A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

A
Abandonment of Property
To vacate a property with a definite intention never to return.

Abandonment of Property
To vacate a property with a definite intention never to return.

Abstract of Title
Registry System: A condensed history of the title to a parcel of land. The abstract consists of a synopsis of every recorded instrument affecting the title to that land arranged in chronological order of recording.

Accelerated Weekly Payment
A mortgage repayment plan in which the borrower makes 52 payments per year instead of 48 which would be required if the payment plan called for four payments per month. The extra four payments each year have the effect of “accelerating” the repayment of the mortgage.

Acceleration Clause
A clause in a mortgage which provides that where default has occurred in making any mortgage payment, the outstanding mortgage amount becomes due.

Acceptance
The offeree’s consent to enter into a contract and to be bound by the terms of the offer.

Accredited Appraiser Canadian Institute (AACI)
The highest level of designation bestowed by the Appraisal Institute of Canada. It allows the holder to conduct appraisals and consultations on various types of property.

Accrued Interest
The interest charged for the period of time that has elapsed since the last interest date.

Action for Possession
A legal remedy available to a lender when a mortgage is in default. It allows the lender to take possession of the mortgage property.

Action of Receiver
A legal remedy available to a lender when a mortgage is in default, asking the courts to appoint a receiver who takes possession of the property

Action on the Covenant for Payment
A legal remedy available to a lender when a mortgage is in default. It gives the lender the right to sue the borrower, even if the borrower has since sold the property.

Acquittance
The term for a discharge of mortgage in Québec.

Adjustable Rate Mortgage
See variable rate mortgage.

Adjustment on Sale
A pro-rated division and distribution of prepaid or accrued taxes, prepaid insurance premiums, prepaid rents and other income and expenses. This adjustment usually occurs when a property is sold and is the manner of determining the amounts due to and from the parties.

Adverse Possession
The right by which someone occupying a piece of land might acquire title against the real owner, if the occupant’s possession has been actual, continuous, hostile, visible, and distinct for a statutory period. Adverse possession is not possible under Land Titles or when Crown property is involved.

Advertising Standards Canada (ASC)
Advertising Standards Canada (ASC) is the Canadian advertising industry’s self-regulatory body. ASC’s mission is to ensure the integrity and viability of advertising. They administer The Canadian Code of Advertising Standards.

Affidavit
A statement or declaration in writing and sworn to or affirmed before some officer who is authorized to administer an oath or affirmation, such as a notary public, or commissioner of oaths.

Agency
An agency relationship is created when one person, called the principal, authorizes another person, called the agent, to act on behalf of and subject to the control of the principal.

Agent
One who is authorized to represent and act on behalf of another person or business, the principal in transactions involving a third party. Unlike an employee who merely works for the principal, an agent works in place of the principal.

Agreement of Purchase and Sale
A written agreement between vendor and purchaser in which the purchaser agrees to buy certain real property and the vendor agrees to sell upon terms and conditions as set out in that agreement.

Alienation Clause
A type of acceleration clause that demands payment of the entire debt upon sale or other transfer of the title.

Amending Agreement
An agreement between the lender and borrower by the lender in which the terms of the registered mortgage are changed. The amending agreement may or may not be not be registered on title.

Amortization
This refers to the process of paying off a mortgage in regular payments composed of both interest and principal.

Amortization Period
The time over which the mortgage is to be completely repaid, assuming equal payments. This means that when looking, for example, at a mortgage with a 25-year amortization period, it would take 25 years to reduce the balance to zero, if all regular payments were made on time and the terms (payment, interest rate) remained the same.

Amortization Schedule
A table showing the amounts of principal and interest which make up each of the periodic level payments and the outstanding principal balance of the loan after each level payment is made.

Amortized Mortgage
A mortgage requiring regular payments which include both principal and interest sufficient to fully repay the loan by maturity.

Anniversary Date
The same date in each calendar year during the term of the mortgage. The first anniversary date occurs one year from the date interest is adjusted and the periodic repayments begin.

Appointment of a Receiver
A legal remedy available to a lender when a mortgage is in default. The receiver takes possession of the property, collects rents, and pays any expenses as required.

Appraisal
An independent, unbiased report that uses various analysis techniques and market research to determine the realistic value of a property.

Appraisal Report
An independent assessment of a property by a qualified individual. A statement giving an opinion of value of an adequately described property, as at a specific date and supported by pertinent data.

Appraiser
An appraiser determines the market value of a house based on its condition and the selling price of comparable houses recently sold in the area. The licensing requirement for real estate appraisers varies from province to province.

Arm’s Length Transaction
A transaction between unrelated parties. A transaction freely arrived at in the open market unaffected by abnormal pressures as might be the case in a transaction between related parties.

Arbitration
The determination of a dispute by a disinterested third party.

Arrears
An overdue payment (in reference to a mortgage for the purposes of this text).

Assessment (assessed value)
A value placed upon property (land and buildings) for taxation purposes.

Assessment Roll
An annual list of the assessed values of all properties in a municipality. The assessment roll includes the name of the property owners or tenants and their addresses. Assessment rolls are usually delivered to a municipality before the end of the year. The term “roll” comes from ancient times and refers to the way information used to be stored - on paper or parchment, rolled up into cylinders.

Assets
Goods of value, either tangible or not, that a borrower or business owns.

Assignee
One who takes the rights or title of another by assignment.

Assignment
The act of transferring rights held by one party, the assignor, to another party, the assignee.

Assignment of Lease
The absolute or conditional transfer of the rights of either party to a lease.

Assignment of Mortgage
The transfer of ownership of a mortgage from one party to another.

Assignment of Rentals
A contract in which the borrower grants the lender the right to collect future rents on a given occurrence, normally default. This assignment is normally taken as additional security on rental loans.

Assignor
One who transfers or assigns the rights or title to another.

Association des courtiers et agents immobiliers du Québec (ACAIQ)
ACAIQ is responsible for administering the Real Estate Brokerage Act and regulations in Québec.

Assumable Mortgage
An existing mortgage that can be taken over (assumed) by the buyer of a property when that property is sold.

Assumption of Mortgage
The act of assuming liability for an existing mortgage on a property by the purchaser of that property. With builders’ loans, the assumption is usually evidenced by written agreement.

Attachment
The seizure of property by court order.

Attornment of Rents
A legal action available upon default of a mortgage. As a result, tenants are directed to pay their rents to the lender.

Automated Valuation Models (AVM)
Computer programs that provide real estate market analysis and estimates of value based on specific attributes of a property as well as sales information.

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B

Balance Sheet
Also known as the Statement of Financial Position or Statement of Assets and Liabilities. The Balance Sheet is a listing of the assets, liabilities (debts), and owners’ equity of a business enterprise at a specific point in time. The assets must equal the liabilities plus the owners’ equity.

