Real Estate Glossary

1

1031 Exchange – A tax-deferred exchange that allows real estate investors to sell a property and reinvest the proceeds in another property, without incurring immediate capital gains tax. To qualify for a 1031 exchange, the properties must be of like-kind and the investor must follow strict guidelines and timelines for identifying and acquiring the replacement property. 1031 exchanges can provide investors with increased flexibility and potential for wealth-building through multiple properties, but require careful planning and compliance with tax regulations.

A

Absorption Rate – A measure of the pace or rate at which the supply of available properties or units in a particular market or area is being sold or leased, typically expressed as a ratio of the number of units sold or leased to the total number of units available over a period of time. Absorption rates can indicate the strength or weakness of the demand for real estate properties or units, and can help forecast the future trends and potential pricing or rental levels. High absorption rates can suggest a tight or hot market, with higher competition and pricing, while low absorption rates can indicate a slow or cold market, with lower demand and pricing. Absorption rates can also be influenced by factors such as economic conditions, population growth, job markets, and marketing and advertising strategies.

Accelerated Payment – A payment schedule that allows borrowers to pay off their mortgage faster by making more frequent payments or increasing the amount of their regular payments.

Acceleration Clause – A clause in a mortgage or loan agreement that allows the lender to demand immediate repayment of the loan if the borrower defaults on their payments or breaches other conditions of the agreement.

Account – An impound account, also known as an escrow account, is an account held by a mortgage lender on behalf of the borrower to collect and manage funds for the payment of property taxes, homeowners insurance, and, if applicable, mortgage insurance premiums. Impound accounts are typically required for certain types of loans, such as FHA loans or loans with a loan-to-value ratio above a certain threshold. Lenders may require impound accounts to ensure that these important expenses are paid on time, protecting their investment in the property. Borrowers make monthly payments into the impound account as part of their overall mortgage payment, and the lender disburses the funds when the bills come due.

Accrued Interest – The interest that has been earned on a loan or investment but has not yet been paid.

Action for Possession – A legal action taken by a lender to take possession of a property after a borrower has defaulted on a mortgage.

Adjustable-Rate Mortgage (ARM) – A type of mortgage with an interest rate that changes periodically based on a reference rate, typically resulting in varying monthly payments.

Affordability Index – A measure used to assess the financial ability of a household to purchase a home, taking into account factors such as income, interest rates, and housing prices.

Agent – A person who acts on behalf of another person or entity in a transaction, such as a real estate agent.

Agreement of Purchase and Sale – A legal document outlining the terms and conditions of a real estate transaction between a buyer and seller, including the purchase price, closing date, and any contingencies.

Alternative Lending – The use of non-traditional lenders, such as private individuals or companies, to provide financing to borrowers who are unable to secure traditional bank loans.

Alternative Mortgage – An alternative mortgage is a non-traditional mortgage product that may have features different from standard fixed-rate or adjustable-rate mortgages. Examples include interest-only loans, balloon loans, and negative amortization loans. These types of mortgages may be more suitable for borrowers with unique financial situations or those looking for specific loan structures.

Amenity – A feature or service that adds value or convenience to a property, such as a pool, gym, parking, or security system. Amenities can be a key factor in attracting and retaining tenants or buyers, and can help differentiate a property from competitors in the market. Amenities can also require additional expenses and maintenance, and may not provide a significant return on investment in all cases.

Amortization – The process of repaying a loan over time, typically through a series of regular payments that include both principal and interest.

Amortization Period – The length of time over which a mortgage or loan is repaid, typically between one and thirty years.

Amortization Schedule – A table that shows the breakdown of each mortgage payment, including the amount of interest and principal paid with each payment.

Amortized Mortgage – A mortgage in which the payments are structured so that the entire loan amount, including interest, is paid off by the end of the term.

Amortizing Loan – An amortizing loan is a type of loan where the principal is gradually paid down over the loan term through regular payments. This results in a predictable and consistent reduction of the outstanding loan balance, with the loan fully repaid at the end of the term. Most mortgages and auto loans are examples of amortizing loans.

Anniversary Date – The date on which a mortgage was originally taken out.

Annual Percentage Rate (APR) – The yearly cost of a mortgage, including interest and other fees, expressed as a percentage. This rate is typically higher than the mortgage interest rate, as it includes additional fees.

Appraisal – An evaluation of a property's value conducted by a professional appraiser, typically used to determine the amount a lender is willing to lend on the property.

Appraisal Contingency – A condition or clause in a real estate contract, typically included in a purchase agreement or offer, that makes the sale or closing contingent upon the property's appraisal value meeting or exceeding a certain threshold or level. Appraisal contingencies can protect buyers from overpaying for a property or lenders from lending more than the property's value, and can allow for renegotiation or cancellation of the contract if the appraisal value is below the threshold. Appraisal contingencies can also involve disputes or disagreements over the appraisal value, and can require careful documentation, communication, and compliance with state and federal regulations.

Appraisal Gap – The difference between the appraised value of a property and the agreed-upon purchase price, often requiring the buyer to make up the difference in cash or renegotiate the price.

Appraisal Report – A written report that provides the results of an appraisal, including an assessment of the property's value and any factors that may affect its worth.

Appraiser – A professional who is licensed and trained to conduct property appraisals.

Appreciation – The increase in a property's value over time, typically due to factors such as market conditions, improvements made to the property, or increased demand.

Arbitration – A dispute resolution process in which a neutral third party, known as an arbitrator, hears arguments and evidence from both sides and makes a binding decision.

Arrears – An overdue payment on a debt, typically a mortgage or loan payment.

Assessed Value – The value of a property as determined by a government assessor for the purposes of property tax assessment.

Assessment – The value of a property as determined by a government assessor for the purposes of property tax assessment.

Assets – Anything that has value and can be owned, such as property, investments, or cash.

Assignment – The transfer of a contract or property rights from one party to another, such as assigning a mortgage loan to a new lender or transferring a lease to a new tenant.

Assumable Mortgage – A type of mortgage that allows a homebuyer to take over (assume) the seller's existing mortgage, including the interest rate, repayment terms, and remaining balance.

Assumption Fee – A fee charged by a mortgage lender to process the paperwork and approve the transfer of an assumable mortgage from the seller to the buyer.

Assumption of Mortgage – The process of transferring an existing mortgage from the seller to the buyer when a property is sold, typically subject to approval by the lender.

Attached Home – A type of residential property that shares one or more walls with neighboring units, such as a townhouse, row house, or semi-detached home.

Automated Valuation Model (AVM) – A computer-generated estimate of a property's value, based on factors such as recent sales, property features, and market trends, often used by lenders and real estate websites to provide instant property valuations

Average Resale Price – A statistical measure representing the average price at which previously owned homes are sold within a specific geographic area and time period.

B

Balloon Mortgage – A type of mortgage that features low initial payments with a large lump-sum payment due at the end of the loan term, often requiring the borrower to refinance or sell the property to make the final payment.

Bank of Canada – The central bank of Canada responsible for conducting monetary policy, promoting financial stability, and issuing Canadian currency, among other functions.

Bankruptcy – A legal process in which an individual or business declares their inability to repay outstanding debts, often resulting in the liquidation of assets and the discharge of certain debts.

Basis Point – A basis point is a unit of measurement used to express changes in interest rates or other financial percentages. One basis point is equal to 0.01% or 1/100th of a percent. For example, if a mortgage rate increased from 4.50% to 4.55%, it would be an increase of 5 basis points.

Beacon Score – A credit score used in Canada to determine a borrower's creditworthiness.

Biweekly Mortgage – Biweekly Mortgage: A mortgage where payments are made every two weeks instead of the standard monthly payments, resulting in a total of 26 payments per year.

Blanket Mortgage – A blanket mortgage is a type of loan used to finance the purchase of multiple properties under a single mortgage. This type of loan is often used by real estate investors or developers who want to consolidate their financing for multiple properties. A blanket mortgage typically allows for the release of individual properties from the mortgage as they are sold or refinanced.

Blended Payments – Mortgage payments that include both principal and interest, typically structured so that the payment amount remains the same over the term of the loan.

Blended Rate – The average interest rate on a mortgage, calculated by blending the interest rate on the outstanding balance with the interest rate on any new funds borrowed.

Blended Rate Mortgage – A mortgage that combines two or more mortgage loans into one, often with a single payment and interest rate, typically used when refinancing.

Bridge Financing – Short-term financing that is used to bridge the gap between the purchase of a new property and the sale of an existing property, typically secured by the equity in the existing property.

Bridge Loan – A type of short-term loan used to provide financing for a property purchase while the borrower is waiting for a longer-term loan to be approved or for other funds to become available.

