Real Estate Dictionary

Every industry has it's own unique terminology, real estate is no different. We have created a glossary of the most commonly used real estate terms and their definitions in order to help you better understand terminology used during your home buying or selling process. With 30+ Years of experience as Realtors® we can help you understand these terms and reduce the stress of your next real estate transaction.



Agency - The relationship between an individual and agent which arises out of a contract (written or oral) in which the agent is employed and authorized by the individual to represent him or her in business transactions with a third party.

Agreement of Purchase and Sale - A legal agreement that offers a certain price for a home. The offer may be firm (no conditions attached), or conditional (certain conditions must be fulfilled before the deal can be closed).

Amortization Period - The total length of time it will take you to pay off your mortgage, typically people choose 25 or 30 year amortization periods.

Anniversary - Many mortgage products allow you to make payments against the principal on the anniversary of the mortgage.

Application - A form used to apply for a mortgage. It includes all of the relevant personal and financial information of the person applying.

Appraisal - The process of determining the value of property, usually for lending purposes. This value may or may not be the same as the purchase price of the home.

Appraiser - A licensed professional regulated by the Appraisal Institute of Canada with expertise in estimating the fair market value of a property.

Appreciation - An increase in the value of a home or other possession from the time it was purchased.

Approved Lender - A lending institution, such as a bank, that the Government of Canada authorizes to make loans under the terms of the National Housing Act. Only approved lenders can offer CMHC-insured mortgages.

Assessment - The value of a property set by the local municipality. The assessment is used to calculate your property tax.

Assumable Mortgage - A mortgage held on a property by a seller that can be taken over by the buyer. The buyer then assumes responsibility for making payments. An assumable mortgage can make a property more attractive to potential buyers.

Assumption Agreement - A legal document that requires a person buying a home to take over the mortgage of the builder or the previous owner.

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Blended Mortgage Payments - Equal or regular mortgage payments consisting of both a principal and an interest component.

Bridge Financing - Money borrowed against a homeowner’s equity in a property (usually for a short term) to help finance the purchase of another property or to make improvements to a property being sold.

Broker - A real estate professional licensed in Ontario to facilitate the sale, lease or exchange of a property.

Buy-down - A situation where the seller reduces the interest rate on a mortgage by paying the difference between the reduced rate and market rate directly to the lender. Or, the difference can be paid to the purchaser in one lump sum or monthly instalments. A buy-down can make a property more attractive to potential buyers.

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Capped Rate - An interest rate with a pre-determined ceiling, usually associated with a variable-rate mortgage.

Caveat Emptor - A Latin expression meaning “Let the buyer beware”. Because the onus of examining the goods or property being purchased is on the buyer, the buyer is therefore at risk.

Certificate of Status (or “estoppel certificate”) - A certificate that outlines the financial and legal status of a condominium corporation.

Chattel - Personal property which is tangible and moveable.

Closed Mortgage - A mortgage that cannot be prepaid, renegotiated or refinanced during its term without significant penalties.

Closing Costs - The legal fees, transfer fees, disbursements and other costs that must be paid when buying a home. These are in addition to the down payment and the GST, PST and HST if applicable. Closing costs are due on the day the buyer officially takes ownership of the home, and they usually range from 1.5% to 4% of the purchase price.

Closing Date - The date on which the sale of a property becomes final and the new owner usually takes possession.

Commission - Monies paid to an agent upon the sale or lease of property, usually as a percentage of the amount involved.

Commitment Letter (or “mortgage pre-approval) - A written notification from a lender to a borrower that says a mortgage loan of a specific amount is approved under specific terms and conditions.

Compound Interest - Interest that is calculated on both the original principal and the interest that has already been earned (or “accrued”) on that principal.

Conditional Offer - An offer to purchase a home that includes one or more conditions (for example, a condition that the buyer is able to get a mortgage) that must be met before the sale can be officially completed.

Contractor - A person who is responsible for the construction or renovation of a home, including scheduling, workmanship and managing subcontractors and suppliers.

Conventional Mortgage - A first mortgage issued for up to 75 per cent of the property’s appraised value or purchase price, whichever is lower.

Counteroffer - An offer made by the seller of a home after rejecting an offer by a potential buyer. The counteroffer usually changes something from the original offer, such as the price or closing date.

Credit Bureau - A company that collects information from various sources on a person’s borrowing and bill-paying habits. They provide this information to lenders to help them assess whether or not to lend money to that person.

Credit Report - The report a lender uses to determine if a person should get a mortgage.

Curb Appeal - How attractive a home looks from the street, including features like landscaping and a well-maintained exterior.

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Debt Service ratio - The percentage of a borrower’s gross income that can be used for housing costs (including mortgage payments and taxes). This is used to determine the amount of monthly mortgage payment the borrower can afford.

Deed - The document signed by the seller transferring ownership of the home to the purchaser. This document is then registered against the title to the property as evidence of the purchaser's ownership of the property.