Balloon Payment
Any payment of principal over and above the regular payment.

Bank Act
The Canadian Bank Act regulates all Canadian banking activity conducted through a federally chartered institution. This includes banks, trust companies, loan companies, and insurance companies.

Bank Rate
The rate at which the Bank of Canada charges loans to the chartered banks. This is the rate on which lending institutions base their prime lending rate.

Basis Point
One one-hundredth of one percent. Used to describe the amount of change in yield in money debt instruments, including mortgages.

Beacon Score
The name given to the credit score published by Equifax. See also Empirica Score.

Binder Insurance
A temporary agreement where one party agrees to insure another party while awaiting receipt of, and final action on, the application for insurance.

Blanket Mortgage
A single mortgage registered against two or more individual parcels of real property.

Blended Payments
Regular equal mortgage payments combining, or blending, interest and principal components in one constant payment.

Blended Rate
The rate that results from the blending of an existing mortgage and a new mortgage with differing interest rates into one consolidated mortgage. The calculation to determine the final rate takes into account both the interest rates and the amount of principal for each of the component loans.

Bona Fide
In good faith, with valuable consideration and with absence of notice of any problems.

Bonus

• A sum paid by the borrower, or retained by the lender, from the advance of mortgage money as part of the consideration for the making of the loan.
• A sum paid by the borrower to the lender as consideration for prepayment of all or part of the principle outstanding.

Book Value
The capital amount at which an asset is shown on the books of an account. Usually it is the original cost, less reserves for depreciation.

Book Value of a Mortgage
The mortgage amount outstanding on a mortgage at any given point in time. The book value is determined by deducting the amount of principal repayment from the original principal amount.

Borrowing By-laws
A document providing proof that a corporation has the power to borrow under its company charter.

Breach of Contract
Failure, without legal reason, to perform any promise that forms the whole or part of the agreed terms contained in the contract.

Bridge Financing
A loan provided to borrowers to provide financing for purchase, pending closing of the sale of their existing property.

Bridge Loan
A bridge loan is a short-term, high interest loan intended to offset financial hardship until a long-term loan is secured.

Brokerage
The aspect of business concerned with bringing parties together for the transaction of business and the execution of contracts. Brokerage involves sales, exchanges and rentals.

Broker
One who acts as an intermediary between parties in a transaction. A broker, for a fee or other consideration, arranges a transaction (a sale) by a seller to the buyer.

Builder’s Loan
A loan designed for borrowers who need financing for construction projects. These differ from normal loans as the funds are received in stages (also known as draws) during the building process to protect the lender from construction abandonment.

Builder’s Risk Insurance
Fire and extended coverage insurance for a building under construction. Coverage increases automatically as the construction progresses and terminates at completion.

Building Code
A set of minimum regulations respecting the safety of buildings with reference to public health, fire protection and structural sufficiency.

Building Scheme
A group of restrictive covenants attached to two or more lots. These covenants are set by a vendor or landlord. They detail restrictions for use and are agreed to by the purchasers or tenants as part of the purchase or lease.

Bundle of Rights
Legal rights with respect to real estate ownership which include the right to use, sell, lease, enter, or to give away the property, plus the right to refuse to take any of these actions.

Buy Down
A lump sum payment as consideration for the reduction in the interest charged on a loan from that which would normally be charged.

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C

Canada Mortgage and Housing Corporation (CMHC)
A Crown Corporation which was initially created to administer the National Housing Act and is a mortgage insurer.

Canada Mortgage Bonds  
Canada Mortgage Bonds (CMBs) are similar to Mortgage Backed Securities (MBS) in that Canada Mortgage and Housing Corporation guarantees the timely payment of interest and principal. However, an MBS has a disadvantage to investors since borrowers of the underlying mortgages can make partial or full prepayments of their mortgage principal. While consumers (borrowers) like this flexibility, investors do not like this unpredictability. The Canada Mortgage Bond program eliminates this cash flow uncertainty to investors, as CMHC guarantees both semi-annual interest payments, and the repayment of principal on a specified maturity date.

Canadian and British Insurance Company Act
The federal statute that governs federally incorporated insurance companies.

Canadian Code of Advertising Standards
These are administered by Advertising Standards Canada. The goal of the standards is to promote the professional practice of advertising, by setting criteria for what is or is not acceptable practice.

Canadian Association of Accredited Mortgage Professionals (CAAMP)
CAAMP is the national organization representing Canada’s mortgage industry and administers the Accredited Mortgage Professional (AMP) designation.

CAAMP’s Code of Ethics
A code of conduct for CAAMP members designed to increase professionalism and decrease the likelihood of fraud.

Caisses Populaires
Credit unions as they are known in Québec. See credit union.

Canadian Residential Appraiser (CRA)
This designation is awarded by the Appraisal Institute of Canada and grants those with the designation the right to valuate individual, undeveloped residential sites.

Capacity (5 Cs of Credit)
The ability of a borrower to repay a loan.

Capital (5 Cs of Credit)
The amount of money the borrower has invested into the property.

Capital Reserve Requirements
Specified amount of capital that is necessary for lenders to hold to back up the loans they grant. The amount is determined by government regulations.

Capped Rate Variable Mortgage
A variable rate mortgage on which the lender has set a limit to interest rate increases or decreases.

Cash Back
A mortgage feature that provides the borrower with cash back, as a percentage of the mortgage principal. It is generally used to cover closing costs.

Caution
A notice registered on title by a person claiming to have a proprietary interest (i.e. a right to call for or receive a transfer of charge) in land or in a charge (mortgage) of which he or she is not the registered owner. Cautions are registered to protect their interests. As a result, the registered owner of the land or charge cannot deal with the land or charge without consent of the cautioner.

Caveat Emptor
“Let the buyer beware”. Buyers must examine the goods or property they are buying since they buy at their own risk.

Central Bank
A body established by a national government to regulate currency and monetary policy on a national / international level. In Canada, it is the Bank of Canada; in the United States, the Federal Reserve Board; in the U.K., the Bank of England.

Certificate of Occupancy (Permit)
A certificate provided by the municipality that a property has been constructed under the authority of the issued building permit, has met the requirements of the building code, and is now suitable to be occupied.

Cessation of Charge
A discharge of a mortgage registered under the Land Titles Act.

Chain of Title
Chain of title refers to who has owned the land in the past. It is uncovered through the lawyer’s search. See extent of title.

Character (5 Cs of Credit)
The overall opinion on a borrower’s credibility to repay a loan; the borrower’s length of employment is a key measurement.

Charge
The name given to a mortgage document when title is registered under the Land Titles System. Also known as Certificate of Charge.