Brokerage – A firm that employs real estate agents and brokers to facilitate real estate transactions, often providing services such as property listings, marketing, and contract negotiation.

Builder’s Loan – A type of loan used to finance the construction of a new building or development.

Building Permit – A document issued by a local government authority that grants approval for construction, renovation, or alteration of a property, ensuring that the proposed work meets building codes and zoning regulations.

Buy Down – A mortgage financing strategy in which the borrower pays a lump sum at the beginning of the loan to reduce the interest rate.

Buy to Let Mortgage – A buy to let mortgage is a type of loan specifically designed for borrowers who intend to purchase a property for the purpose of renting it out to tenants. These loans usually have different underwriting criteria, interest rates, and fees compared to standard residential mortgages, as lenders often consider them to be higher risk.

Buydown – A mortgage financing arrangement in which the borrower pays an upfront fee to secure a lower interest rate for a specified period, often used to make the initial loan payments more affordable.

Buyer Agency Agreement – A contract between a homebuyer and a real estate agent or brokerage, outlining the terms of the agent's representation, the services they will provide, and the commission they will earn.

Buyer's Agent – A licensed real estate professional who represents the interests of a homebuyer in a real estate transaction, providing services such as property search, negotiation, and contract preparation.

C

Canada Mortgage Bonds Program – A program operated by the Canadian government that allows investors to purchase bonds backed by mortgages insured by the Canada Mortgage and Housing Corporation (CMHC).

Canada Mortgage and Housing Corporation (CMHC) – A federal agency responsible for administering Canada's National Housing Act, which includes providing mortgage loan insurance for lenders.

Capital (5 Cs of Credit) – One of the five factors used to assess a borrower's creditworthiness, referring to the borrower's financial resources and ability to repay the loan.

Capital Gains Tax – A tax levied on the profit made from the sale of an asset, such as real estate, stocks, or bonds.

Capitalization Rate – A ratio used to estimate the value of an income-producing property based on its net operating income (NOI) and the expected rate of return for similar properties in the market. The capitalization rate can be used to compare the value of different investment properties, and can help investors assess the potential return on investment and risks associated with a particular property.

Capitalization Rate (Cap Rate) – A measure of the expected or actual rate of return on a real estate investment, calculated as the net operating income (NOI) divided by the property's market or purchase price. The cap rate can provide investors with a way to compare the potential or actual returns of different properties or markets, and can reflect the risk, liquidity, and growth prospects of the investment. Higher cap rates can indicate higher potential returns but also higher risks or lower demand, while lower cap rates can suggest lower returns but also lower risks or higher demand. Cap rates can also be influenced by factors such as location, market conditions, financing costs, and management efficiency, and can require careful evaluation, analysis, and projection.

Capped Rate Variable Mortgage – A variable rate mortgage in which the interest rate is capped at a maximum level, providing some protection against interest rate fluctuations.

Cash Back – A mortgage feature that provides the borrower with a cash payment when the mortgage is approved, typically a percentage of the mortgage amount.

Cash Flow – The net income or profit generated by a rental property after all expenses and debt service have been paid, typically calculated on a monthly or annual basis. Positive cash flow can provide investors with passive income and a source of capital for further investments, while negative cash flow can indicate a need for changes to the property or financing structure.

Cash Reserve – A requirement by some mortgage lenders that borrowers have a certain amount of cash on hand after closing, ensuring they can continue to make their mortgage payments in case of unforeseen financial difficulties.

Cash-Out Refinance – A cash-out refinance is a mortgage refinancing option in which the borrower takes out a new loan for an amount larger than the outstanding balance on the current mortgage. The difference between the two loans is provided to the borrower as cash. This option can be used to consolidate debts, make home improvements, or cover other large expenses. However, it often results in a higher loan balance and potentially higher interest costs over time.

Certificate of Location – A document prepared by a land surveyor that shows the boundaries, dimensions, and position of a property, as well as any encroachments, easements, or restrictions that may affect the title.

Chain of Title – The chain of title is the sequence of historical transfers of title and ownership of a property, from the original grantor to the current owner. It provides a record of all previous owners and any encumbrances or liens that may have affected the property. A clear chain of title is important for establishing legal ownership and ensuring that there are no outstanding issues that could affect the transfer of ownership during a sale.

Character (5 Cs of Credit) – One of the five factors used to assess a borrower's creditworthiness, referring to the borrower's reputation and history of financial responsibility.

Chattel – Personal property that is not permanently attached to a property, such as appliances, furniture, or light fixtures, which may be included or excluded from a real estate sale.

Chattel Mortgage – A type of mortgage that is used to finance the purchase of movable property, such as equipment or a vehicle.

Clear Title – A clear title is a property title that is free of liens, encumbrances, or other legal issues that may impact the transfer of ownership. When a property has a clear title, it means there are no unresolved claims, disputes, or other problems that could prevent the buyer from taking full ownership.

Closed Mortgage – A type of mortgage that has a fixed term and typically a lower interest rate, with restrictions on prepayments or refinancing before the end of the term without incurring penalties.

Closing – The final step in a real estate transaction, in which ownership of the property is transferred from the seller to the buyer, and the funds and documents required to complete the sale are exchanged.

Closing Costs – Expenses incurred by the buyer and seller in a real estate transaction, such as legal fees, land transfer taxes, and mortgage insurance premiums, typically paid at closing.

Closing Date – The date on which the sale of a property is finalized and the ownership is transferred from the seller to the buyer.

Cloud on Title – A cloud on title refers to any claim, lien, or other encumbrance that might potentially create doubt or uncertainty about the ownership of a property. It can include issues such as unpaid taxes, easements, or unresolved legal disputes. Clouds on title must be resolved before a property can be sold or refinanced, as they may affect the ability of the buyer to obtain clear title.

Co-Applicant – A person who applies for a loan with another person, typically a spouse or partner, and is jointly responsible for repaying the loan.

Co-Insurance – A type of insurance policy in which two or more parties share the risk of loss, typically used in the context of property insurance.

Co-Operative – A type of housing in which the residents collectively own and manage the property.

Co-Ownership – A type of property ownership in which two or more parties own a property together, typically with each party owning a specific share of the property.

Collateral – Assets pledged by a borrower to secure a loan, which may be seized by the lender in the event of default to recover the outstanding balance. In a mortgage, the property itself serves as collateral.

Collateral (5 Cs of Credit) – One of the five factors used to assess a borrower's creditworthiness, referring to the property or other assets that are pledged as security for the loan.

Collateral Mortgage – A type of mortgage in which the borrower's property is pledged as security for the loan.

Commercial Mortgage – A commercial mortgage is a type of loan used to finance the purchase or refinance of commercial properties, such as office buildings, retail centers, or industrial complexes. These loans typically have different terms, interest rates, and underwriting criteria compared to residential mortgages, as they are intended to finance income-producing properties and are often considered higher risk.

Compound Interest – Interest that is calculated not only on the principal amount borrowed, but also on any interest that has already accrued on the loan.

Conditional Offer – An offer to purchase a property that is contingent upon specific conditions being met, such as the buyer obtaining financing or the property passing a home inspection.

Conforming Loan – A conforming loan is a mortgage that meets the underwriting guidelines established by Fannie Mae and Freddie Mac, two government-sponsored enterprises that buy and guarantee mortgages in the secondary market. Conforming loans typically have lower interest rates and more favorable terms compared to non-conforming loans, such as jumbo loans, which exceed the maximum loan limits set by these agencies.

Construction Loan – Construction Loan: A short-term loan used to finance the construction or renovation of a property. Funds are typically released in installments as construction progresses.

Construction-to-Permanent Loan – A construction-to-permanent loan is a type of financing that combines a short-term construction loan with a long-term mortgage. This allows borrowers to finance the construction of a new home and then convert the loan to a permanent mortgage upon completion of the project. This type of loan can simplify the financing process for borrowers, as they only need to apply for and close on one loan instead of two separate loans.

Consumer Financial Protection Bureau (CFPB) – The Consumer Financial Protection Bureau (CFPB) is a U.S. government agency responsible for protecting consumers in the financial marketplace. The CFPB regulates financial institutions, enforces consumer protection laws, and educates consumers about financial products and services, including mortgages. It helps ensure that borrowers have access to clear, accurate information about mortgage terms, costs, and risks.

Contingency – A condition or event that must occur before a real estate contract becomes legally binding, such as obtaining mortgage financing or passing a home inspection.

Conventional Mortgage – A mortgage that is not insured by the government and requires a down payment of at least 20% of the purchase price of the property.

Convertible Rate – A type of mortgage rate that allows the borrower to switch from a variable rate to a fixed rate at a predetermined time.

