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If you’re new to the real estate market, you may hear a lot of confusing jargon. Here are some key terms that are worth understanding as you start the buying or selling process.
The number of years over which the mortgage loan is to be repaid. In most cases, this is 25 years.
When a new mortgage is obtained to purchase a property, the lender requires an independent opinion of value of the property to ensure that they are not lending more than the property is truly worth. This independent opinion is provided by a professional appraiser.
Chattels are items which are NOT attached to the property, such as furniture and appliances.
Closing costs include such items as property inspections, legal fees and disbursements, appraisals, mortgage application fees, interest and property tax adjustments. These costs must be incurred in order to complete the transaction, and are in addition to the actual purchase price.
Canada Mortgage and Housing Commission (CMHC) provides insurance on high-ratio mortgages(see definition below). This insurance is paid for by the borrower and protects the lender in case the borrower defaults (ceases to pay). Fee varies depending on the down payment. The fee for a mortgage with a 5% down payment is 3.75% of the total amount borrowed. This amount is added on to the principle of the mortgage and is repaid over the total amortization period, which is usually 25 years.
These are clauses within the Purchase Contract which specify certain events which must occur in order for the contract to proceed. Conditions may benefit either the buyer or the seller. A condition of "subject to financing" protects the purchaser should he or she not be able to obtain financing. A seller may place a condition on the contract stipulating that they accept the offer "subject to the seller successfully purchasing another property by a certain date". Conditions must include a date by which they must be met or else the contract becomes void. Any cost involved in satisfying a condition must be borne by the individual who receives the benefit of the condition.
A first mortgage for up to 75% of the lesser of a property’s appraised value or purchase price.
In many cases, the Realtors representing the buyer and seller are different, and are from different Real Estate Agencies. Whenever the Realtor for the buyer and the seller work for the same Agent, there is a situation of Dual Agency. This is a common occurrence, and simply must be disclosed to all parties so that everyone involved has a clear understanding of who is representing whom.
Any mortgage for more than 75% of the purchase price of the property is considered a high ratio mortgage. The maximum amount which can be loaned to first-time purchasers is 95% of the lesser of purchase price or appraised value. In most other cases, the maximum loan is 90% of the purchase price or appraised value, whichever is less.
Legal fees represent fees for services provided. Disbursements include those costs incurred by your lawyer on your behalf such as registration of the transaction at Land Titles, courier charges, long distance phone calls etc.
A contract between a real estate agent and the owner of a property when a property is put on the market for sale.
A loan used to purchase a home. The borrower pledges the property as security to guarantee repayment of the mortgage loan.
A computer-based system for relaying information to Realtors about properties for sale.
A real estate professional who is a member of the local real estate board, and the provincial and federal real estate associations
When you purchase a property, you take on responsibility for the property taxes as well. In many cases, the seller has been paying an amount on a monthly basis for their next property tax bill. When you purchase the property, this "saved" amount becomes credited to you with city hall, and so you will need to repay the seller for this. However, the adjustment is also based on the proportion of the tax year that you will be the resident of the home. Your lawyer will calculate the exact amount for you at closing.
A survey providing details of a property’s boundaries, measurements and structures. It also describes any easements, rights-of-way, or encroachments made by either your property or by adjoining properties. The city reviews this document and indicates whether or not the structures "comply" with existing standards and requirements. It is the seller’s responsibility to provide this report.
The term of a mortgage is the number of years the current interest rate is in effect. For example, you may choose a 3 year mortgage at 5% or a 5 year mortgage at perhaps 5.5% depending on the current economic situation. At the end of the term (eg. 3 years), your mortgage may be renewed with the lender provided it is in good standing for another term of your choosing.