Chattels
Movable possessions, personal property (generally items that may be removed without injury to the freehold estate).

Chattel Mortgage
A mortgage given on chattels. This type of mortgage is usually given as collateral security to a mortgage on real estate. As an example, there may be a chattel mortgage on refrigerators and stoves in an apartment building.

Closed Mortgage
A mortgage agreement that cannot be repaid, refinanced or renegotiated until maturity, unless otherwise stated in its terms.

Closing Costs
Expenses, in addition to the purchase price of the home, that are payable upon the closing date.

Closing Date
The date on which a sale becomes final, funds are transferred from the purchaser to the vendor, and the new owner takes possession of a property.

Closing Process
The procedure of finalizing the sale, once the lender receives an accepted commitment.

Co-Applicant
One of two or more people applying together for a loan.

Co-Insurance
A sharing of risk between insurer and insured which depends on the relationship of the amount of the insurance carried versus the amount of insurance required at the time of the loss.

Collateral (5 Cs of Credit)
Guaranteed support for a loan, generally consisting of funds or real estate, that ensures added security to the lender. Collateral can also take the form of guarantees provided by third parties, i.e. guarantors.

Collateral Mortgage
The mortgage registered to document collateral security.

Collateral Security
Security given in addition to the direct security and subordinate to it.

Commercial Properties
Properties that are utilized for commerce or trade (e.g. stores, office buildings).

Commitment Letter
A letter / document issued by a lender reciting the basic terms of a loan which, when accepted by the borrower, forms a binding contract. The commitment may have conditions attached to it which must be met before the contract can be finalized.

Common Law
A legal system of principles and rules of action based on customs and common usages. It forms a major part of the law in many countries, especially those with a history as British territories, such as Canada. Common law developed from rulings by judges based on tradition, custom and precedent, with the idea being that there was a legal framework common to all cultures throughout time.

Common Mistake
Both parties make the same mistake in a term of the contract.

Completion Loan
The single disbursement of the total loan following satisfactory completion of the property.

Comparable Properties
Properties that contain similar characteristics to the subject property in an appraisal. Appraisals typically require three comparable properties. Comparables should have sold recently, be from the same or similar neighbourhood, be of the same style/age/condition, be of similar size and on similar lots. See Comparative Method of Appraisal.

Comparative Method of Appraisal
A method of appraisal that bases the value of the property on that of comparable properties.

Compound Interest
Interest charged not only on the principal sum but also on interest amounts charged, but not paid, in preceding periods that accumulate as new principal.

Condition
A clause or statement in the contract, which must be met to fulfil an obligation in the agreement.

Conditional Offer
An offer to purchase subject to conditions. These conditions may relate to financing, or the sale of an existing home. Usually a time limit in which the specified conditions must be satisfied is stipulated.

Condition Precedent
Clause in a contract that lays down factors and/or events that must occur for the agreement to be binding.

Condominium
Ownership of property whereby the owners hold negotiable title to their own unit. At the same time they share with fellow owners the title and cost of operation of the balance of the property (common elements) making up the condominium.

Consideration
Consideration means “some right, benefit or profit accruing to the promisor or some forbearance, detriment, loss or responsibility suffered by the promissee”. In other words, when dealing with contracts, the party trying to enforce the contract must have provided some benefit in return for the promise to complete the contract.

Contract
A contract is a legally binding agreement between two or more capable people for consideration or value, to do or not do some lawful and genuinely intended act.

Contract of purchase and sale
A contract involving the sale of a property that outlines the complete duties of the promisor and the promissee in the real estate transaction.

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

Conventional Mortgage
A conventional mortgage does not exceed 80% of the market value of the property. This means that the borrower must have 20% or more available for the down payment.

Convertible Rate
Mortgages with a convertible rate feature allow borrowers to fix the rate of their variable rate mortgage at any time with no penalty.

Co-Operative
A form of multiple ownership of real estate in which a corporation or business trust holds title to a property. Individual unit holders have the exclusive right to occupy their unit by lease but their investment in the corporation is by way of shares.

Co-Ownership
The idea that a property (present or future) can be held at the same time by several persons. The most common types of co-ownership are joint tenancy and tenancy-in-common.

Corporation
A separate legal entity which exists apart from a person but has the rights and liabilities of an individual.

Cost of Goods Sold (Income Statement)
The costs of purchasing or producing and manufacturing items sold.

Counter Offer
A new offer made in response to an offer received. This has the effect of rejecting the original offer and placing the counter offer on the table for consideration.

Covenant
An agreement in writing (in Common Law must be under seal) contained in a deed and creating an obligation. It may be positive, stipulating the performance of some action. It may be negative or restrictive, forbidding the commission of some act.

Credit (5 Cs of Credit)
The repayment history of the borrower.

Credit Report
A detailed description of the applicant’s credit records. This includes information provided by lenders concerning credit card payments and loans repayment history.

Credit Score
A single number that represents the information found in a borrower’s credit history. Equifax’s credit score is known as the Beacon Score, while TransUnion’s score is called the Empirica Score.

Credit Unions
Credit unions are lending institutions owned by their members. Membership is often based on a common bond of association such as employment or ethnic background.

Creditor
One to whom a debt is owed.

Cross Default Clause
Mutual clauses in two or more mortgages, which state that a default under one mortgage constitutes a default under the other(s).

Current Assets
Goods that can easily be turned into cash, sold or consumed within a year’s time.

Current Liabilities
Debts and obligations that are expected to be paid within a year, e.g. account payable, expenses, taxes.

Current Ratio
A measure that shows the ability of a firm to pay its current liabilities. It is calculated by dividing current assets by current liabilities.

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D

Damages
A financial solution determined by a court to compensate one party for injury by another party. Damages are intended to restore the parties to the state that would have existed if the contract had been performed.

Debt Service Ratios
Ratios that are used to compare borrowers’ debts to their incomes to determine if they can afford loans

Debt-to-Assets Ratio
This ratio identifies how much of a company’s operations are funded through borrowing. It is calculated by dividing total liabilities by the total assets.

Debt-to-Equity Ratio
Another ratio (see debt-to-assets) which assesses how much of a company’s operations are funded through borrowing, compared to the amount of money provided by the owners. It is calculated by dividing total liability by owners’ equity.

Debtor
One who owes a debt.

Dedication
The granting of land by the owner for some public use and its acceptance for such use by authorized public officials.

Deed (Certificate of Ownership)
A legal document in writing, duly executed and delivered, that conveys title or an interest in real property.

Default
Failure to fulfill contractual obligations.

Deficiency Judgement
A court order to pay the balance owed on a loan or mortgage if the proceeds from the sale of the security are insufficient to pay off the loan.

