Mortgage Terminology

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 consisting of a synopsis of every recorded instrument affecting the title to that land arranged in chronological order of recording. Land Title System: A chronological listing of every recorded instrument currently affecting title to that land.

Acceleration Clause - A clause in a mortgage which provides that where default has occurred in making any payment of moneys due under a mortgage or in the observance of any covenant in a mortgage and under the terms of the mortgage, by reason of such default, all moneys secured thereby become due and payable.

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

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

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.

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

Blended Rate - A new interest rate on an increased mortgage loan which is derived from a formula which takes into account the interest rate and remaining term on the existing loan and the derived rate and term on the new funds being advanced.

Canada Housing Trust - A special purpose vehicle (SPV) created to issue Canada Mortgage Bonds (CMB) and utilize the proceeds to purchase mortgages packaged in newly issued NHA Mortgage Backed Securities.

Canada Mortgage Bonds - A bullet pay type of bond investment. Issued by Canada Housing Trust and guaranteed as to full and timely payment by CMHC, these bonds feature semiannual interest payments and principal at maturity.

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.

Debt Coverage Ratio - The percentage of the borrower's income used for monthly payments of principal, interest, taxes, heating costs and condo fees (if applicable).

Easement - A right enjoyed by one landowner over the land of another.

Face Rate - The contractual interest rate stated in a mortgage document or other financial instrument.

Fee Simple - The highest estate or absolute right in real property.

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

Holdback - The with holding 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.

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 mortgagee, a lessee or a trustee.

Interest Rate - interest Rate is the percentage charged on outstanding loan balances.

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

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).

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

Market Value - The highest price which a buyer, willing, but not compelled to buy, would pay, and the lowest a seller, willing, but not compelled to sell, would accept.

Mortgage - Any charge on real property as security for a loan.

Mortgagee - The lender or creditor. A mortgagee goes into possession when he or she deprives the mortgagor of the management and control of the mortgaged property.

Mortgagor - The borrower or debtor.

Net Lease - A lease that provides that all expenses attributable to the real estate are paid by the tenant. Local terminology may require some expenses to be paid to the landlord.

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: offer being subject to arranging the mortgage or selling a home.

Participation
Income Participation: The lenders right to share in the annual income produced by the property over the term of the mortgage, in addition to receiving debt service 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. It may have 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.

Prime Rate - The rate at which financial institutions lend to their best customers.

Quiet Enjoyment - The right of a lessee (tenant) to use the leased property without interference from the lessor (owner).

Real Property - The interests, benefits, and rights inherent in the ownership of the physical real estate. It is the bundle of rights with which the ownership of real estate is endowed, with limitations, and does not include personal property. Often called 'property", "real estate", or "land".

Second Mortgage - A mortgage placed on real property which is already encumbered with one mortgage. Determination of first, second, third mortgage is by priority or registration (time and date).

Standing Mortgage - A mortgage that provides for equal, regular lump-sum payments of principal, usually quarterly, plus accrued interest.

Take-out Loan - A first mortgage loan that is committed and expected to be made upon completion of a property with the loan proceeds to be used to repay an interim or construction loan.

Term Mortgage - A non-amortizing mortgage under which the principal is paid in its entirety upon the maturity date. Sometimes called a straight loan.

Total Debt Service Ratio (Single Family) - The ratio of an amount equal to the annual mortgage charges and acceptable installment account payments to an amount equal to the effective gross annual income of the borrower.

Usury Rate - The maximum legal rate for interest, discounts, or other fees that may be charged for the use of money.

Vender's Lien - A notice registered on title by the vendor, protecting the vendor for the unpaid balance of the purchase price. It is usually collaterally secured by a mortgage.

Writ - A form of written command in the name of sovereign, state, court, etc. issued to an official or other person and directing him or her to act or abstain from acting in some way.

Yield to Maturity - A percent returned each year to the lender on actual funds borrowed, considering that the loan will be paid in full at the end of maturity.

Zoning - The uses to which property may be put in specific areas, as specified by municipal authorities.