Contract And Mortgage Terms


CONTRACT OF PURCHASE AND SALE

A written document in which the purchaser agrees to buy certain real estate and the seller agrees to sell under stated terms and conditions.

AMORTIZATION

Repayment of a mortgage in equal installments, usually monthly, of principal and interest, rather than interest-only payments.

ASSUMABLE MORTGAGE

The mortgage holder allows the buyer to take over the seller's mortgage on the property. The lender must approve the buyer in order to release the original borrower (usually the seller) from liability.

BALANCE DUE ON COMPLETION

The amount of money the purchaser will be required to pay to the vendor to complete the purchase, after all adjustments have been made.

BREACH OF CONTRACT

Failure to fulfill an obligation under a contract. Breach confers a right of action on the offended party.

CAVEAT EMPTOR

"Let the buyer beware." The buyer must examine the goods or property he/she is buying and he/she, therefore, buys at his/her own risk.

CLOSED MORTGAGE

A mortgage that locks you into a specific payment schedule as relates to both rate of interest and term (length) of the mortgage. A penalty usually applies if you repay the loan in full before the end of the closed term.

COMPLETION (CLOSING) DATE

The date on which the sale of a property becomes final.

COMMON LAW

That part of the law formulated, developed and administered by the old common law courts, based originally on common customs and mostly unwritten.

COMPENSATION / REMUNERATION

Payment or reward for performance of service.

COMPOUND INTEREST

Interest on both the original principal and on interest accrued.

CONDITION PRECEDENT

A condition in a contract which calls for the happening of some event, or performance of some act, before the agreement can become binding on the parties.

CONDOMINIUM / STRATA

A form of real estate ownership where the owner receives title to a particular unit and has a proportionate interest in certain common areas. The unit itself is generally a separately owned space whose interior surfaces (walls, floors, ceilings) serve as its boundaries.

CONSIDERATION

Something of value given by a promisee to a promisor to make the promise binding.

CONTINGENCY

A condition that must be satisfied before a contract is binding. For instance, an agreement for purchase and sale may be contingent upon the buyer obtaining financing.

CONTRACT

A contract is a legally binding agreement between two or more capable persons for consideration or value, to do or not to do some lawful and genuinely intended act. If affecting real estate it must be in writing.

CONVENTIONAL MORTGAGE

A first mortgage outside the conditions of the National Housing Act granted by an institutional lender such as a bank, mortgage, loan, or trust company wherein the amount of the loan does not exceed 80% of the approved lending value of the property.

CONVEYANCE

The transfer of an interest in property from one person to another.

COVENANT / RESTRICTIVE COVENANT 

An agreement contained in a deed and creating an obligation. It may be positive, stipulating the performance of some act. It may be negative or restictive, forbidding the commission of some act.

DEFAULT

Failure to fulfill an obligation.

DEPOSIT

The portion of the down payment delivered to the vendor by the purchaser with a written offer as evidence of good faith. Also known as earnest money.  In a standard real estate transaction the deposit it normally held by the buyers Real Estate Agent (Brokerage) or a Lawyer acting on behalf of either party as a stakeholder. 

DESCRIPTION

A legal identification of land or premises.

DISCHARGE

To repay a mortgage in full.

DOMINANT TENEMENT

The estate (i.e. property) which derives benefit from an easement over a servient tenement, as in a Right-of-way.

DOWN PAYMENT

The buyer's cash payment towards the property. The difference between the purchase price and the amount of the mortgage loan.

EXPRESS AUTHORITY

Authority delegated by the principal which clearly sets forth in exact, plain, direct and well-defined limits those acts and duties which the agent is empowered to perform on behalf of the principal, e.g. an exclusive listing.

EXPROPRIATION

Taking of private property by the state for public use, with fair compensation to the owner, through the exercise of the right of eminent domain.

GROSS DEBT SERVICE (GDS) RATIO

The gross annual income required to cover payments associated with housing (mortgage principal and interest, taxes, secondary financing, heating, and 50% of condominium fees, if applicable). Expressed as a percentage.

HIGH RATIO MORTGAGE

A mortgage loan that exceeds the normal limit of a conventional first mortgage, in regard to the ratio of the loan amount to the property's lending value; the higher loan is made possible by a mortgage insurance plan, usually held by Canada Mortgage and Housing Corporation.