Counteroffer – A response to an initial offer in a real estate transaction, in which the recipient proposes new terms or conditions for the agreement.

Covenant – Covenant: A legally binding agreement or restriction placed on a property by the seller, developer, or homeowner's association, typically to maintain certain standards or requirements.

Credit (5 Cs of Credit) – One of the five factors used to assess a borrower's creditworthiness, referring to the borrower's history of making payments on time and managing credit responsibly.

Credit Bureau – An agency that collects and maintains credit information on individuals and businesses, providing credit reports and scores to lenders and other authorized parties.

Credit Check – An investigation into a borrower's credit history and current financial situation, typically conducted by a lender or other financial institution before approving a mortgage or loan application.

Credit History – A record of an individual's borrowing and repayment activities, used by lenders to assess creditworthiness and the likelihood of repaying a loan.

Credit Report – A record of a borrower's credit history, including information about their credit accounts, payment history, and outstanding debts.

Credit Score – A numerical score used by lenders to evaluate a borrower's creditworthiness, based on their credit history and other factors.

Current Ratio – A financial ratio that compares a borrower's current assets to their current liabilities, used to evaluate their ability to meet their short-term financial obligations.

D

Debt Consolidation – The process of combining multiple debts into a single loan with a lower interest rate and more favorable repayment terms.

Debt Service Ratio (DSR) – A calculation used by lenders to determine a borrower's ability to repay a loan, expressed as the percentage of their income required to cover monthly debt payments, including the mortgage, property taxes, and other obligations.

Debt Yield – Debt Yield: A ratio that measures the annual net operating income of a property compared to the total loan amount. It is used to assess the riskiness of a loan.

Debt-to-Income (DTI) Ratio – A calculation used by lenders to determine a borrower's ability to manage their debt payments, expressed as the borrower's total monthly debt payments divided by their gross monthly income.

Deed – A legal document that transfers ownership of a property from one party to another.

Deed in Lieu of Foreclosure – A deed in lieu of foreclosure is a voluntary agreement between a borrower and a lender in which the borrower transfers the ownership of their property to the lender in exchange for the release of their mortgage debt. This option can be used as an alternative to foreclosure when the borrower is unable to continue making mortgage payments and wishes to avoid the negative consequences of foreclosure on their credit and financial situation.

Deed of Trust – A deed of trust is a legal document used in some states as an alternative to a mortgage. It involves three parties: the borrower, the lender, and a trustee. The borrower transfers the legal title of the property to the trustee, who holds it as security for the lender. If the borrower defaults on the loan, the trustee can sell the property to satisfy the debt. If the borrower fulfills the terms

Default – The failure to meet the terms and conditions of a mortgage loan, such as not making payments, which may result in foreclosure.

Demand Letter – A written request or notice from a lender or creditor demanding payment of a debt that is past due.

Deposit – An amount of money paid by the buyer to the seller upon acceptance of an offer to purchase a property, held in trust and applied towards the purchase price at closing.

Depreciation – A decrease in the value of an asset over time, typically due to factors such as age, wear and tear, or changes in market conditions.

Direct Lender – A direct lender is a financial institution that originates and funds loans directly to borrowers, without the involvement of intermediaries such as brokers or loan correspondents. Direct lenders can include banks, credit unions, and online lenders. They typically offer a range of loan products and can have more control over the underwriting and approval process.

Discharge Document – A legal document that shows a mortgage or other loan has been fully repaid, typically used to release any liens or other claims against the property.

Discharge of Mortgage/Charge – The process of removing a mortgage or lien from a property's title once the loan has been paid in full.

Disclosure Statement – A document provided by the seller to the buyer, disclosing any known defects, issues, or material facts about the property that may affect its value or desirability.

Discount Points – Discount Points: Fees paid to the lender in exchange for a lower interest rate. Each point typically equals 1% of the loan amount.

Double Up Option – A mortgage feature that allows the borrower to make an additional payment, typically equal to the regular payment amount, to pay down the principal of the loan more quickly.

Down Payment – The initial payment made by a borrower towards the purchase of a property, usually expressed as a percentage of the property's value. The remainder is financed with a mortgage loan.

Due Diligence – The process of investigating and verifying all relevant information about a property, including title, zoning, permits, and any potential issues, before finalizing a real estate transaction.

E

Earnest Money Deposit – A payment made by a potential homebuyer as a sign of good faith when submitting an offer to purchase a property, typically held in escrow until closing.

Easement – A legal right granted to an individual or entity to use a portion of another person's property for a specific purpose, such as access to a road or utility line.

Electronic Funds Transfer (EFT) – A method of transferring funds electronically from one bank account to another, typically used for recurring payments such as mortgage payments or utility bills. Electronic funds transfers can be initiated by the account holder or by a third party, and can be made through various channels such as online banking, mobile apps, or automatic debits.

Encroachment – A situation where a structure or improvement extends onto another person's property, often resulting in disputes or legal action to resolve the issue.

Encumbrance – A claim, lien, or restriction on a property that may affect the owner's ability to transfer ownership or use the property as collateral for a loan.

Energy Audit – A professional assessment of a home's energy efficiency, identifying areas for improvement and potential cost savings through upgrades or retrofits.

Environmental Assessment – A study conducted to evaluate the potential environmental impacts of a proposed development or project, often required by government agencies as part of the approval process.

Equity – The difference between the market value of a property and the outstanding balance on any loans or mortgages secured by the property, representing the owner's financial interest in the property.

Equity (for Mortgages) – The difference between the value of a property and the amount owed on any outstanding mortgages or liens.

Equity Build – The process of building equity in a property over time through appreciation and debt reduction, typically with the goal of maximizing the potential return on investment. Equity build can be achieved through various strategies such as buying undervalued properties, making improvements or upgrades, increasing rents, and refinancing or selling the property at the right time. Equity build can provide investors with increased cash flow and net worth, and can be a key factor in long-term real estate investment strategies.

Equity Investment – A type of real estate investment in which an investor provides capital to finance the purchase or development of a property in exchange for an ownership stake or share of the profits. Equity investments can provide investors with higher potential returns and more control over the property than other forms of investment, such as debt or crowdfunding, but can also carry higher risks and require more expertise and resources. Equity investments are commonly used for commercial, industrial, or large-scale residential properties.

Equity Loan – Equity Loan: A loan that allows a homeowner to borrow against the equity in their home, typically through a home equity loan or a home equity line of credit (HELOC).

Escrow – A neutral third party who holds funds or documents on behalf of the buyer and seller during a real estate transaction, ensuring that all conditions are met before the transaction is completed.

Estoppel Certificate – A legal document that verifies the status of a condominium corporation or homeowners' association, confirming the financial health, bylaws, and any outstanding fees or assessments that may affect a prospective buyer.

Existing Mortgage – A mortgage that is already in place on a property, typically transferred to a new owner when the property is sold.

Expandability – A mortgage feature that allows the borrower to increase the amount of their mortgage without incurring penalties or having to requalify for the loan.

F

FHA Streamline Refinance – The FHA Streamline Refinance program is a simplified mortgage refinancing option available to borrowers with existing FHA-insured loans. The program allows borrowers to refinance their mortgages with reduced documentation requirements and often without the need for an appraisal. The primary purpose of an FHA Streamline Refinance is to reduce the borrower's interest rate or change the terms of their loan, such as switching from an adjustable-rate mortgage to a fixed-rate mortgage.

FICO Score – The FICO Score is a widely used credit scoring model developed by the Fair Isaac Corporation. It is used by lenders to assess a borrower's creditworthiness and the likelihood of repaying a loan. FICO Scores range from 300 to 850, with higher scores indicating lower credit risk. Lenders often use FICO Scores in conjunction with other factors, such as income and employment history, to make lending decisions.

Fair Market Value – The value of a property as determined by the current market conditions, typically used for real estate transactions.

Fair Market Value (FMV) – The price at which a property would likely sell in an open market, given a willing buyer and seller, with both parties having reasonable knowledge of all relevant facts and not being under any undue pressure to complete the transaction.

Fannie Mae – Fannie Mae, or the Federal National Mortgage Association, is another government-sponsored enterprise (GSE) that operates similarly to Freddie Mac. Established in 1938, Fannie Mae's primary purpose is to provide liquidity to the mortgage market by purchasing and securitizing mortgages from lenders. By doing so, Fannie Mae helps ensure that lenders have the funds necessary to make new loans to homebuyers. Like Freddie Mac, Fannie Mae sets guidelines for conforming loans, which are the types of mortgages it will purchase.

First Mortgage – The primary mortgage on a property, typically used to purchase the property.