Deficiency Settlement
A monetary settlement by a mortgage lender or insurer when the net proceeds under a Power of Sale or Judicial Sale is less than the lender’s total claim.

Demand Letter
A letter sent by the lender to the borrower demanding immediate payment of all arrears, together with costs.

Demographic
Characteristics of a population such as size, growth, age, etc.

Deposit
A sum of money deposited in trust by the purchaser when making an offer to be held in trust by the vendor’s agent, lawyer or notary until the closing of the transaction.

Depreciation
The loss of value of an asset over time.

Direct Comparison
This type of appraisal, also referred to as the market data approach, bases property value on the current selling prices of similar properties.

Discharge Document
Once the receipt (acknowledging the completion of payment) has been processed and registered to the title, it becomes the discharge document.

Discharge of Mortgage / Charge
A legal document executed by the lender, and given to the borrower when a mortgage loan has been repaid in full, releasing him or her from all obligations and covenants contained in the mortgage.

Disclose Defects
To make known current or past imperfections. Failure to disclose defects will not affect consent, but will have the same effect as a misrepresentation.

Disclosure Statement
A written statement disclosing information about a specific loan and potential conflicts of interest required under various consumer protection acts.

Doctrine of Estates
It is the concept that specifies the various rights to land ownership in common law countries.

Doctrine of Privity
Also known as the “third party rule”. The doctrine of privity states that only parties to a contract are entitled to enforce a contract; third party beneficiaries do not have the right to take action.

Dollar Adjustments
These are estimates of the dollar amount allocated to each factor being compared to the subject property in an appraisal. For example a dollar adjustment would reflect how much extra a buyer would pay for a home with a finished basement compared to one with an unfinished basement. See percentage adjustment.

Dominant Tenement
The land which derives benefit from an easement over a servient tenement, as in a Right-of-way.

Double Up Option
A clause that may be included as part of an open mortgage contract, giving the borrower the opportunity to double the scheduled principal and interest payments.

Draft Mortgage Document
The foundation of the document is to specify all terms and conditions of the agreement. A lawyer must ensure its contents accurately list loan amounts, interest rates, proper legal descriptions, repayment contract and other factors that affect the loan agreement. The draft mortgage document is a last check on the mortgage required by some lenders.

Draws
The stages in which the borrower receives a partial loan disbursement in a builder’s loan.

Duress
The threat of force, false imprisonment or threats upon individuals to result in action or lack of action contrary to their wishes or interests. If duress is used to enter a contract, courts may find the agreement void and null.

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E

Easement (Servitude)
A right enjoyed by one landowner over the land of another.

Economic Life
The estimated period over which it is anticipated that a property or asset may profitably be used.

Economic Obsolescence
A loss of value over time resulting from external determinants such as heavy traffic, crime and unfavourable non-residential land uses.

Effective Gross Income (Income Property)
The annual income from a property, if fully leased, less an annual allowance for vacancies and bad debts.

Effective Interest Rate (for Mortgages)
The actual rate that the borrower must pay on a loan after the effects of compounding are considered. It is also known as the true rate. It differs from the nominal interest rate.

Egress
Going out (access to exit).

Electronic Funds Transfer (EFT)
The automatic transfer of funds from one account to another. Mortgage repayments can be made electronically directly to the lender.

Empirica Score
The name given to the credit score published by TransUnion. See also Beacon Score.

Encroachment
An improvement such as a wall, fence, or building that intrudes illegally upon another’s property.

Encumbrance
Outstanding claim or lien recorded against property, or any legal right to the use of the property by a person who is not the owner.

Equity (for Mortgages)
The difference between lending value (the purchase price or market value) and indebtedness.

Equity
The difference between the price for which a home could be sold (market value) and the total debts registered against it.

Equity Financing (Lending)
Investment in the equity in leveraged or unleveraged real estate by investors. These investors are usually institutional and may or may not have provided the mortgage financing.

Equity of Redemption
The right of a borrower to repay a loan that was in default and retain possession of the property.

Error and Omissions Insurance
Insurance for professionals with respect to claims regarding mistakes and absences that occur when acting on behalf of a consumer.

Escrow
Securities, instruments, money or other property deposited by two or more people with a third person, to be delivered on performance of a certain event.

Estates
An abstract legal right. Estates are interests and rights of ownership.

Estoppel Certificate
Legal certificate usually issued by a condominium corporation. It indicates details of the project and is given to the lender / purchaser or tenant. Delivery of the certificate prevents anyone from claiming a different set of facts at a later date.

Existing Mortgage
A mortgage loan that is already in-place when the property is being sold. The buyer may have the option of taking over assuming the mortgage or taking out a new one, depending on whether or not the mortgage is assumable.

Expandability
This is a feature available in some mortgages. It allows the borrower to increase or expand the principal on a first mortgage at the lender’s agreed upon interest rate.

Expert Software
This software, offered by Filogix, dominates the electronic mortgage delivery system market in Canada.

Expropriation
Expropriation involves taking private property for public use, with fair compensation to the owner, through the exercise of the right of eminent domain.

Extended Coverage Endorsement
An endorsement that may be attached to fire insurance policies. It generally includes coverage against the peril of windstorm, hail, explosion, riot, civil commotion, damage by aircraft or vehicles and smoke.

Extension Agreement
An agreement extending a loan past the original maturity date.

Extent of Title
The quantitative factors that determine and affect ownership of land. They include boundaries, improvements, area of land, etc. See chain of title.

Exculpatory Clause
A clause in a contract holding one party harmless in the event of some default.

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F

Face Rate
The contractual interest rate stated in a mortgage document or other financial instrument. Also known as the nominal rate.

Face Value
The face value of the loan is the amount of money the borrower promises to repay (at the contract rate of interest).

Fair Market Value
Fair market value, also known as market value, is the highest price reasonably expected for an interest in land when sold by a willing seller to a willing buyer after adequate time and exposure to the market.

Fee
The right of ownership of a property. In real estate, this is an inheritable estate in land.

Fee Simple
The highest estate or absolute right in real property. In common practice, fee simple is thought of as absolute ownership.

Fellow of the Real Estate Institute (Appraisal Specialist)
Awarded by the Real Estate Institute, the FRI(A) signifies quality and experience in appraisals and valuation of properties up to triplexes.

Fiduciary
An individual or a trust institution charged with the duty of acting for the benefit of another party as to matters coming within the scope of the relationship between them. The relationship between a trustee and a beneficiary is an example of a fiduciary relationship. The implication in this type of relationship is that the fiduciary must act solely for the other person’s benefit, because of the trust placed in him or her.

Final Order of Foreclosure
A judgement which extinguishes the borrower’s (defendant’s) equity of redemption and beneficial title goes over to the lender.

