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Canadian Mortgage Glossary Terms

Here is a simple glossary of Canadian mortgage lending and finance related terms. To find the term you are looking for quickly, simply click on the letter below.

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

  1. The act of giving up or proscribing completely. Yielding, ceding or giving up totally, especially ceding permanent control to another.
  2. The voluntary relinquishment or surrender of property, or an interest in property, without any intention of resuming enjoyment or possession, or of vesting it in anyone else. The disclaiming of a right, expressly or by implication, without leaving any evidence of an intention to reclaim that right. Thus, abandonment requires two elements, an intention to relinquish a right or property and the act by which the intention is carried into effect (Roebuck v. Mecosta County Road Comm’n, 59 Mich App 128, 229 NW.2d 343, 345-6 (1975)).

Abstract of Judgment
When a judgment is made in a lawsuit, a court document is drafted that states how much the person who lost the lawsuit owes. This document can create a lien or a claim on property when it is filed with the country recorder where the property is owned.

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 Titles System: A chronological listing of every recorded instrument currently affecting the 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.

Account Agreement
An account agreement is a set of conditions that outline both your rights and responsibilities and those of the bank concerning your bank account. This agreement must be read, agreed upon, and signed before your account is activated.

Accounting Method
Accounting method refers to how individuals or businesses keep their financial records. A common accounting method for both individuals and small businesses is the cash method, even though businesses with inventory are required to use the accrual method. See also "Accrual Method" or "Cash Method."

Accounts Payable
Money owed by a business for goods and services provided without pre-payment.

Accounts Receivable
Money owed to a business by purchasers who are not required to make a payment prior to receiving goods and/or services.

Accredited Mortgage Professional
The Accredited Mortgage Professional (AMP) is Canada’s national designation for mortgage professionals. Launched in 2004, the AMP was developed by CIMBL as part of an ongoing commitment to increasing the level of professionalism in Canada’s mortgage industry through the development of educational and ethical standards. Consumers should know that the AMP designation sets a single national proficiency standard for Canada’s mortgage professionals.

Accrual Method
In business accounting, the accrual method refers to reporting income in the year it was earned along with any expenses incurred, rather than reporting the income and expenses when payment is received or made. For example, if you renovated a basement and billed the customer in December 2004, the amount you charged is reported in 2004 as income even if the customer did not pay until the following year. Also, if you own a business that keeps an inventory, you are also required to use this method of business accounting.

Accrue
To gather together an amount often over a period of time.

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

Action for Possession
A legal remedy available to a mortgagee when a mortgage is in default.

Action on the Covenant for Payment
A legal remedy available to a mortgagee when a mortgage is in default.

Acquiring Financial Institution
To receive credit for credit card transactions, merchants must have and maintain an account with an acquiring financial institution so that daily credit card totals can be deposited into the merchant’s account minus any fees owed to the acquiring financial institution.

Acquisition Fee
Some leasing companies charge a fee for initiating the original loan. This is similar to mortgage lenders who charge additional percentage points as an origination fee. This fee is often not specified in a contract, but is included in the cost when calculating monthly payments.

Acre
A plot of land 180 by 242 feet is equal to one acre or 43,560 square feet.

Acre Foot
An acre foot is equivalent to 325,851 gallons of material (water or other) that is needed to cover an acre of land one foot deep.

Act of God
This term is generally used in insurance policies and refers an event caused by natural forces that results in damage to property. Natural forces can include hail, rain, tornados, lightning, floods, and earthquakes.

Active Income
Active income refers to wages, tips, and profits from your business or employment that you partake in. It also includes portfolio income such as interest and dividends, but you cannot usually offset active income with passive losses. See also "Non-passive Income."

Actual Age
The actual age (usually in years) of a structure since building was complete.This differs from effective age.

Actual Cash Value
The monetary amount that a broker or dealer has invested in a used vehicle. This cash value is used for the purchase and repair of the vehicle.

Add-on Interest
Interest that is calculated at the beginning of the loan and added to the principal amount owing. This means that the added interest must also be repaid, even if the loan is paid off early.

Addendum
A change, revision, or update made to a contract.

Additional Principal Payment
You can pay extra money in addition to your required loan payment to help pay off the principal loan amount faster. By making the extra payment, you also reduce the amount of interest paid.