First-Time Home Buyer Tax Credit – The First-Time Home Buyer Tax Credit is a government program that provides tax incentives to encourage first-time homebuyers to purchase homes. These tax credits can help make homeownership more affordable for eligible buyers by reducing their tax liability. The specific terms and availability of first-time homebuyer tax credits can vary depending on the legislation in effect at the time.

First-Time Homebuyer – An individual or household that has not owned a home within a specified period, typically three years, often eligible for special financing programs and incentives.

Fixed Period ARM – A fixed period adjustable-rate mortgage (ARM) is a type of mortgage in which the interest rate is fixed for an initial period, usually 3, 5, 7, or 10 years, and then adjusts periodically based on a specified index. After the fixed period ends, the interest rate and monthly payments can change, typically annually or semi-annually. These loans can be attractive to borrowers who plan to sell or refinance their homes before the adjustable period begins, as they often have lower initial interest rates compared to fixed-rate mortgages.

Fixed Rate Mortgage – A mortgage in which the interest rate remains the same for the entire term of the loan.

Fixed-Rate Mortgage – A type of mortgage in which the interest rate remains constant for the entire term of the loan, providing predictable monthly payments and protection against interest rate fluctuations.

Fixture – Items that are permanently attached to a property, such as built-in appliances, light fixtures, or plumbing, and are typically included in the sale unless specifically excluded in the agreement of purchase and sale.

Flood Certification – A flood certification, also known as a flood determination or flood zone certification, is a document that identifies whether a property is located in a designated flood hazard area. Lenders typically require a flood certification during the mortgage application process to determine if the borrower will be required to purchase flood insurance. Flood insurance is mandatory for properties located in high-risk flood zones if the mortgage is federally backed.

For Sale By Owner (FSBO) – A method of selling a property without the assistance of a real estate agent or broker, with the owner assuming responsibility for marketing, negotiations, and legal paperwork.

Foreclosure – The legal process through which a lender takes possession of a property when the borrower defaults on their mortgage loan.

Foreclosure Rescue – Foreclosure rescue refers to schemes or services that claim to help homeowners avoid foreclosure, often through loan modifications or other assistance. Some of these schemes can be fraudulent or predatory, charging high fees for services that are not provided or do not actually prevent foreclosure. Homeowners facing foreclosure should be cautious of foreclosure rescue offers and should consider contacting a HUD-approved housing counselor for assistance.

Freddie Mac – Freddie Mac, or the Federal Home Loan Mortgage Corporation, is a government-sponsored enterprise (GSE) that was established in 1970 to provide liquidity, stability, and affordability to the U.S. housing market. Freddie Mac purchases mortgages from lenders, packages them into mortgage-backed securities (MBS), and sells them to investors. This process helps lenders to free up capital, allowing them to make more loans to homebuyers. Freddie Mac sets guidelines for the types of loans it will purchase, which are referred to as conforming loans.

Full Amortized Mortgages – A mortgage in which the payments are structured so that the entire loan amount, including interest, is paid off by the end of the term.

Fully Amortized Mortgages – Mortgages that are structured so that the entire loan amount, including interest, is paid off by the end of the term.

Fully Amortizing Mortgage – A mortgage in which the regular payments are structured to fully pay off the principal and interest over the term of the loan, resulting in a zero balance at the end of the amortization period.

G

Gift Letter – Gift Letter: A document that confirms funds gifted to a borrower for a down payment are not a loan and do not need to be repaid.

Good Faith Estimate (GFE) – Good Faith Estimate (GFE): A document provided by a lender that estimates the costs associated with a mortgage, including closing costs, interest rates, and other fees.

Government National Mortgage Association (Ginnie Mae) – Ginnie Mae, or the Government National Mortgage Association, is a government-owned corporation within the U.S. Department of Housing and Urban Development (HUD). Unlike Fannie Mae and Freddie Mac, Ginnie Mae does not buy or sell mortgages or issue mortgage-backed securities (MBS). Instead, Ginnie Mae guarantees the timely payment of principal and interest on MBS that are backed by government-insured mortgages, such as FHA, VA, and USDA loans. This guarantee helps to attract investors to these securities and promotes liquidity in the mortgage market.

Graduated Payment Mortgage (GPM) – Graduated Payment Mortgage (GPM): A mortgage with lower initial monthly payments that gradually increase over a set period, typically five to ten years.

Gross Debt Service (GDS) Ratio – A calculation used by lenders to determine a borrower's ability to manage housing-related expenses, expressed as the borrower's total monthly housing costs divided by their gross monthly income.

Gross Lease – A type of lease agreement in which the tenant pays a fixed rent amount that covers all or most of the operating expenses, such as property taxes, insurance, maintenance, and utilities, for the rental property. Gross leases are commonly used for residential and commercial properties, and can provide tenants with predictable and stable rental costs, while relieving landlords of the responsibility for some or all of the property expenses. Gross leases can also limit the potential for cash flow and profit for landlords, especially in cases of high operating expenses or low rental rates.

Gross Rent Multiplier – A ratio used to estimate the value of a rental property based on its gross rental income and the prevailing market rates for similar properties. The gross rent multiplier can be used to quickly compare the value of different investment properties, and can help investors assess the potential return on investment and risks associated with a particular property.

Group Insurance – Insurance coverage that is provided to a group of individuals, typically through an employer or other organization.

Guarantor – A person who agrees to guarantee the repayment of a loan or mortgage, typically by co-signing the loan agreement.

H

Hard Money Lender – Hard Money Lender: A private lender that provides loans based on the value of the underlying property rather than the borrower's credit history or income.

Hard Money Loan – A type of short-term loan typically used by real estate investors to finance the purchase or renovation of a property, using the property as collateral. Hard money loans are generally provided by private lenders or investors, and can have higher interest rates, fees, and requirements than traditional bank loans. Hard money loans can provide investors with quick access to capital and flexibility, but can also carry higher risks and require careful evaluation of the property and financing terms.

High Ratio Mortgage – A mortgage that requires a down payment of less than 20% of the purchase price of the property, and typically requires mortgage insurance.

High-Ratio Mortgage – A mortgage loan where the borrower's down payment is less than 20% of the property's value, typically requiring mortgage loan insurance.

Holdback – An amount of money that is held back by a lender or other party until certain conditions have been met, typically used to ensure that the conditions of a contract are fulfilled.

Home Buyers' Plan (HBP) – A Canadian government program that allows first-time homebuyers to withdraw funds from their Registered Retirement Savings Plans (RRSPs) tax-free to use as a down payment on a home.

Home Equity Conversion Mortgage (HECM) – A Home Equity Conversion Mortgage (HECM) is a type of reverse mortgage that is insured by the Federal Housing Administration (FHA). HECMs allow homeowners who are 62 years of age or older to convert a portion of their home equity into cash while still living in the home. The loan proceeds can be used for any purpose, such as supplementing retirement income, covering medical expenses, or making home improvements. The borrower is not required to make monthly payments on the loan, as the principal and interest become due when the homeowner sells the home, moves out, or passes away.

Home Equity Financing – A type of loan or line of credit that is secured by the equity in a property. Home equity financing allows homeowners to borrow against the value of their home to finance home improvements, debt consolidation, or other expenses.

Home Equity Line of Credit (HELOC) – A type of loan that allows homeowners to borrow against the equity in their home, typically through a revolving line of credit that can be used for various purposes such as home renovations, debt consolidation, or other expenses. Home equity lines of credit can provide borrowers with greater flexibility and lower interest rates than other types of loans or credit cards.

Home Inspection – A professional evaluation of a property's condition, typically conducted before a sale, to identify any potential issues or necessary repairs.

Home Mortgage Disclosure Act (HMDA) – The Home Mortgage Disclosure Act (HMDA) is a U.S. federal law that requires certain financial institutions to collect, report, and disclose data about their mortgage lending activities. The purpose of HMDA is to help regulators and the public monitor lending practices, identify potential discriminatory patterns, and ensure that lenders are meeting the credit needs of their communities. Lenders subject to HMDA must report information about loan applications, originations, and purchases, as well as borrower characteristics such as race, ethnicity, and income.

Homeowners Insurance – A type of property insurance that covers damage to a home and its contents, as well as liability for accidents or injuries that occur on the property.

Homeowners' Association (HOA) – An organization that oversees the management and maintenance of a residential community, such as a condominium or planned development, and enforces community rules and regulations.

Housing Finance Agency (HFA) – A Housing Finance Agency (HFA) is a state or local government organization that focuses on providing affordable housing opportunities for low- and moderate-income individuals and families. HFAs may offer various programs and services, including mortgage financing, down payment assistance, homeownership education, and affordable rental housing. These agencies can help make homeownership more accessible for eligible borrowers by offering loans with lower interest rates, flexible underwriting standards, and other favorable terms.