Financial Institutions Commission of British Columbia (FICOM)
An agency of the British Columbia provincial government that administers the Real Estate and Mortgage Brokers Department, the Credit Unions and Trust Companies Department, the Insurance Department and the Pensions Department.

Financial Services Commission of Ontario (FSCO)
FSCO regulates insurance, pensions, credit unions, caisses populaires, cooperatives, mortgage brokers and loan & trust companies in Ontario.

Finder’s Fee
A fee or commission paid by a lender to a mortgage professional for referring a mortgage loan.

Firm Offer
An offer to buy the property as outlined in the offer to purchase with no conditions attached.

First Mortgage
A mortgage registered before all others on title.

Fiscal Year
A business’ operating year. Some companies do not use the calendar year for their bookkeeping but run over a 12 month cycle, beginning and ending at another point in the year.

Five Cs of Credit
The ability and willingness of a borrower to pay is determined by five criteria:

• Capacity - The ability of a borrower to repay a loan
• Capital - The amount of money the borrower has invested into the property
• Character - The overall feeling regarding a borrower’s credibility to repay a loan; the borrower’s length of employment is a key measurement
• Collateral - Guaranteed support for a loan, generally consisting of funds or real estate, that ensures added security to the lender. Collateral can also take the form of guarantees provided by third parties, i.e. guarantors.
• Credit - The repayment history of the borrower

Fixed Assets
Fixed assets are typically long term in nature. The value of fixed assets to a company lies in their use in producing goods and services, rather than in their sale value. Fixed assets wear out over time or otherwise lose their usefulness.

Fixed Rate Mortgage
In a fixed rate mortgage the interest is determined and is set for the term of the mortgage. Fixed rate mortgages are most desirable when current interest rates are low.

Fixtures
Chattels that have been attached to the land or building so as to lose their character as chattels.

Forbearance
The waiving of a covenant in a mortgage document.

Foreclosure
A legal remedy available to a lender when there is default under any of the covenants in the mortgage. It deprives the borrowers of their equitable right to redeem.

Foreigners
In law, a foreigner refers to an individual who cannot read or speak the language of the contract. Foreigners are bound to agreements if they understand the nature of them. However, if an agreement is fraudulently interpreted by another party, then the contract is void.

Freehold Estate
An estate, or interest, in land or real property of uncertain duration, which is either of inheritance or for the life of the tenant. There are three (3) freehold estates, or interests: fee simple, fee tail and life estate.

Frustration
When unexpected events occur that render the contract impossible to be performed, the frustrated party is allowed to rescind the contract without penalty.

Full Review
The most comprehensive type of appraisal, it includes a review of both the internal and external features of the property as well as an assessment of neighbourhood factors.

Fully Amortized Mortgages
A mortgage that requires the constant regular payments, including both principal and interest components, for the life of the mortgage.

Fully Open Mortgage
An open mortgage that allows principal payments to be made in any amount, at any time, in addition to regular mortgage payment, without penalty.

Functional Obsolescence (in Real Estate)
A loss of value over time due to some characteristic(s) of a building becoming less valuable as styles change. A building with no central air conditioning will suffer from functional obsolescence as air conditioning becomes “the norm” for new buildings.

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G

Gale Date (for Mortgages)
The date on which interest is charged or compounded on the loan.

Garnishment
The legal attachment of a debtor’s wages, cash flow or assets by creditors. The party served with notice must comply with the Garnishee Order and forward funds to the creditor(s) named.

Genuine Consent
For genuine consent both parties must have a clear understanding of the details of the contract in question. Lack of genuine consent can void an agreement.

Good Title
A proof of ownership that is free of any legal holds or claims.

Grant
Technical term used in deeds of conveyance to indicate a transfer of an interest or estate in land.

Grantee
The party to whom an interest in real property is conveyed (the buyer).

Grantor
The person who conveys an interest in real estate by deed (the seller).

Gross Area
The total floor area of a building, measured from the outside of the exterior walls.

Gross Debt Service Ratio (GDS)
The percentage of the borrower’s income that is needed to make all payments for costs associated with housing. There is a maximum amount associated with this ratio to ensure that borrowers can afford to carry the debt.

Gross Income (Single Family)
The total annual personal income before deductions used in the calculation of an applicant’s debt service ratios.

Gross Leasable Area
The total floor area designed for tenant occupancy and exclusive use and that area on which tenants pay rent. This does not include common areas.

Gross Profit (Income Statement)
Total revenue of a business minus the cost of goods it sold.

Ground Lease
Contract for the rental of land, usually for a long term.

Group Insurance
A type of insurance plan in which premiums are set for a large group as a whole, as opposed to individual premiums set on personal characteristics. All mortgage creditor insurance plans are group insurance plans.

Guarantor
One who promises to pay a debt or perform an obligation contracted by another in the event the original borrower fails to pay or to perform as contracted.

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H

High Ratio Mortgage
A mortgage is considered to be high ratio when the loan-to-value is 80% or more. This occurs when the borrower’s down payment is 20% or less of the property value.

Highest and Best Use
This is the most probable, legally allowable, financially feasible use for the property in question. The appraiser includes an opinion on this as part of the appraisal report.

Holdback
The withholding of or non-advancement of a portion of a mortgage loan to maintain adequate security,
1. pending achievement of a performance requirement, or
2. as protection against liens.

Home Equity Financing
A type of mortgage refinancing in which the mortgage amount is increased to take advantage of the increased equity in a home.

Household Formation
Looks at how individuals group together to create a household. A household can be made up of an individual, a couple, or either one of these with children. Generally mirrors growth, aging, and divorce/separation patterns of the general population.

Hypothec
The appropriate civil law term that corresponds to the common law concept of ‘mortgage’.

I

ICI Properties
Investment, commercial, and industrial properties.

Illegal Contract
A contract that requires criminal acts and is thus void. The parties involved have no standing in court.

Illiterates
In law, an illiterate refers to an individual who cannot read or speak English. Illiterate individuals are bound to an agreement if they understand its nature. However, if it is fraudulently interpreted by another party, then the contract is void. See foreigner.

Immigration
To enter and settle in a country or area in which one is not native.

Immovable Property
The term used for real property (as opposed to personal property) in civil law.

Incapacity
Refers to the inability of people to make or engage in certain binding dispositions of their rights, such as entering into contracts.

Income Property
Real property that is used, or is capable of being used, for the production of annual income through leasing of the property.