Additional Property
A property that is owned by the person that is not being financed.

Adjustable Rate Mortgage (ARM)
An "Adjustable Rate Mortgage" or ARM refers to the type of mortgage loan where the interest rate and monthly payments can be adjusted to rise and fall with market conditions. The interest rate and payments can be adjusted as frequently as once a month or you can adjust the principal loan balance or the loan term to reflect the rate change.

Adjusted Balance
Some credit card companies use the "adjusted balance" method for applying finance charges. This means the credit card company will subtract all of the payments made during the month and then add the finance charges to the remaining balance.

Adjusted Basis
"Adjusted Basis" refers to the amount used to determine profit or loss from a sale or property trade. To calculate this amount for an asset, take the original amount paid, add improvement and assessment costs, and then subtract deductions. Deductions can include down grading, depreciation, or depletion.

Adjusted Cost Basis
To calculate the "Adjusted Cost Basis," take the amount paid for the item, plus the amount paid for improvements, and then subtract the losses and depreciation. The profit or loss is determined when the owner sells the item, and determines the difference between the sale price and the adjusted cost basis.

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

Adjustment Period
The period of time between interest rate changes in an adjustable-rate mortgage.

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.

Adverse Use
Using someone's property without their verbal or formal written permission.

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.

Affinity Card
A type of credit card (usually Visa or MasterCard) that has an endorsement or sponsorship agreement with an organization, charity, or non-profit group in which a percentage of the sales transactions made using the card go to that organization. The logo or organization name is generally displayed on the credit card.

Agency
An agency 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.

Agency Closing
The use of a title company or agency to supervise the closing meeting where the property is transferred and mortgage is finalized.

Agent
A person who acts on behalf of another person (or client) when dealing with a third party transaction. In real estate, an agent is a person who conducts property transactions on behalf of sellers and buyers. The agent usually works on commission or for a pre-determined fee.

Agreed Boundary
In the event of a dispute between neighbouring property owners, property lines or an agreed boundary can be drawn to settle the dispute.

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 forth in that agreement.

Agreement of Sale / Balance of Sale
A method of financing a sale, but different from a mortgage. The buyer does not receive a deed nor does title pass to him or her immediately; rather he or she receives a contractual interest on a time basis. Payments are made directly to the seller who in turn is still responsible for any outstanding mortgage on the property. The seller who still holds title may mortgage their remaining equity.

Air Miles
Air Miles is a popular and recognized reward program that works with airline-affiliated co-branded cards. This means that the cardholder earns Air Miles (points) each time he or she uses the card. The earnings are then transferred on a monthly basis to the cardholder’s account and can be redeemed for flights, travel discounts, or other merchandise.

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 which may or may not be registered on title by the lender in which the terms of the registered mortgage are changed.

Alimony
Alimony is a monthly payment made to an ex-spouse usually as determined by the courts. If you are receiving alimony, payments must be received continuously for one year to qualify as income for a loan, mortgage or otherwise.

Allowances
Money set aside by builders for amenities or services such as driveways, landscaping, carpeting, and fixtures. These amenities are usually standard, but they can have optional designs.

Alternative Minimum Tax
This tax primarily affects high-income taxpayers who shelter some of their income from taxation through certain tax preference items or deductions. It is often referred to as AMT. If your income meets the limit, then you have to recalculate your tax amount that is due based on the separate alternative minimum tax rates and tables.

Alternative Mortgage
When a home loan is not a standard fixed-rate mortgage, it is considered an alternative mortgage.

Amenities
Amenities are features such as green space, playgrounds, community centers, shopping malls, or swimming pools that make a neighborhood or community more desirable for living.

Amortization
Term used to describe the time over which the mortgage is to be paid, assuming equal payments. The life of a loan, e.g. a mortgage with a 25-year amortization period means that if all regular payments were made on time and the terms (payment, interest rate) remained the same, it would take 25 years to reduce the balance to 0.

Amortization Schedule
A table showing the amounts of principal and interest comprising each level payment due at regular intervals 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.

Amortization Table
A mathematical formula used to calculate monthly mortgage payments based on the borrowed loan amount, the interest rate, and the loan term.
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Amortization Term
The period of time that is required and agreed upon to repay (amortize) an entire mortgage loan.