Hybrid ARM – A hybrid adjustable-rate mortgage (ARM) is a type of mortgage that combines features of both fixed-rate and adjustable-rate mortgages. Hybrid ARMs typically have an initial fixed-rate period, followed by an adjustable-rate period. During the fixed-rate period, the interest rate and monthly payments remain constant. After this period, the interest rate adjusts periodically based on a specified index and margin. Common hybrid ARM products include the 3/1, 5/1, 7/1, and 10/1 ARMs, where the first number represents the length of the fixed-rate period in years, and the second number indicates how often the rate adjusts after the fixed period, typically annually.

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Index – In the context of adjustable-rate mortgages (ARMs), an index is a benchmark interest rate that is used to determine the interest rate adjustments for the loan. Common indices used for ARMs include the U.S. Prime Rate, the London Interbank Offered Rate (LIBOR), and the Constant Maturity Treasury (CMT). The specific index used for an ARM, along with the margin (a fixed percentage added to the index rate), will determine the borrower's new interest rate when the loan enters its adjustable-rate period.

Inflation – Inflation is the rate at which the general level of prices for goods and services in an economy is rising over time. As inflation increases, the purchasing power of money decreases. Central banks, such as the Federal Reserve in the United States, monitor and manage inflation to maintain price stability and promote economic growth. Inflation can affect mortgage interest rates, as lenders may increase rates to compensate for the loss of purchasing power over the life of the loan. In turn, higher interest rates can affect housing affordability and demand.

Interest Adjustment Date (IAD) – The date when the interest accrued between the closing date of a property purchase and the first mortgage payment is due.

Interest Only Loan – A type of loan in which the borrower only pays the interest on the loan for a set period of time, typically between one and five years, after which they must begin repaying both principal and interest.

Interest Rate – The rate at which interest is charged on a mortgage or loan, typically expressed as an annual percentage rate (APR). The interest rate can be fixed, meaning it stays the same for the entire term of the loan, or variable, meaning it may change over time based on market conditions.

Interest-Only Mortgage – Home Equity Line of Credit (HELOC): A revolving line of credit that allows homeowners to borrow against the equity in their home, typically with a variable interest rate.

Internal Rate of Return – A measure of the potential return on investment for a real estate property, taking into account the timing and amount of cash flows, the purchase price and financing costs, and other factors such as taxes and appreciation. The internal rate of return can help investors evaluate different investment opportunities and make informed decisions about buying, holding, or selling properties.

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Joint Tenancy – A type of property ownership in which two or more parties own a property together, with each party having an equal share in the property. If one party dies, their share of the property passes to the surviving owner(s).

Joint Venture – A type of partnership or collaboration between two or more parties, typically real estate investors or developers, to pool their resources and expertise to invest in a property or project. Joint ventures can provide participants with access to capital, skills, and opportunities that they may not have on their own, while sharing the risks and rewards of the investment. Joint ventures can also require careful planning, communication, and legal agreements to avoid conflicts and ensure a fair distribution of benefits.

Judgement – A legal ruling that requires a borrower to repay a debt, typically issued by a court or other legal authority.

Jumbo Loan – Interest-Only Mortgage: A mortgage where the borrower pays only the interest for a set period, typically five to ten years. After the interest-only period, the borrower must start paying principal and interest.

L

Land Titles System – A system used to register and track property ownership in some jurisdictions, typically maintained by a government agency.

Land Transfer Tax – A tax levied by provincial and municipal governments on the transfer of property ownership, typically paid by the buyer at closing.

Lease Option – A type of lease agreement that includes an option for the tenant to purchase the property at a specified price or terms, typically within a set timeframe. Lease options can provide tenants with the flexibility and time to evaluate the property and their ability to finance a purchase, while providing landlords with stable rental income and a potential buyer for the property. Lease options can also be complex and require careful negotiation and documentation to avoid legal and financial issues.

Leasehold – A type of property ownership in which an individual rents land or a building for a specified period, rather than owning it outright.

Legal Description – A detailed description of a property's boundaries, typically used for legal and surveying purposes.

Leverage – The use of borrowed money or financing to invest in a property, typically with the goal of increasing the potential return on investment. Leverage can magnify the gains or losses from a real estate investment, and can be affected by factors such as interest rates, loan terms, and the property's cash flow and appreciation potential.

Lien – A legal claim against a property that is used as security for a debt or other obligation.

Limited Partnership – A type of partnership in which one or more partners provide the capital and have limited liability for the debts and obligations of the business, while another partner, typically a general partner, manages the business and assumes unlimited liability. Limited partnerships are commonly used for real estate investments, and can provide investors with tax benefits, limited liability, and potential returns, while allowing for specialized expertise and management. Limited partnerships can also require legal and financial expertise and compliance with state and federal regulations.

Listing Agreement – A legal agreement between a property owner and a real estate agent, giving the agent the exclusive right to market and sell the property for a specified period of time. The listing agreement typically outlines the terms and conditions of the sale, including the commission to be paid to the agent.

Loan Modification – A loan modification is a change to the terms of an existing loan agreement between a borrower and a lender. It can involve a reduction in the interest rate, an extension of the loan term, a different type of loan, or a combination of these factors. The goal is to make the loan more affordable for the borrower.

Loan Origination Fee – A loan origination fee is a charge by the lender for processing and underwriting a new loan application. It covers the lender's administrative costs, such as document preparation, credit checks, and verification of income and assets. This fee is typically expressed as a percentage of the loan amount and may be negotiable depending on the lender and the borrower's creditworthiness.

Loan Servicing – Loan servicing refers to the ongoing process of managing and administering a loan from the time it is originated until it is paid off or closed. This includes tasks such as collecting and processing monthly payments, maintaining records, managing escrow accounts, handling customer inquiries, and managing any delinquencies or defaults. Loan servicing can be performed by the original lender, or it may be outsourced to a third-party servicing company.

Loan-to-Value (LTV) Ratio – A calculation used by lenders to determine the risk of a mortgage loan, expressed as the loan amount divided by the property's value.

Loan-to-Value Ratio (LTV) – The ratio of the amount of a mortgage or loan to the value of the property securing the loan, expressed as a percentage. For example, a $200,000 mortgage on a property worth $250,000 would have an LTV of 80%. The LTV is an important factor in determining the risk of a mortgage or loan, as higher LTVs indicate greater potential losses in case of borrower default.

Lock-in Period – A lock-in period, also known as a rate lock or rate commitment, is a specified period during which the lender guarantees a specific interest rate for a mortgage loan. The lock-in period usually ranges from 30 to 60 days or more, depending on the lender's policy and market conditions. During this time, the borrower is protected from any interest rate fluctuations in the market. If the borrower fails to close the loan within the lock-in period, the lender may charge a fee or provide a different interest rate based on the current market rates.

Lump Sum Payment Option – A mortgage feature that allows the borrower to make a one-time payment to pay down the principal of the loan more quickly, typically without penalty. Lump sum payments can be used to reduce the overall interest paid on the loan and shorten the term of the mortgage.

Lump Sum Payment Options – A mortgage feature that allows the borrower to make a lump sum payment on their mortgage, typically without penalty.

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Margin – In the context of adjustable-rate mortgages (ARMs), the margin is the percentage added to the loan's interest rate index to determine the fully indexed rate. The margin is set by the lender and remains constant throughout the life of the loan. For example, if the interest rate index is 3% and the margin is 2%, the fully indexed rate would be 5%. The margin is a key component in determining the borrower's monthly payment and overall cost of the loan.

Market Value – The estimated value of a property based on the price that a willing buyer and seller would agree upon in an arm's-length transaction, with neither party under duress or pressure to complete the transaction. Market value can be affected by a variety of factors such as location, condition, and market demand, and can be determined through appraisals, comparative analysis, or other methods.

Maturity – The date on which a mortgage or other loan is due to be fully repaid.

Maturity Date – The date on which a mortgage or other loan is due to be fully repaid.

Maximum Mortgage Amount – The maximum amount that a borrower is eligible to borrow on a mortgage, typically based on their income, creditworthiness, and other factors.

Mortgage – A loan secured by real estate, where the borrower pledges the property as collateral for the loan and agrees to make regular payments until the loan is repaid.

Mortgage Broker – A licensed professional who works on behalf of borrowers to find the best mortgage products and rates from various lenders.

Mortgage Default Insurance – Insurance that protects lenders against losses if a borrower defaults on their mortgage loan, typically required for high-ratio mortgages with a down payment of less than 20%. Also known as mortgage loan insurance or CMHC insurance.

Mortgage Insurance – Insurance that protects lenders against losses if a borrower defaults on their mortgage loan, typically required for high-ratio mortgages.