Income Statement
Summarizes the findings of calculations between a company’s revenues and expenses. The income statement can be reported annually, quarterly or monthly. The income statement is generally broken down as follows:

• Revenue or Sales - Earnings from day-to-day operations of the business
• Cost of Goods Sold -The costs of production and manufacturing
• Gross Profit - Total revenue of a business minus the cost of goods it sold
• Operating Expenses -The total costs of the day-to-day operations
• Net Income from Operations - The amount that is remaining when you subtract all costs and taxes from total sales

Incorporated Companies
A form of business ownership in which the business is set up as a separate legal entity under the laws of the jurisdiction it operates in (provincial and/or federal). When an incorporated company is a party to a contract it is important to determine if the company exists, and if it has the capacity to become a party to the contract.

Indefeasible
That which cannot be forfeited or done away with.

Industrial Property
Property that contains units that are designed for manufacturing, production and warehousing.

Infant
A person younger than the age of majority (varies among provinces and territories).

Inflation
A general increase in the price level of goods and services.

Ingress
Going in; right of entrance.

Injunction
An order of a court of equity prohibiting an act or compelling an act to be done.

Inspection
The examination of a house by a building inspector selected by the purchaser.

Instrument
A formal written legal document.

Insurable Interest
An interest of such a nature that the occurrence of the event insured against would cause financial loss to the insured. Such interests, for example, may be that of an owner, a lender, a lessee or a trustee.

Insurable Value
The term is used conventionally to designate the amount of insurance that may be carried on destructible portions of a property to indemnify the owner in the event of loss.

Intangible Assets
Non-physical goods that have value to a business. Most common forms are business goodwill or legal rights to market a product.

Interest
An amount, expressed as a percentage, which a borrower agrees to pay on borrowed money, at a certain frequency as per an agreement with the lender.

Interest Accruing Loan
In this type of loan no payments on interest or the principal are paid until the end of the term. Only when the mortgage contract has expired are the payments due.

Interest Adjustment
The process of calculating compound interest payable on the amount borrowed between the day the loan is disbursed and the day the amortization period starts.

Interest Adjustment Date
The date from which interest is calculated at the rate and compounded at the frequency set out in the mortgage contract. It is normally the first day of the month following the closing of the mortgage transaction.

Interest Factor
The decimal equivalent for an interest rate on a unit amount for a certain period of time, calculated as the interest rate divided by the number of days in a year, times the number of days accrued.

Interest Only Loan
A loan in which the borrower only pays regularly scheduled payments on the interest to the lender and the principal remains the same during the life of the loan. The principal is repaid in full at the end of the loan’s term.

Interests Less than Estates, or Interests Less than Full Ownership
These describe the situation when a fee simple owner divides ownership according to the kind of use permitted or restricted upon the land.

Interest Plus Specified Principal Loan
Also known as a straight-line principal reduction loan. In this type of loan an equal amount of principal is repaid at every interest compounding period in addition to the interest that must be paid for that period.

Interest Rate
Interest rate is the percentage charged on outstanding loan balances.

Interest (Unities)
All joint tenants must have the same interest (extent, nature, duration) in the land.

Interim Financing (Construction Financing)
Interim loans are used to provide construction financing until the permanent loan can be funded.

Internal Rate of Return
That rate at which the present worth of all present and future investment costs equals the present worth of all present and future investment benefits.

Intoxication
see Insanity. This is another form of incapacity in contract law.

Investment Property
Property which is rented out to individuals who do not own the property, and pay rent to the owner of that property. The opposite of an owner occupied property.

Invitation to treat
It is an action by one party inviting others to make an offer. It is not a contract. An invitation to treat may be seen as a request for expressions of interest.

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J

Joint Tenancy
An ownership of property by two or more people, each of whom has an undivided interest subject to the right of survivorship.

Joint Venture
An arrangement under which two or more people or businesses go into a single venture as partners.

Judgement
The official and authentic decision of a court of justices upon the respective rights and claims of the parties to an action or suit being litigated and submitted to its determination.

Judicial Sale
A legal remedy available to a lender when a mortgage is in default. With this remedy any excess money from the sale of the property over and above the mortgage debt is distributed to the borrower.

Junior Mortgage
A mortgage that is subsequent to the claims of the holder of a prior (senior) mortgage.

K

Known Defects
Problems associated with the title that are known before the policy is taken out.

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L

Land
Includes not only the ground or soil, but also everything that is attached to the earth, whether by course of nature, such as trees and herbage, or by the hand of man, such as houses and other buildings. It includes not only the surface of the earth but everything under it and over it. Condominium Acts divide land horizontally thereby limiting the vertical ownership.

Land Titles System
This is a system of land registration under which the registrar, or master of titles, passes on the validity of the mortgage instrument, determines its legal effect, and the Government guarantees title.

Land-use Regulations
Municipal level regulations that restrict and regulate the types of buildings and uses allowed on a property.

Late Charge
An additional charge a borrower is required to pay as penalty for failure to pay a regular instalment when due.

Latent Defects
Present or potential imperfections or blemishes that are not readily evident.

Lawyer’s Report (or Opinion) on Title
The Lawyer’s Report outlines the mortgage details, including the results of the title search, tax details, fire insurance and any other related insurance coverage details, verification that title insurance has been obtained (if applicable), and any other relevant facts (i.e. easements, restrictions, liens).

Lead Lender (Mortgages)
A financial institution that heads up a financial consortium or syndicate of two or more lenders to provide funds for a mortgage.

Lease
A contract between landlord (lessor) and tenant (lessee) for the occupation or use of the landlord’s interest in a property by the tenant for a specified period of time and for a specified consideration (rent).

Lease Guarantee Insurance
Insurance that protects the owner of leased commercial and industrial real estate from loss of rental income through the failure of a tenant to make rental payments.

Leasehold
An estate or interest in an estate in real property held by virtue of a lease for a term of years. A leasehold is considered personal property.

Leasehold Mortgage
A mortgage given by lessees on the security of their leasehold interests in the land.

Legal Description
The written geographical description of a property (metes and bounds) as described in the land register.

Legal Intent
This means that for an individual to be bound by a contract, that person has intended to create a commitment.

Lending Value
The property value for mortgage purposes. Usually, the lesser of appraised value or sale price.

Lessee
Tenant.

Letter of Instruction
A letter of instruction will call for the lawyer to act for the lender and administer the distribution of the mortgage loan.

Liabilities
A business’ or a borrower’s debts and legal obligations.

Lien
A claim on real or personal property for the payment of some undischarged debt or duty.

Life Estate or Interest
An interest in land that gives exclusive possession of the land for a lifetime only.

Limited-Restricted Appraisal
A type of appraisal that provides only an exterior inspection for transactions that are somewhat riskier than standard, e.g., in a new or unknown market, or in mixed use neighbourhoods but not high risk. Also known as a drive-by appraisal.

Liquidity
The readiness or ease with which an asset can be converted to cash.