Amortized Loan
An amoritized loan is a loan where the interest and principal are both paid off in their entirety through a series of scheduled payments over a specified amount of time.

Amount Due at Lease Signing
When leasing a vehicle there are generally costs associated with the transaction and payment is due before the customer can take possession of the vehicle. Such costs can include a security deposit, title fee, capitalized cost reduction, monthly payments paid at signing, and registration fees.

Amount Financed
The amount financed refers to the principal amount that is borrowed. This amount can include the entire purchase cost along with any other items incorporated into the payments.

Angels
Those private individuals with capital to invest in business enterprises are often called angels.

Anniversary Date
The same date in each calendar year during the term of the mortgage with the first anniversary date taking place one year from the date interest is finally adjusted.

Annual Fee
Banks and credit lenders generally charge an annual fee for the use of a credit card levied each year. Annual fees can range from $15 to $300, and are billed directly to the customer's monthly statement. Many credit cards are now offering incentives to customers by getting rid of annual fees to make the cards more appealing.

Annual Mortgagor Statement
An annual report or statement sent to the borrower which details the remaining principal amount owing on the loan and the amount paid in taxes and interest for the previous year.

Annual Percentage Rate (APR)
A yearly interest rate that includes fees and costs paid to obtain the loan. Lenders are required by law to disclose this interest rate. The rate is calculated in a standard way, taking the average compound interest rate over the loan term, so borrowers can compare loans. In mortgages, it is the interest rate of a mortgage when taking into account the interest, mortgage insurance, and certain closing costs including points paid at closing. There is no APR in an automobile lease; instead, the cost of money is expressed as the money factor.

Annual Percentage Yield (APY)
The percentage disclosed on interest-bearing deposit accounts that reflect the total interest to be earned based on an institution's compounding method, assuming funds remain in the account for a 365-day year. This disclosure is required by Truth in Savings regulations.

Annuity
A periodic payment made to a policy holder by an insurance company for a certain length of time.

Anticipatory Breach
In a contract, when one party reneges on the agreement, the other party is notified and is no longer responsible for fulfilling their end of the agreement.

Application
A document or form that is filled out by a prospective borrower to qualify for a loan. The application requires the borrower to provide detailed information about his or her financial situation.
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Application Fee
Lenders charge a fee to process the application or document as filled out by a prospective borrower to qualify for a loan. The application generally details the financial situation of the borrower and must be reviewed before a loan decision can be made.

Appointment of a Receiver
A legal remedy available to a mortgagee when a mortgage is in default.

Appraisal
A market value estimate for a parcel of real estate that is made by a competent professional who is knowledgeable about local real estate prices and market trends.

Appraisal Fee
A cost charged by professionals who are hired to offer educated opinions about the monetary worth or value of a property.

Appraisal Report
An independent assessment of the 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.

Appraised Value
An educated opinion or estimate regarding the value (monetary worth) of a property.

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.

Appreciation
Appreciation refers to the increase in the value of a property or item over time.

Approval
An assessment or judgement made by a lender regarding the ability of a borrower to repay a mortgage loan. Being approved also helps the borrower when home shopping because the lender will confirm the amount the borrower can obtain to purchase a home.

Appurtenance
A right used with the land for its benefit.

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 true in the case of a transaction between related parties.

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

Arbitration
A method used to resolve disputes that requires an impartial third party to make a reasonable and fair decision for all parties involved. The impartial third party must be agreed upon by all sides involved in the dispute before a decision can be made.

Architect
A person who designs structures and buildings.

Architectural Fees
Fees paid to a person who designs structures or buildings

Arpent
An area equal to approximately 0.845 acres. This measurement was traditionally used in France, Quebec, and Louisiana. Today, hectares and acres are more commonly used to measure area.

As is Where is
The buyer makes the purchase at his or her own risk.

Asbestos
A fire-resistant element that once was commonly used for insulation in buildings, but was discovered to cause health issues in the lungs. This material is no longer used and is typically removed from buildings when it is discovered.

Asking Price
The amount of money the seller requests for the property or item. This is not the same as the appraised value.

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, which includes the name of the property owner or tenant and their address. 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.