Mortgage Pre-Approval – A preliminary assessment by a lender of a borrower's eligibility for a mortgage loan, providing an estimate of the maximum loan amount and interest rate.

Mortgage Prepayment – The act of paying off a portion or the entire mortgage balance before the end of the loan term, which may be subject to penalties.

Mortgage Term – The length of time a borrower commits to a specific mortgage rate and conditions, typically ranging from 6 months to 5 years.

Mortgage-backed Securities – A type of investment vehicle that pools together multiple mortgages and sells them as a single security to investors. Mortgage-backed securities can provide investors with exposure to real estate and mortgage markets, while offering predictable cash flows, risk diversification, and liquidity. Mortgage-backed securities can also be complex and subject to market risks, credit risks, and other factors that can affect their value and performance.

Multiple Listing Service (MLS) – A database of property listings used by real estate professionals to market and share information about homes for sale.

N

Negative Amortization – Negative Amortization: A situation where the monthly payments on a mortgage are not enough to cover the interest, causing the loan balance to increase over time.

Net Lease – A type of lease agreement in which the tenant pays a base rent amount plus additional expenses such as property taxes, insurance, maintenance, and utilities, for the rental property. Net leases can be structured in different ways, such as triple net (NNN) leases, double net (NN) leases, or single net (N) leases, depending on the allocation of expenses between the landlord and tenant. Net leases can provide landlords with stable income and lower operating costs, while requiring tenants to assume more responsibility and risks.

Net Operating Income – The total income generated by a rental property after subtracting all operating expenses such as property taxes, insurance, maintenance, and utilities. The net operating income can be used to assess the cash flow and profitability of a rental property, and can be used to calculate other metrics such as the capitalization rate and the gross rent multiplier.

New Housing Rebate – A tax rebate offered to homebuyers in Canada who purchase a new or substantially renovated home, intended to offset the Goods and Services Tax (GST) or the Harmonized Sales Tax (HST) paid on the purchase.

No Cost Switching of Payment Option – A mortgage feature that allows the borrower to switch between payment options without incurring additional fees or penalties.

No-Closing-Cost Mortgage – A no-closing-cost mortgage is a type of loan where the lender covers some or all of the closing costs associated with the mortgage in exchange for a higher interest rate or a higher loan amount. This can help borrowers who do not have enough cash on hand to cover the upfront costs of getting a mortgage. However, it may result in higher monthly payments and more interest paid over the life of the loan. Borrowers should carefully consider the long-term implications of a no-closing-cost mortgage before choosing this option.

Non-Recourse Loan – A non-recourse loan is a type of loan in which the lender can only recover the collateral securing the loan in the event of a default, rather than pursuing the borrower's other assets. This means that if the borrower defaults on the loan, the lender can only seize the collateral (usually the

O

Offer to Purchase – A legal document that outlines the terms of an offer to purchase a property, typically including the purchase price and any conditions of the sale.

Open Mortgage – A type of mortgage that allows the borrower to pay off the loan in full or in part before the end of the term without penalty.

Option Agreement – A legal agreement that gives one party the right, but not the obligation, to buy or sell a property at a specified price or terms, within a set timeframe. Option agreements can be used for a variety of purposes, such as securing a future purchase or sale, locking in a favorable price, or avoiding risks or uncertainties. Option agreements can also require careful negotiation, documentation, and compliance.

Option to Increase a Payment – A mortgage feature that allows the borrower to increase their regular mortgage payments, typically without penalty.

Origination Fee – An origination fee is a charge by the lender for processing and underwriting a new loan application. It covers the lender's administrative costs, such as document preparation, credit checks, and verification of income and assets. This fee is typically expressed as a percentage of the loan amount and may be negotiable depending on the lender and the borrower's creditworthiness.

Owner-Occupied – A residential property in which the owner lives in the home as their primary residence, as opposed to renting it out to tenants or using it as a vacation property.

P

Partial Claim – A partial claim is a loss mitigation option offered by some mortgage loan servicers, particularly for FHA-insured loans. In this process, the servicer provides an interest-free loan to the borrower to cover a portion of the delinquent mortgage payments, bringing the loan current. The borrower is required to repay the partial claim when the mortgage is paid off, refinanced, or the property is sold. This option helps borrowers avoid foreclosure by allowing them to catch up on their mortgage payments.

Partially Amortizing Loan – Partially Amortizing Loan: A loan where only a portion of the principal is paid off during the loan term, leaving a remaining balance (or balloon payment) due at the end of the term.

Partly Amortized Mortgage – A mortgage in which the payments are structured so that only a portion of the loan amount, typically the interest, is paid off by the end of the term.

Payment Cap – A payment cap is a limit on the amount by which a borrower's monthly payment can increase during a specified period, typically applied to adjustable-rate mortgages (ARMs) or other loans with variable interest rates. Payment caps protect borrowers from significant jumps in their monthly payments due to interest rate fluctuations. They can be expressed as a percentage or a dollar amount, and they may be applied on a periodic basis (e.g., annually) or over the life of the loan. However, payment caps may result in negative amortization if the cap prevents the payment from covering the full interest due.

Payment Shock – Payment shock is a term used to describe a significant increase in a borrower's monthly mortgage payment, often due to an adjustable-rate mortgage's interest rate reset, the expiration of an interest-only period, or the end of a temporary buydown. Payment shock can make it difficult for borrowers to meet their new monthly payment obligations, increasing the risk of default and foreclosure. Borrowers facing payment shock should explore loan modification or refinancing options to help manage the increased monthly payments.

Points – Points, also known as discount points, are a form of prepaid interest that borrowers can pay to the lender at closing to secure a lower interest rate on their mortgage. One point typically equals 1% of the loan amount, and paying points can help borrowers save money over the life of the loan by reducing the interest rate. Borrowers should carefully consider whether it makes financial sense to pay points based on their expected time in the home, as the upfront cost may not be recouped through lower monthly payments if they sell or refinance their mortgage within a few years.

Portable Mortgage – A mortgage that can be transferred from one property to another, allowing the borrower to take their mortgage with them when they sell their current home and buy a new one. Portable mortgages typically have lower fees and charges than new mortgages, and can be a cost-effective way to finance a move.

Power of Sale – A legal process used by a lender to take possession of and sell a property when the borrower has defaulted on their mortgage payments. Power of sale allows the lender to recover the outstanding balance of the mortgage and any other costs associated with the sale of the property.

Pre-Qualification – Pre-Qualification: An informal assessment of a borrower's ability to obtain a mortgage, based on their financial situation and credit history, without a full application or credit check.

Prepayment – Prepayment refers to the act of paying off a portion or the entirety of a loan's principal balance before the scheduled due date. This can be done through a lump sum payment or by making additional monthly payments above the required amount. Prepaying a mortgage can help borrowers save on interest costs and reduce the loan term, but it may be subject to prepayment penalties depending on the loan terms. Borrowers should review their loan agreement and consult with their lender to determine if prepayment is the right option for them.

Prepayment Clause – A provision in a mortgage or loan agreement that allows the borrower to prepay some or all of the principal of the loan before the maturity date, typically subject to certain conditions or penalties. Prepayment clauses can provide borrowers with greater flexibility and can help to reduce the overall interest paid on the loan.

Prepayment Option – A feature of some mortgage loans that allows the borrower to make additional payments towards the principal balance without incurring penalties.

Prepayment Penalty – A fee charged by the lender when a borrower pays off a mortgage loan before the end of the term, typically associated with closed mortgages.

Prime Rate – Prime Rate: The interest rate that commercial banks charge their most creditworthy customers, often used as a benchmark for other interest rates.

Principal – The initial amount of a mortgage loan, not including interest, that the borrower owes to the lender.

Principal Residence – The primary home where an individual resides for the majority of the year, often eligible for tax benefits and exemptions.

Private Equity Real Estate – A type of real estate investment that involves the acquisition, development, or management of properties or projects using private capital from high-net-worth individuals, institutional investors, or private equity firms. Private equity real estate can provide investors with higher potential returns, greater control and flexibility, and lower regulatory and reporting requirements than public investments, but can also carry higher risks, fees, and illiquidity.

Private Mortgage Insurance (PMI) – A type of insurance that protects lenders against losses if a borrower defaults on a mortgage loan, typically required for loans with a down payment of less than 20%.

Promissory Note – Promissory Note: A legal document signed by a borrower that outlines the terms of a loan, including the principal amount, interest rate, and repayment schedule.

Property Assessment – The process of determining the value of a property for tax purposes, typically conducted by a government agency or independent appraiser.

Property Tax – A tax levied by local governments on the assessed value of a property, used to fund municipal services and infrastructure.

