General terms used in the mortgage and real estate business. Acceleration clause: A provision in a mortgage that gives the lender the right to demand payment of the entire outstanding balance if a monthly payment is missed.

Agreement for sale: A formal, written document in which the purchaser agrees to buy certain Real Estate and the seller agrees to sell under stated conditions and terms. BEWARE - Title will generally not pass on to you until you have paid off the whole agreement amount. Consult a Lawyer if you are offered such a transaction. There are some situations, where this can be a good deal for you.

Amortization: The gradual repayment of a mortgage by installments.

Amortization schedule: A timetable for payment of a mortgage showing the amount of each payment applied to interest and principal and the remaining balance on the loan.

Appreciation: An increase in the value of a house due to changes in market conditions or other causes.

Assessed value: The valuation placed upon a property by a public tax assessor for purposes of taxation.

Appraisal: An independent evaluation of the property. The Lender usually requires an appraiser to determine the current market value of the property for lending purposes.

Assets: A list of things of liquid value owned by the applicant/borrower. These can include cash, term deposits, GIC's, RRSP's, real estate properties, automobiles, stocks, bonds, mutual funds, jewelry and other household goods.

Assumable mortgage: A mortgage that can be taken over ("assumed") by the buyer when a home is sold.

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CMHC - Canada Mortgage and Housing Corporation: This is a Crown Corporation set up under the National Housing Act (NHA) to insure lenders of high ratio mortgages against losses in case of default by the borrower.

Clear title: A title that is free of liens and legal questions as to ownership of the property.

Closed mortgage: A mortgage that CANNOT be prepaid or repaid in advance of the maturity date without penalty.

Common tenancy: The ownership of property by two of more persons, where on the death of one, his share is credited to his own estate.

Completion: The date where the Real Estate transaction is legally concluded in the Registry Office. The Purchaser pays his money on this date and the Vendor receives it.

Conventional mortgage: A mortgage where the loan does not exceed 75% of the value of the property.

Common areas: Lands or improvements on land that are designated for common use and enjoyment by all occupants, tenants or owners. A pool, tennis court, hot tub or common halls would all be part of the Common Area.

Compounding: Indicates the frequency with which interest is computed and added to the principal to arrive at a new actual balance. The essential point to remember if you are a borrower is, the less frequent the compounding, the better deal for you. If you are a lender (or saver at the bank) the more often the frequency of compounding, the more you will get in return. In Canada, lenders generally compound mortgages semi-annually.

Condominium: A form of property ownership in which the homeowner holds title to an individual dwelling unity plus an interest in common areas of a multi-unit project.

Conveyance: Transfer of Title of real estate property from one individual to another.

Covenant: Solemn or written agreement.

Covenantor: In a mortgage this means the Borrower.

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Deed: The legal document conveying title to a property.

Delinquency: A loan in which a payment is overdue but not yet in default.

Deposit: Cash paid to the seller when a formal sales contract is signed.

Depreciation: A decline in the value of a property; the opposite of "appreciation".

Down payment: The part of the purchase price which the buyer pays in cash and does not finance with a mortgage.

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Easement: A right to the limited use or enjoyment of land. The easement is usually held by another and is a registered interest in land to enable sewer or other municipal services, power lines, roads or to allow for access to the property.

Encroachment: An improvement (building, fence, etc.) that illegally violates another's property.

Equity: The difference between the market value of a property and the homeowner's outstanding mortgage balance. If your home is worth $100,000 and you owe $65,000, you are said to have 35% equity in your home.

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Fair market value: The price or value at which property is transferred between a willing and informed buyer and a willing and informed seller, each of whom has a reasonable knowledge of all pertinent facts and neither being under any compulsion to buy or sell.

First mortgage: The mortgage that has first claim (or "lien") in the event of a default.

Fixed-rate mortgage: A mortgage in which the interest rate does not change during the entire term of the loan.

Foreclosure: The process by which a mortgaged property may be sold when a mortgage is in default.