Asset
Any item or possesion of monetary value that is legally owned by a person. Assets can include real or personal property, and enforceable claims against others including bank accounts, stocks, mutual funds, etc.

Asset Case
A bankruptcy proceeding where there are non-exempt assets that might be accessible to pay creditor's claims.

Assignment
Assignment refers to the transfer of a mortgage from one person to another person.

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

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 whereby the mortgagor grants the mortgagee the right to collect future rents on a given occurrence, normally default. Normally taken as additional security on rental loans.

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

Assumability
The ability of a mortgage to be taken over from the original borrower by a new borrower.

Assumable
A loan or obligation that can be taken over from the original borrower by a new borrower.

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.

Assumption Clause
A provision in a mortgage contract that enables the buyer to assume or take responsibility for the existing mortgage loan from the seller.

Assumption Fee
Lenders will charge a fee to update mortgage records when a buyer assumes an existing mortgage from the seller.

ATM Access Fee
A fee charged for an account holder to access the ATM system and conduct banking activities such as cash withdrawls. This fee is charged in addition to any individual account fees already paid by the account holder to their financial institution. See also "Automated Teller Machine."

ATM Alliance
An alliance between banks and/or credit unions that is designed to avoid or minimize surcharges for non-bank customers at ATM machines. Customers from one bank that belongs to the alliance can use surcharge-free ATMs at all alliance banks. See also "Automated Teller Machine."

ATM Card Fee
This is not a debit card fee. It can be an annual or monthly fee charged on top of individual account fees to obtain an ATM card. The fee may also be charged per card or per account. For example, if an account is held jointly, the bank may charge for the second person to hold a card or it may charge one fee for all the cards on an account. See also "Automated Teller Machine."

ATM Surcharge
A fee charged to someone using a bank-owned ATM because he or she does not hold an account with that bank. It is a good idea to review what your bank charges you to use another bank's ATM system to avoid paying additional surcharges to your bank. See also "Automated Teller Machine."

Attachment
The seizure of property by court order.

Attornment of Rents
The agreement of a tenant to pay rent to a new landlord, especially a mortgagee who has commenced a legal action.

Audit
An examination of a taxpayer's income tax return or other transactions bearing tax consequences. Audits range from a simple letter from the agency to a detailed review of individual or business tax filings and records.

Authorized User
An authorized user is a person with permission to use a credit card account belonging to someone else. The card bearer is the one who must grant the permission for use.

Automated Valuation Model (AVM)
AVM stands for Automated Valuation Model. The AVM Product is a highly sophisticated valuation model and methodology that MPAC has developed to render a monthly "real-time" estimate of market value for essentially all residential properties in the province of Ontario.

Automated Banking Machine (ABM)
See "Automated Teller Machine (ATM)."

Automated Teller Machine (ATM)
An interactive terminal that allows customers with valid accounts from either a banking or other financial institution to conduct various transactions including money withdrawals, deposits, bill payments, and transfers. Customers require a magnetically encoded card and P.I.N. (personal identification number) to use the terminal and may be subject to a surcharge. These terminals are interconnected to allow customers access to their accounts from anywhere in the world.

Automatic Payment
An agreement giving authorization to various companys or lenders to make specified withdrawals from a person's bank account to make payments towards bills or loans. For example, regular monthly payments such as car or mortgage payments can be set up to automatically be withdrawn from your account each month or as specified in your authorization agreement.

Average Annual Yield
The average yield per year over the life or term of the investment, assuming all principal and interest remain on deposit until maturity.

Average Daily Balance
The method used by most credit card companies to calculate your due payment. An average daily balance is determined by adding each day's balance and then dividing that total by the number of days in a billing cycle. The average daily balance is then multiplied by a card's monthly periodic rate, which is calculated by dividing the annual percentage rate by 12.

Average Tax Rate
The average tax rate is the real rate of taxes paid after taking federal tax brackets into account. There are different tax rates for different income levels; you pay lower rates on the first part of your income, more on the later earnings. As you pass each income level, the money above that level is taxed at the next higher rate. Therefore, your average tax rate is less than the top rate you pay on a portion of income.

Aviation Easement
An agreement granting the right to fly airplanes over property, even if doing so causes damage, inconvenience, or loss of property value to the property owner. This type of agreement usually restricts the property owner from building or growing anything over a defined height.


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