Q

Qualified Mortgage (QM) – Qualified Mortgage (QM): A mortgage that meets certain standards set by the Consumer Financial Protection Bureau, designed to ensure that borrowers can afford the loan and protect them from predatory lending practices.

Qualifying Rate – Qualifying Rate: The interest rate used by a lender to determine whether a borrower can afford a mortgage, often higher than the actual rate offered on the loan.

R

Rate Hold – A commitment by a lender to guarantee a specific mortgage interest rate for a certain period, typically 60 to 120 days, while the borrower completes the mortgage application process.

Rate-and-Term Refinance – Rate-and-Term Refinance: A type of refinancing where the borrower replaces their existing mortgage with a new one, typically to obtain a lower interest rate or change the loan term.

Real Estate – Property consisting of land and the buildings on it, along with its natural resources such as crops, minerals, or water. Real estate can be owned by individuals, corporations, or governments, and is typically bought and sold through real estate agents or brokers. Real estate is a major asset class and can be used for a variety of purposes, including residential, commercial, and industrial.

Real Estate Agent – A licensed professional who represents buyers or sellers in real estate transactions, providing services such as property marketing, negotiation, and contract preparation.

Real Estate Council (REC) – A provincial regulatory body responsible for licensing and overseeing the conduct of real estate professionals, as well as enforcing real estate legislation and protecting consumers.

Real Estate Investment Trust (REIT) – A type of investment vehicle that pools together multiple real estate properties or mortgages and sells them as shares to investors. REITs can provide investors with exposure to diversified real estate portfolios, potential income, and liquidity, while offering tax benefits and low minimum investments. REITs can also be subject to market risks, management fees, and other factors that can affect their performance and value.

Real Estate Owned (REO) – Real Estate Owned (REO): Properties that have been foreclosed on and are now owned by a lender, such as a bank or government agency.

Real Estate Syndication – A type of partnership or joint venture between real estate investors or developers and passive investors or limited partners, in which the investors pool their capital and expertise to finance or manage a real estate project or portfolio. Real estate syndications can provide investors with access to higher-yield or specialized real estate investments, while sharing the risks and rewards with other investors. Real estate syndications can also require careful evaluation of the sponsor's track record, fees, and legal documents.

Real Estate Wholesaling – A real estate investment strategy in which an investor contracts to purchase a property at a discounted price and then quickly assigns or resells the contract to another buyer, typically without taking possession of the property. Real estate wholesaling can provide investors with quick profits and minimal risk, but requires extensive knowledge of the local market, negotiating skills, and the ability to find and close deals quickly.

Real Property Report (RPR) – A legal document that shows the location and dimensions of a property, along with any improvements, encroachments, or easements.

Recourse Loan – Recourse Loan: A loan where the lender can pursue the borrower's other assets if they default on the loan, in addition to seizing the collateral (typically the property).

Refinancing – The process of replacing an existing mortgage or loan with a new mortgage or loan, typically with better terms, rates, or payments. Refinancing can provide homeowners or investors with lower interest rates, shorter or longer loan terms, cash-out options, or other benefits, depending on their financial goals and circumstances. Refinancing can also involve closing costs, fees, and credit checks, and can require careful evaluation of the costs and benefits.

Renewal – The process of extending a mortgage loan after the initial term has expired, usually involving a new interest rate and updated terms and conditions.

Renewal Agreement – An agreement between a borrower and a lender to renew a mortgage or loan for another term, typically subject to certain conditions and adjustments to the interest rate or other terms.

Rent-to-Own – A type of home purchase agreement in which a tenant rents a property with the option to buy it within a specified period, often with a portion of the rent applied towards the purchase price.

Reserves – Reserves: Funds that a borrower sets aside to cover unexpected expenses, such as repairs or vacancies, often required by a lender when obtaining a mortgage.

Return on Investment (ROI) – A measure of the profitability of a real estate investment, typically calculated as the ratio of the investment's net gain or profit to the amount of the initial investment. ROI can be affected by a variety of factors such as the property's cash flow, appreciation potential, financing costs, and taxes, and can be used to compare the potential returns and risks of different investment opportunities.

Reverse Mortgage – A type of mortgage that allows homeowners to borrow against the equity in their home, typically with no payments required until the homeowner dies, sells the property, or moves out.

Right of First Refusal – A contractual right that gives an individual or entity the opportunity to match or better any offer received by the property owner before the property is sold to another party.

Right of Survivorship (Real Estate) – The legal right of a surviving co-owner of a property to inherit the ownership interest of a deceased co-owner, without the need for probate or other legal proceedings. Right of survivorship is typically associated with joint tenancy or tenancy by the entirety, and can provide greater security and simplicity for co-owners.

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Seasoning – Seasoning: The length of time a borrower has held a mortgage, often used to determine eligibility for refinancing or loan modifications.

Second Mortgage – An additional mortgage loan secured by a property that is already mortgaged, typically having a higher interest rate and shorter term than the first mortgage.

Seller Financing – Seller Financing: A financing arrangement where the seller of a property provides a loan to the buyer, often in the form of a mortgage.

Seller's Market – A real estate market condition characterized by low housing inventory and high demand, often leading to increased competition, higher prices, and faster sales.

Seller's Points – Seller's Points: Fees paid by the seller of a property to the buyer's lender in exchange for a lower interest rate on the buyer's mortgage.

Short Sale – A real estate transaction in which the homeowner or seller agrees to sell the property for less than the amount owed on the mortgage or loan, with the lender's approval. Short sales can be a way for homeowners to avoid foreclosure or bankruptcy and for lenders to minimize their losses, but can also involve lengthy negotiations, paperwork, and credit consequences. Short sales can also affect the value and competition of other properties in the area.

Skip a Payment Option – A mortgage feature that allows the borrower to skip one or more regular mortgage payments, typically without penalty.

Speculation Tax – A tax levied on vacant or under-utilized residential properties in certain regions of Canada, intended to discourage speculative investment and increase the availability of affordable housing.

Subject To Financing – A contingency in a real estate contract that makes the agreement dependent on the buyer securing a mortgage loan within a specified period.

Subprime Mortgage – Subprime Mortgage: A mortgage offered to borrowers with a higher credit risk, typically due to a lower credit score or unstable income, often with higher interest rates and fees.

Survey – A professional measurement of a property's boundaries and features, often used to verify the accuracy of a property's legal description and title.

Syndicate – A group of investors or individuals who pool their resources and expertise to finance or manage a real estate project or portfolio, typically through a partnership or limited liability company (LLC). Syndicates can provide investors with access to larger or specialized real estate investments, while sharing the risks and rewards with other investors. Syndicates can also require careful evaluation of the sponsor's track record, fees, legal documents, and compliance with state and federal regulations.

T

Tax Benefits – The various tax advantages and incentives available to real estate investors, such as deductions for mortgage interest, property taxes, and depreciation, as well as lower tax rates for long-term capital gains and real estate investment trusts (REITs). Tax benefits can help investors reduce their taxable income and increase their cash flow and returns, and can be an important factor in real estate investment strategies.

Tax Credit – A direct reduction of an individual's tax liability, often offered by the government to encourage certain activities or investments, such as purchasing a home or making energy-efficient upgrades.

Tax Deduction – An expense that can be subtracted from an individual's taxable income, reducing their overall tax liability, such as mortgage interest or property taxes.

Tax Lien – A legal claim or encumbrance against a property for unpaid taxes, imposed by a government agency or tax authority. Tax liens can prevent the sale or transfer of the property until the taxes are paid or the lien is released. Tax liens can also be sold or auctioned to investors, who can earn interest or profit by paying the taxes and receiving the lien amount plus fees from the property owner. Tax liens can provide investors with potentially high returns and secured investments, but can also involve legal and financial risks and require careful due diligence.

Tax-Free Savings Account (TFSA) – A Canadian investment account that allows individuals to save money and earn interest tax-free, with withdrawals also being tax-free. TFSAs can be used to save for various financial goals, including a down payment on a home.

Teaser Rate – Teaser Rate: An initial low interest rate offered on an adjustable-rate mortgage that lasts for a limited time, after which the rate adjusts to a higher, variable rate.

Tenancy in Common – A type of co-ownership of a property in which each owner, or tenant in common, has a fractional interest in the property, with no right of survivorship. Tenants in common can own unequal or equal shares of the property, and can transfer, sell, or mortgage their shares independently. Tenancy in common can provide flexibility and affordability for multiple owners or investors, but can also involve conflicts, disagreements, and risks if one or more tenants default on their obligations or sell their shares. Tenancy in common can also require careful legal and financial documentation and compliance with state laws.