Listing Agreement
The listing agreement is a contract between a seller and a real estate agent or broker. It sets out the conditions of the listing. A listing agreement generally includes, but is not limited to, the following: the length of the listing period, the desired sales price and the amount of the commission.

Loan Companies Act
A federal act regulating loan companies.

Loan Qualification
Also known as qualifying the borrower. Loan qualification is the process of analyzing the buyer’s eligibility for financing.

Loan-to-Value Ratio (LTV)
The amount of the mortgage loan compared to the value of the property. This ratio is calculated by the lender prior to providing the loan. The results of this calculation help to determine whether or not the applicant will qualify for a loan and whether the application, if approved, will be for a conventional loan or a high ratio loan.

Long Term Investments
These investments are similar to fixed assets but typically do not depreciate in value.

Long Term Liabilities
Debts and obligations that must be repaid over a long period of time, e.g. mortgages.

Lump Sum Payment Option
A clause that may be included in an open mortgage allowing the borrower to prepay a portion of the principal if desired and in accordance with the specific terms of the contract.

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M

Marketable Title
A title that may not be completely clear but has only minor objections that a well-informed and prudent buyer of real estate would accept.

Market Data Approach
One type of appraisal. See direct comparison and methods of appraisal.

Market Value Appraiser (MVA)
A designation awarded to practicing realtors who meet specific experience and education requirements by the Canadian Real Estate Association, the MVA demonstrates an acute sense of local markets and values that enables them to provide realistic residential appraisals to lenders.

Marketing
The process of planning, promoting, and distributing ideas to encourage consumers to purchase a product and/or service.

Marketing Environment
The marketing environment includes economic, demographic, sociological, competitive, political and regulatory forces in the target market.

Marketing Strategy
An organized, detailed plan to meet a specific set of goals. It involves a combination of product concepts, a pricing scheme, promotion ideas, and a distribution plan.

Maturity
The end of the mortgage’s term.

Maturity Date
The final day of the term of the mortgage, on which the balance of the mortgage owing becomes due.

Maximum Loan Amount
The maximum dollar that a lender is willing to fund. It is expressed as a percentage of the value of the property to be purchased when using the loan to value ratio.

Metes and Bounds
A system of land description whereby all boundary lines are set out using terminating points and angles. ‘Metes’ refers to a limit or limiting mark and ‘bounds’ refers to the boundary lines.

Methods of Appraisal
There are three methods of appraisal:

1. Direct Comparison
   Also known as market data approach. Direct comparison generates a property value based on the current selling prices of similar properties.
2. Cost Approach
   An estimation of land value and the cost of replacing the building less the depreciation of the property in question.
3. Income Method
   This method is used for valuating income-producing properties such as apartment complexes, plazas and commercial units.

Migration
The movement of people to or from one country or area to another.

Mill Rate
A rate which, when multiplied by each one thousand dollars of property assessment, gives the annual real estate taxes.

Minor
See infant.

Misrepresentation
A statement of false facts, generally occurring during negotiations prior to contract creation. Misrepresentation typically induces the other party to enter the agreement.

Mistake
An error in the terms of a contract or agreement. There are three types of mistake:

1. Common Mistake
   Both parties make the same mistake in a contract.
2. Mutual Mistake
   Each party makes a different mistake on the same contract.
3. Unilateral Mistake
   One party is mistaken while the other party is aware of it and makes no attempts to rectify it.

Moratorium (Mortgage)
A period during which a borrower is granted the right to delay fulfillment of an obligation.

Mortgage
A legal method by which a borrower can pledge property to a lender as security for a debt. In Quebec, this is referred to as a hypothec.

Mortgage Agent
An individual authorized to deal in mortgages on behalf of a mortgage broker.

Mortgage Averaging
A method of determining a weighted mortgage rate. Mortgage averaging is used when calculating an “average” rate for a first and second mortgage, each of which has a different mortgage rate.

Mortgage Banker
One who originates mortgages with the intent to sell them to permanent investors. The mortgage banker does so under the understanding that it will service these loans for the investor.

Mortgage-Backed Securities (MBS)
An MBS represents an undivided interest in a pool of insured residential first mortgages. As mortgages, these financial instruments are secured by the value of the underlying real estate. NHA MBS carry the CMHC Timely Payment Guarantee and represent an obligation of the Government of Canada.

Mortgage Bond
In recent years, there has been an increased activity in mortgage bonds, mainly for larger loans. When a very large loan is required, the number of potential lenders is limited. A loan in the category of $50,000,000 for instance, is usually made by the mortgage bond method that is really a device for dividing up the loan. A bond could be issued for an amount as low as $100,000 and sold to various pension funds through investment dealers on a public issue, or more commonly sold as a private placement issue.

Mortgage Broker
An individual authorized to deal in mortgage and lend money using real estate as a security.

Mortgage Brokers Act
A piece of legislation that regulates the activities of mortgage brokers across Canada. In Ontario, for example, the Mortgage Brokers Act regulates the activities of mortgage brokers in that province.

Mortgage Consultant
See mortgage agent.

Mortgage Creditor Insurance
This type of insurance protects the borrower, by relieving the borrower of the need to make mortgage payments should unforeseen circumstances make it impossible for them to do so (e.g. serious illness or death).

Mortgage Default Insurance
A type of insurance which protects the mortgage lender in case the borrower defaults on the mortgage payments.

Mortgage Fraud
Any material misstatement, misrepresentation or omission relied upon by a lender or insurer to underwrite, approve, fund or insure a mortgage loan.

Mortgage Impairment Insurance
A master insurance policy carried by mortgage lenders that provides them with insurance proceeds in the event of an otherwise uninsured loss of a property securing their debt. Some policies also insure losses resulting from the borrower’s failure to pay real estate taxes.

Mortgage Life Insurance
A form of reducing term insurance recommended for all mortgages. If you die, have a terminal illness, or suffer an accident, the insurance can pay the balance owing on the mortgage. The intent is to protect survivors from the loss of their home.

Mortgage Originator
A mortgage professional engaged in the acceptance, completion and/or submission of the mortgage loan applications to an underwriting lender.

Mortgage Portfolio
The aggregate of mortgage loans held by an investor.

Mortgage Refinancing
The replacement of current mortgage financing with new financing, usually to take advantage of different interest rate or financial conditions or the existing equity in the property.

Mortgage Representative
Employees of a financial institution who originate mortgages. Unlike originators operating outside of lending institutions and are regulated provincially, institutional originators, if working for federally incorporated lenders, are governed under the Office of the Superintendant of Financial Institutions (OSFI).

Mortgage Servicing
The process of managing the administrative duties resulting from the mortgage contract.

Mortgage Specialist
See mortgage agent.