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Gross Debt Service Ratio: GDSR or GDS. The measure by which lender defines the ability of the borrower to pay for their mortgage debt. This is the total mortgage debt service expressed as a percentage of the borrower's income. This ratio is calculated by dividing the total of Principal, Interest, Taxes and a Heating component into the Borrowers total income. Most lenders will allow up to 32% of gross income to be used.

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Homeowner's insurance: An insurance policy that combines liability coverage and hazard insurance.

High ratio mortgage: A mortgage for more than 75% of the value of the purchase price or value. These have to be "insured" by CMHC and an insurance premium is added to the loan.

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Inter alia mortgage: Also referred to as a Blanket Mortgage. The words "Inter Alia" are Latin for "Amongst other things". Therefore an Inter Alia Mortgage would cover more than one property. Typically it is a mortgage covering 2 or more properties.

Interest: Consideration in the form of money, paid for the use of money. Usually expressed as a percentage, compounded semi-annually. Can also mean a right, share or title in property.

Interest rate differential: IRD. Usually refers to compensation due to the lender on payout. This is the value of the difference between the contractual rate of the mortgage and the rate the lender can now get for his money. Example: A mortgage has a term of 3 years to go at 10% and now the lender can only get a market rate of 8%. You want to pay out your mortgage. The Lender may ask you to pay the difference in interest. This can add up to thousands of dollars. Payout penalties are usually quoted as the "greater" of IRD or 3 months interest penalty. Borrowers not asking about the IRD may be in for a shock if rates decline considerably.

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Joint tenancy: Ownership of Real Property by two or more people. When one dies, his share automatically passes to the survivors.

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Liabilities: The amount of debts a person owes

Lien: A legal claim against a property that must be paid when the property is sold.

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Mortgagee: The lender in a mortgage agreement.

Mortgagor: The borrower in a mortgage agreement.

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Negative amortization: Payment terms under which the borrower's monthly payments do not cover the interest due; as a result, the balance due is added to the loan balance making it rise - thus "negative amortization".

Net worth: The residual after deducting assets from liabilities

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Open mortgage: A mortgage that can be prepaid at anytime during the contract without penalty.

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Prepayment clause: In a mortgage, an agreement giving the Borrower the privilege of paying additional sums off the principal balance over and above the agreed contractual payments.

Prepayment penalty: A fee charged to a borrower who pays off a mortgage before the term has expired. See Interest Rate Differential.

Principal: The amount borrowed or remaining unpaid; also, that part of the monthly payment that reduces the outstanding balance of a mortgage.

Property purchase tax: In British Columbia, we have a Property Purchase Tax, which applies to most properties. There are exemptions for First Time Buyers. Generally, the tax is 1% of the first $200,000.00 purchase and 2% of the balance. First Time Buyers are exempt from the tax up to a limit.

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Real property: Land and appurtenances, including anything of a permanent nature such as structures, trees, minerals and the interest, benefits and inherent rights thereof. Sometimes called Real Estate.

Real estate agent: A person licensed to negotiate and transact the sale of real estate on behalf of either the borrower or seller, or in some cases both partied.

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Second mortgage: A mortgage that has rights that are subordinate to the rights of the first mortgage. As such, these loans are often less secure and may demand higher interest rates.

Strata fees: Monthly levies by the corporation owning the Condominium for the maintenance of common areas, cleaning, reserves for repairs to major common areas like the roof, etc.

Survey: A drawing showing the legal boundaries of a property, it's fixtures, and any easements or encroachments.

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TDS or TDSR: See Total Debt Service Ratio

Term: The amount of time that the contract is written for and that the interest rate is guaranteed for. Not to be confused with "Amortization". Typically in Canada terms range from 1 to 10 years.

Title: A legal document establishing the right of ownership.

Title search: A check of the title records to ensure that the seller is the legal owner of the property and that there are no liens or other claims outstanding.

Total debt service ratio: TDSR or TDS. Add all other debt payments to the GDSR and measure as a percentage of the total income of the Borrower. Lenders will usually allow up to 40% maximum TDS.

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Vendor take back mortgage: A purchase in which the seller provides all or part of the financing