performed by a trained professional to determine what a house is worth.
Completion Date: The day the seller received your funds in exchange for you receiving title to the property. The title is registered under your name at the Provincial Land Titles Office on that day. The date must fall on a normal business day, Monday to Friday.
Conventional Mortgage Loan: A mortgage loan up to a maximum of 75% of the lending value of the property for which a lender does not require mortgage loan insurance.
Counter Offer: When one party to an Offer to Purchase (buyer or seller) does not accept some or all of the terms and conditions offered by the other party and in turn “counter” offers alternate terms and conditions. During the course of negotiation through offering and counter offering the buyer and seller work towards achieving terms and conditions acceptable to both parties.
Deposit: The amount of money a buyer initially puts down at the time a Contract of Purchase and Sale is entered into to show sincerity of intent and to provide for potential liquidated damages in favour of the seller if the buyer does not perform according to the terms agreed to in the Contract. The funds are usually placed in the buyer’s realtors trust account and forms part of the purchase monies. A deposit in the amount of 5% of the purchase price is common real estate practice in Greater Vancouver.
Down Payment: The actual money a buyer has to put toward the purchase of a property from their own resources.
Easement: The 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.
Gross Debt Service (GDS): The percentage of the borrower’s gross income that will be used for monthly payments of principal, interest and taxes, heating costs and half of condominium fees.
High-Ratio Mortgage: A first mortgage loan, often for more than 75% of the value of the property, where the lender has the mortgage insured by either CMHC or a private mortgage insurance company. Mortgage loans of more than 75% of the value are also called high-ratio loans.
Mortgage: The balance of the purchase price (purchase price – down payment = mortgage amount) borrowed from a lender which is secured by the lender by a charge against the property title and your personal guarantee to repay the loan.
Mortgagee: The lender who provides the mortgage 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.
Possession Date: Usually the same date as the adjustment date. The day you are entitled to the legal possession of the property you have purchased (you get the keys!). In BC, possession usually occurs a day or two after completion.
Subject Clause: A condition(s) that must be satisfied before a contract becomes firm (unconditional). Examples are subject to financing, inspection or receipt and approval of condominium bylaws and financial statements. The conditions must be removed from the contract in writing by a certain date in order for the contract to become “firm”.
Principal: The amount of money actually borrowed.
Term: The length of time during which you pay a specific interest rate on your mortgage loan. You may not have paid off your entire mortgage principal at the end of a term because your amortization period will likely be longer than the term.
Title (Freehold or Leasehold): A freehold title is evidence of ownership of land and buildings for an indefinite period of time.
A lease hold title is evidence of a right to use and occupy land and buildings for a defined period of 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:
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