HOME WARRANTY PLAN

Protection against failure of mechanical systems within the property. Usually includes plumbing, heating systems, and installed appliances.  British Columbia requires a Home Warranty Plan on all new construction, whether built by a developer or an owner-builder.

INTEREST

The percentage which is charged for the use of borrowed money.

IRREVOCABLE

Incapable of being recalled or revoked; unchangeable, unalterable.

JOINT TENANCY

Joint Tenants is where two or more people acquire an equal undivided interest in a property. When one person dies, that person's share automatically goes to the survivor or survivors.  (see also Tenants in Common).

LEGAL DESCRIPTION

A written description by which property can be located, definitely.

MILL (RATE) 

One-tenth of one cent, a measure used to indicate the property tax rate, e.g. a tax rate of one mill per dollar is the same as 0.10 per cent of the assessed value.

MORTGAGE

A conveyance of property to a creditor as security for payment of a debt with a right of redemption upon payment of the debt.

MORTGAGEE

The one to whom property is conveyed as security for the payment of a debt; the lender or creditor.

MORTGAGOR

The one who makes the mortgage; the borrower or debtor.

MORTGAGE COMMITMENT

A formal indication, by a lending institution that it will grant a mortgage loan on property, in a certain specified amount and on certain specified terms

MORTGAGE INSURANCE

Applies to high-ratio mortgages. It protects the lender against loss if the borrower is unable to repay the mortgage.

MORTGAGE LIFE INSURANCE

Pays off the mortgage if the borrower dies.

OFFER AND ACCEPTANCE

The basic requisite of any contract is a proposal by one party, called the offeror, to another party, called the offeree, to accept the basic terms of the Agreement. If the offeree indicates assent to the proposal, there is an acceptance and the contract will bind both parties to its terms.

OPEN MORTGAGE

Allows partial or full payment of the principal at any time, without penalty.

OPTION

A right given by the owner of property to another (for valuable consideration) to buy certain property within a limited time at an agreed price.

 

PORTABILITY

A mortgage option that enables borrowers to take their current mortgage with them to another property, without penalty.

POWER OF ATTORNEY

Delegated written authority to a person to legally act on behalf of another.

PRE-APPROVED MORTGAGE

Qualifies you for a mortgage before you start shopping. You know exactly how much you can spend and are free to make a 'firm' offer when you find the right home.

PREPAYMENT CLAUSE

A clause inserted in a mortgage, which gives the mortgagor the privilege of paying the mortgage debt in advance of the maturity date, on stipulated terms.

PRE-PAYMENT PRIVILEDGES

Voluntary payments in addition to regular mortgage payments.

PRINCIPAL

The employer of an agent or brokerage, who gives the agent the authority to do some act for him/her.

PRINCIPAL AMOUNT

In mortgage law, this term refers to the debt itself, as distinguished from interest. This is the amount borrowed or still owing on a mortgage loan. Interest is paid on the principal amount.

REFINANCING

Paying off the existing mortgage and arranging a new one or re-negotiating the terms and conditions of an existing mortgage.

RENEWAL

Re-negotiation of a mortgage loan at the end of a term for a new term.

TENANTS IN COMMON

A Tenants in Common ownership is where two or more persons acquire interest in a single property. Each may sell or bequeath their respective interest and in the event of death their interest becomes a part of their estate. (see also Joint Tenants).

TERM

In a mortgage term is the actual length of time for which the money is loaned and for which the interest rate is fixed.

TERM MORTGAGE

A non-amortizing mortgage under which the principal is paid in its entirety upon the maturity date.

TIME IS OF THE ESSENCE

Requires punctual performance of a contract on closing date and is indicated by so stating as in an Agreement of Purchase and

TITLE

The means of evidence by which the owner of land has lawful ownership thereof.

TRANSFER

To convey from one person to another.

TRUST ACCOUNT

An account separate and apart from one's personal monies, as required by law in the case of a brokerage.

VARIABLE RATE MORTGAGE

A mortgage with fixed payments, but fluctuating interest rates. The changing interest rate determines how much of the payment goes towards the principal.

VENDOR

A seller of real property.

VENDOR TAKE-BACK MORTGAGE

When the seller provides some or all of the mortgage financing in order to sell their property

ZONING BY-LAW

A by-law passed by a municipality prohibiting the use of land in certain areas for any purpose other than as set out in the by-law.

 

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