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Below that is a group of realestate abbreviations and their meanings. Amortization. The number of years that it will take you to pay off a mortgage. Amortization periods are usally 15, 20, or 25 years in length. Appraisal. This is the process to try to determine the lending value of a property. Assuming a mortgage. Taking over the obligations of the previous owner's mortgage when you buy a property. Capped rate. An interest rate with a pre-determined ceiling. These are usually associated with the variable-rate mortgages. Closed mortgage. A mortgage which has a fixed interest rate (usually lower than an open mortgage rate) and a set, unchangeable term. Closing costs. Costs that are in addition to the purchase price of a property and which are payable on the closing date. Examples include legal fees, land transfer taxes etc. Closing date. This is the date on which the sale of a property becomes final and the buyer can take possession of the said property. Convertible mortgage. A mortgage that you can change from short-term to long-term, depending on your financial needs. Down payment. The money that you pay up front for a house. Down payments range from 10%-25% of the total value of the home. High-ratio mortgage. The mortgage you obtain when you have less than 25% of the total purchase price to put down as your down payment. In Canada these types of mortgages are to be insured (through other sources such as CMHC). Home insurance. Insurance to cover both your home and its contents in the event of fire, theft, vandalism etc. (also referred to as property insurance). This is different from mortgage life insurance, which pays the outstanding balance of your mortgage in full if you die. Home Inspection. The process of having a qualified home inspector identify potential repairs to the property you are interested in and their estimated cost. Interest adjustment. This is the amount of interest due between the date your mortgage starts and the date the first mortgage payment is calculated from. Sometimes there is a gap between the closing date of your home purchase and the first payment date of your mortgage. Let's say that the closing date on your new house is August 10th - but your mortgage payments are on the 15th of each month (so your first payment is calculated from August 15th and paid on September 15th). That leaves four days (August 10th to 14th) that are not accounted for in your first mortgage payment. Interest adjustment is the extra payment that makes up for these four days; the payment is generally due on your closing date. You can avoid all this by arranging to make your first mortgage payment exactly one payment period (e.g., one month) after your closing date. Land transfer tax. A tax that is levied (in some states/provinces) on any property that changes hands. Legal fees. Some of the legal costs associated with the sale or purchase of a property. It's in your best interest to engage the services of a real estate lawyer even if you are selling FSBO. Lump sum payment. An extra payment that you make to reduce the amount of your mortgage. This is the same as pre-paying, which you cannot do if you have a closed mortgage. Mortgage. A financing or loan or monies borrowed to buy property. The collateral is the property itself. Mortgage insurance. This form of insurance pays the outstanding balance of your mortgage in full if you die. This is not the same as home or property insurance, which insures your home and the contents inside the home. Mortgage rate. The percentage interest that you pay on top of the loan principal. For example, you may take out a mortgage of $200,000 at a rate of 6%. Your monthly payments will consist of a portion of the original $200,000, plus 6% interest. Offer to Purchase. A legally binding agreement between you and the person who owns the house you want to buy. It includes the price you are offering, what you expect to be included with the house, and the financial conditions of sale (your financing arrangements, the closing date, etc.). Open mortgage. A mortgage which you can pay off, renew or refinance at any time. The interest rate for an open mortgage is usually higher than a closed mortgage rate. Porting (Canada). Transferring an existing mortgage from one home to a new home when you move. This is known as a "portable" mortgage. Pre-approved mortgage. A written agreement stating that you will get a mortgage for a set amount of money at a set interest rate. Getting a pre-approved mortgage allows you to shop for a home without worrying how you'll pay for it. Prepaid tax and adjustments. The amount you will owe if the person selling you the home has prepaid any property taxes or utility bills. Pre-payment. Repaying part of your mortgage ahead of schedule. Depending on your mortgage agreement, there may be a penalty for pre-paying. This would usally be 2-3 months of payments. Property survey. This is a legal description of your property and its location and dimensions. An up-to-date survey is usually required by your mortgage lender. Refinancing. Increasing the amount of your current mortgage, at a new interest rate. The term of the new mortgage must be equal to or greater than the term remaining on your current mortgage. Renewal. Once the original term of your mortgage expires, you have the option of renewing it with the original lender or paying off all of the outstanding balance. Sales taxes. Taxes applied to the purchase cost of a property. Some properties are exempt from sales tax and some are not. For instance, in Canada residential resale properties are usually GST exempt, while new properties require GST. Service charges. The extra costs incurred when hooking up hydro, gas, phone, etc. to a new address. Term. The length of time during which you pay a specific rate on the mortgage loan (i.e., the number of years in your mortgage contract). This is different from the amortization period. A mortgage is usually amortized over 20-25 years, with a shorter term (typically 6 months to 5 years). After the term expires, the interest rate is usually renegotiated with the lender (your bank, for example). Variable rate mortgage. A mortgage with an interest rate that changes with the market. The rate changes each month, meaning that the portion of your monthly payment that goes towards interest may go up or down each month. However, your total monthly payment will probably stay the same.  Abbrevations & Terms ARV - After-Repaired Value |
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