Tenant Improvements – Improvements made to a rental property by a landlord or tenant to customize or upgrade the space for the tenant's specific needs or preferences. Tenant improvements can include a wide range of upgrades such as interior design, fixtures, appliances, or structural changes, and can be negotiated as part of a lease agreement or separately. Tenant improvements can increase the rental value and appeal of a property, but can also require additional expenses and time.

Term Mortgage – A type of mortgage in which the terms and conditions are fixed for a specific term, typically between one and ten years. At the end of the term, the mortgage can be renewed or renegotiated, or the borrower can pay off the remaining balance of the loan. Term mortgages provide borrowers with greater certainty and stability in their mortgage payments.

Third Mortgage – A third mortgage taken out on a property, typically with a higher interest rate than both the primary and second mortgages due to the increased risk to the lender.

Title – The legal right to ownership of a property, along with the rights and responsibilities that come with ownership. Title can be transferred from one owner to another through a variety of means, including sale, gift, or inheritance, and is typically recorded in public records such as a land titles office.

Title Company – Title Company: A company that specializes in examining property titles, ensuring they are clear of liens or other issues, and providing title insurance to protect the buyer and lender.

Title Fraud – A type of real estate fraud in which a criminal uses false documents or information to steal the ownership of a property from its rightful owner.

Title Insurance – Insurance that protects property owners and mortgage lenders against defects or issues with the property's title, such as liens or encroachments.

Title Insurance Policy – An insurance policy that protects the property owner and/or lender from any losses or damages due to defects in the title, typically obtained during the purchase or refinancing of a property.

Title Search – A thorough examination of public records to confirm a property's legal ownership, identify any liens or encumbrances, and ensure that the title is free and clear of defects.

Toronto Land Transfer Tax (TLTT) – A municipal land transfer tax levied by the City of Toronto on the transfer of property ownership, in addition to the provincial land transfer tax.

Total Debt Service (TDS) Ratio – Total Debt Service (TDS) Ratio: A ratio that compares a borrower's total monthly debt payments, including housing, to their gross monthly income, used to assess the borrower's ability to afford a mortgage.

Transaction Costs – Transaction Costs: The various fees and expenses associated with buying or selling a property, such as closing costs, agent commissions, and appraisal fees.

Transfer Tax – A tax levied by the government on the transfer of property ownership, typically paid by the seller at closing.

Transfer/Deed of Land – A legal document used to transfer ownership of a property from one party to another. The transfer/deed of land typically includes a description of the property, the names of the buyer and seller, and any other terms and conditions of the transfer. The transfer/deed of land must be signed and registered with the appropriate government agency in order to be legally valid.

Trust Deed – A legal document that secures a loan or mortgage against a property and conveys the title of the property to a trustee, who holds the title until the loan is paid in full or default occurs. Trust deeds can provide lenders with a legal and enforceable interest in the property, and can allow for faster and less costly foreclosure proceedings in case of default. Trust deeds can also involve legal and financial risks, such as title defects, fraud, or disputes, and can require careful documentation and compliance with state laws.

Truth in Lending Act (TILA) – Truth in Lending Act (TILA): A federal law that requires lenders to disclose the terms and costs of a loan, including the annual percentage rate (APR), to borrowers.

Turnkey Property – A type of investment property that is fully renovated, furnished, and managed by a professional company or investor, and requires little or no additional work or effort from the buyer or investor. Turnkey properties can provide investors with a hassle-free and passive investment, with potential cash flow and capital appreciation, but can also carry higher costs, fees, and risks if the property or management fails to meet expectations. Turnkey properties can also require careful due diligence, evaluation of the location, market, and management, and compliance with regulations and laws.

Two-Step Mortgage – Two-Step Mortgage: A type of adjustable-rate mortgage with an initial fixed-rate period followed by an adjustable-rate period, typically with a lower rate during the fixed period.

U

Underwater Mortgage – A situation in which a homeowner owes more on their mortgage loan than the current market value of their property, often making it difficult to refinance or sell.

Underwriter – Underwriter: A professional who evaluates a borrower's financial situation, credit history, and the property itself to determine whether to approve or deny a mortgage application.

Underwriting – The process through which a lender evaluates the risk of a mortgage loan application and determines whether to approve or deny the loan.

Upfront Mortgage Insurance Premium (UFMIP) – The UFMIP is a one-time fee paid at closing for FHA-insured loans. It is typically a percentage of the loan amount and is used to protect the lender in case the borrower defaults on the loan. This fee can be financed into the loan amount or paid in cash at closing.

Usury – The practice of charging unreasonably high interest rates on a loan, often prohibited by law or subject to specific regulations.

V

Vacancy Rate – The percentage of rental units or space that is currently unoccupied or available for rent, typically calculated on a monthly or annual basis. Vacancy rate can be affected by a variety of factors such as location, market demand, rental rates, and competition, and can have a significant impact on a property's cash flow, profitability, and overall value. Low vacancy rates indicate strong demand and potential for higher rental income, while high vacancy rates can indicate oversupply and potential for lower rental income and value.

Value-Add Strategy – A real estate investment strategy that aims to increase the value, income, or appeal of a property by making improvements, renovations, or changes to its physical, functional, or financial aspects. Value-add strategies can involve upgrading the property's amenities, systems, or design, repositioning the property in the market, changing the tenant mix or lease terms, or reducing the expenses or inefficiencies of the property. Value-add strategies can provide investors with higher potential returns than passive or stabilized investments, but can also carry higher risks, costs, and uncertainties. Value-add strategies can also require careful evaluation of the property's condition, location, market, and feasibility, and compliance with zoning, building, and environmental codes.

Variable Rate Mortgage – A type of mortgage in which the interest rate can fluctuate over the term of the loan, typically based on changes in the lender's prime rate or other market conditions. Variable rate mortgages can provide borrowers with lower initial interest rates and greater flexibility, but can also be more unpredictable and can result in higher costs over the long term.

Variable-Rate Mortgage – A mortgage with an interest rate that fluctuates over time based on changes in the lender's prime rate, resulting in variable monthly payments.

Vendor Take-Back Mortgage – A type of mortgage in which the seller of a property provides financing to the buyer, typically by holding a mortgage on the property. Vendor take-back mortgages can provide buyers with an alternative source of financing, and can also provide sellers with greater flexibility and a potential source of income.

Vendor’s Lien – A type of lien that is placed on a property by the seller, typically to secure payment for all or part of the purchase price. Vendor's liens can be used as an alternative to traditional financing, and can provide sellers with greater security and flexibility in real estate transactions.

Verification of Employment (VOE) – A document or process used by lenders to confirm a borrower's employment status, income, and job stability before approving a mortgage loan.

W

Walk-Through – An inspection or visit of a property, typically performed by a buyer, investor, or tenant, to evaluate its condition, features, and suitability for their needs or goals. Walk-throughs can involve visual, physical, or digital inspection of the property's interior, exterior, structure, systems, amenities, and surroundings, and can provide valuable information and feedback for decision-making, negotiation, or planning. Walk-throughs can also reveal defects, hazards, or other issues that can affect the value or safety of the property, and can require careful documentation and compliance with legal and ethical standards.

Walk-through – A final inspection of a property by the buyer before closing, typically to ensure that any agreed-upon repairs have been completed and that the property is in the expected condition.

Warranty Deed – A legal document that transfers the title of a property from the seller to the buyer and guarantees that the title is free and clear of any defects or liens.

Welcome Tax – A tax levied by municipalities in Quebec on the transfer of property ownership, also known as the "land transfer tax" or "duty on the transfer of immovables."

Wholesale Real Estate – A real estate investment strategy in which an investor buys a property at a discount from the market value and quickly resells it to another buyer, typically without making any significant improvements or repairs to the property. Wholesale real estate can provide investors with quick profits and minimal risk, but requires extensive knowledge of the local market, negotiating skills, and the ability to find and close deals quickly.

Wraparound Mortgage – A form of secondary financing in which a new mortgage is created to encompass an existing mortgage, with the borrower making payments to the lender who, in turn, continues to pay the original mortgage.

Y

Yield Spread Premium (YSP) – Yield Spread Premium (YSP): A fee paid by a lender to a mortgage broker for placing a borrower into a loan with a higher interest rate than the lowest rate the borrower qualifies for.

Z

Zoning – The regulation or classification of land use by a local or state government, typically through zoning ordinances, codes, or maps, that specifies the permitted or prohibited uses, density, height, setback, and other criteria of a property or area. Zoning can influence the development, value, and compatibility of properties, and can affect the rights and obligations of property owners and users. Zoning can also reflect the goals, interests, and priorities of the community and the government, and can be subject to legal and political challenges and changes. Zoning can require careful interpretation, application, and compliance, and can involve negotiation, appeals, and permits.