Mortgage Term
The length of time the interest rate is guaranteed for a mortgage. Mortgage terms normally range from 6 months to 5 years or more, after which time the borrower can either repay the balance of the principal owing or re-negotiate the mortgage at current rates.

Mortgaged Out
The situation existing when the total mortgage debt equals or exceeds the market value or cost of the property.

Mortgagee
The lender or creditor.

Mortgagor
The borrower or debtor.

MorWEB
The electronic mortgage application system available through Marlborough Stirling.

Movable Property
The term used for personal property (as opposed to real property) in civil law.

Municipal Property Assessment Corporation (MPAC)
MPAC is responsible for administering a consistent, Ontario-wide property valuation to property owners, municipalities, and the Province of Ontario. It operates using an automated valuation model (AVM).

Mutual Mistake
Each party makes a different mistake on the same contract.

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N

National Housing Act (NHA)
A federal act, administered by CMHC, which seeks to assist the private market in producing affordable housing to meet the needs of most Canadians.

Net Income/Net Loss from Operations (Income Statement)
The amount that is remaining when you subtract all costs and taxes from total revenues.

Net Worth
The difference between what you own (assets) and what you owe (liabilities).

No Cost Switching of Payment Option
This option allows the borrower to change the payment schedule (to either monthly/semi-monthly/bi-weekly/weekly) in an open mortgage at no charge.

No-Doc
Refers to ‘no document necessary’ when confirming past income earnings.

No-Fault
Title insurance claims are paid on a no-fault basis, which means that the insurer cannot argue negligence in order to deny coverage.

Nominal Interest Rate
Also known as the stated rate. This is the interest rate used to calculate interest payments. It differs from the effective interest rate.

Non-Conforming Use
A property that is being used in contravention of current zoning by-laws but is permitted to remain because it pre-dates the enactment of these zoning by-laws.

Non-Disturbance Agreement
An agreement that permits a tenant under a lease to remain in possession despite any action by a lender.

Non Est Factum
Latin for “it is not my deed”. A claim of ‘non est factum’ means that the signature on the contract was signed by mistake or without knowledge of its meaning.

Notes to Financial Statements
The part of a financial statement that includes an auditor’s or accountant’s opinion on the statements and other relevant notes pertaining to the company’s operations and the specific methods of accounting used.

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O

Offer to Purchase
A written contract outlining the terms under which the buyer agrees to purchase the property. There may be conditions attached to the offer, for example, the offer may be conditional on the buyer arranging mortgage financing or selling a current home.

Offeree
The individual or group who receives an offer to enter into a contract.

Offeror
The individual or group who presents something to another for acceptance or rejection.

Open Mortgage
An open mortgage allows a borrower to repay any amount of the principal at any time without notice or penalty. Mortgages may be partially open, having clauses that allow partial pre-payment at specified times, or in specified ways. For example,

• Double Up Option
  The opportunity to double the scheduled principal and interest payments.
• Lump Sum payment Option
  The choice to prepay a portion of the principal.
• No Cost Switching of Payment Option
  This option allows the borrower to change the payment schedule (monthly/semi-monthly/bi-weekly/weekly).
• Skip Payment Option
  This alternative grants the borrower the ability to skip a monthly payment without the mortgage going into default.

Operating Expenses (Income Statement)
The total costs of the day-to-day operations of a business.

Operational Costs (Mortgage Fraud)
Costs associated with collections, legal commitments and foreclosure, property repair, management, and resale of homes. See reputational costs and public costs.

Option Agreement
This is an agreement in which the seller has the right, but not the obligation, to undertake an action. This act allows the offer to be kept open for a period of time under a separate contract.

Owner Occupied
The owner of the land also resides in that property. The opposite of an investment property.

Owner’s Equity
The amount left over for the firm’s owner(s) if the company’s assets were used to pay off all its liabilities.

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P

Par
An expression used when a mortgage is sold or purchased for the outstanding balance without premium or discount.

Pari Passu
“On an equal basis”. When mortgages are syndicated, the lenders participate equally. No one party has preferential access to gains or is able to opt out of losses. In company stock, it refers to equal ranking of a company’s preferred shares.

Partial Discharge
A release from the mortgage of a definite portion of the mortgaged lands. A partial discharge may be given after the borrower has prepaid a specific portion of the mortgage debt.

Partially Amortized Mortgage
A mortgage that protects both borrowers and lenders from the risk of unexpected interest rate fluctuations. The loan matures on a short term basis, at which time the full amount of the outstanding amount must be either repaid or refinanced at current interest rates.

Participation
Income Participation: The lender’s right to share in the annual income produced by the property over the term of the mortgage, in addition to receiving debt repayments on the mortgage.

Equity Participation: Partial ownership of income or investment property given by the owner to the lender as part of the consideration for making the loan. There may be an indefinite term and may endure beyond the maturity of the loan. It need not involve any equity investment by the lender beyond the amount of the mortgage loan.

Partnership
A business co-owned by two or more people. This form of ownership is less common than a sole proprietorship or a corporation. Like a sole proprietorship, a partnership does not exist as a separate legal entity. Each partner is taxed on his or her share of any profits.

Performance
The actions required by a contract or agreement to fulfill one’s obligations. The contract is considered completed following the last act of performance.

Patent Defects
An obvious flaw.

Percentage Adjustments
These are estimates of differences between each factor being compared to the subject property, expressed as a percentage of the sales price in an appraisal. For example, a buyer might pay 10% more (calculated as a percentage of the selling price) for a home with a finished basement compared to one with an unfinished basement. See dollar adjustment.

Perfecting Title
The elimination of any claims against title.

Performance Bond
A bond issued by a duly incorporated surety company. It covers faithful performance of the contract and payment of all obligations arising under the contract

Permanent Loan
An amortizing loan on completed property, intended to remain on that property over the full amortization period. The terms and conditions of the loan usually change during that period.

Personal Liability
The borrower’s personal assets are pledged, or subject to claim, in addition to a primary security.

Personal Property
Alternatively referred to as ‘chattels’. Personal property is more temporary and more destructible than real property.

PIT
The three costs included in the calculation of the gross debt service ratio, namely principal, interest and taxes.

Plot Plan
A drawing showing a layout of improvements on a site, including their location, dimensions and landscapes. It is generally a part of the architectural plans.

Portable Mortgage
A mortgage with an option that allows a buyer to transfer a current mortgage to a new property (typically subject to credit approval and a property appraisal).

Possession (Unities)
Each interest is an undivided interest in the whole of the property.

Postal Acceptance Rule
This rule provides guidelines on how to accept offers. Basically it indicates that an acceptance should be delivered in the same manner as the offer is made and defines when that acceptance goes into effect. For example, if an offer is made by non-instantaneous means such as mail, then the acceptance is effective when it is put in the mailbox, rather than when it is received.