Default - Failing to make a mortgage payment on time or to otherwise abide by the terms of a mortgage loan agreement. If borrowers default on their mortgage payments, their lender can charge them a penalty or even take legal action to take possession of their home.

Delinquency - Failing to make a mortgage payment on time.

Deposit - Money that a buyer places in trust to show they are serious when they make an offer to purchase a home. The deposit is held by the real estate agent or lawyer until the sale is complete, and then it’s transferred to the seller.

Depreciation - A decrease in the value of a home or other possession from the time it was purchased.

Down Payment - The portion of the home’s purchase price that is not financed by a mortgage loan. The buyer must pay the down payment from their own funds (or other eligible sources) before securing a mortgage.

Duplex - A building that contains two separate and complete single-family homes located either adjacent to each other or one on top of the other.

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Easement - A legal interest in a property owned by another person or company for a specific limited purpose. For example, a public utility company may have an easement that lets them pass through a property.

Emergency Fund - Money that a homeowner regularly sets aside to pay for emergencies or major repairs. Owners should usually save around 5% of their monthly income for emergencies.

Encroachment - An intrusion onto an adjoining property. A neighbour’s fence, shed or overhanging roof line that partially or fully intrudes onto your property are examples.

Equity - The cash value that a homeowner has in their home after subtracting the amount of the mortgage or other debts owed on the property. Equity usually increases over time as the mortgage loan is gradually paid. Changes in overall market values or improvements to a home can also affect the value of the equity.

Estoppel Certificate (or “certificate of status”) - A certificate that outlines a condominium corporation’s financial and legal status.

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First Mortgage - The first security registered on a property. Additional mortgages secured against the property are termed ‘secondary’.

Fixed Interest Rate Mortgage - A mortgage with a locked-in interest rate, meaning it won’t change during the term of the mortgage.

Foreclosure - A legal process whereby the lender takes possession of a property if the borrower defaults on a loan. The lender then sells the property to cover the unpaid debt.

Freehold - A form of homeownership where the homeowner buys the right to have full and exclusive ownership of a home and the land it sits on for an indefinite period. Freehold is in contrast to leasehold ownership, which gives the homeowner the right to use and occupy the land and building for only a limited defined period.

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Gross Debt Service (GDS) Ratio - The percentage of a person or household’s gross monthly income that goes to pay the mortgage principal and interest, property taxes and heating costs, plus 50% of any condominium maintenance fees or 100% of the annual site lease for leasehold tenure if applicable. To qualify for a mortgage, the borrower’s GDS ratio must be at or below 32%.

Gross Monthly Income - Total monthly income of a person or household before taxes and other deductions.

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High Ratio Mortgage - A mortgage for more than 75 per cent of a property’s appraised value or purchase price.

Home Inspection - A thorough examination and assessment of a home’s state and condition by a qualified professional. The examination includes the home’s structural, mechanical and electrical systems.

Home Inspector - A professional who examines a home for anything that is broken, unsafe or in need of replacement. The inspector also checks if the home has had any major problems in the past.

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).

Household Budget - A monthly plan that tracks household income and expenses to make sure household members are living within their means and meeting their savings and investment goals.

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Insurance broker - A professional who can help homeowners choose and buy different types of insurance, including property insurance, life and disability insurance and mortgage loan insurance.

Interest - The cost of borrowing money. Interest is usually paid to the lender in regular installments along with repayment of the principal (that is, the amount of the original loan).

Interest Adjustment - The amount of interest due between the date your mortgage starts and the date the first mortgage payment is calculated from. Avoid it by arranging to make your first mortgage payment exactly one payment period after your closing date.

Interest Rate - The rate used to calculate how much a borrower has to pay a lender for the use of the money being loaned to them.

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Land Registration - A system to record legal interests in land, including ownership and disposition of land.

Land Surveyor - A professional who surveys a property in order to provide a land survey (or “certificate of location”). If the seller doesn’t have a survey, or if it’s more than five years old, the buyer will likely need to hire a surveyor before they can get a mortgage. A real estate agent usually helps coordinate the survey with the seller.

Land Transfer Tax - A tax charged by many provinces and municipalities (usually a percentage of the purchase price) that the buyer must pay upon closing. 

Lawyer - A legal advisor who is licensed to practice law and who will protect legal interests and review any contracts.

Leasehold -  A form of homeownership where the homeowner buys the right to have full and exclusive ownership of a home and the land it sits on for a defined period. Leasehold is in contrast to freehold ownership, which gives the homeowner the right to use and occupy the land and building for an indefinite period.               

Lender - A bank, trust company, credit union, caisse populaire, pension fund, insurance company, finance company or other institution that loans people money to buy a home.

Lien - A claim against a property by another person or company for money owed by the owner or previous owner.

Listing Agreement - A legal agreement between the listing broker and the seller describing the property for sale and stating the services to be provided and the terms of payment.

Lump-Sum Pre-Payment - An extra payment that is made to reduce the principal balance of a mortgage, with or without a penalty. Lump sum payments can help borrowers save on interest costs and pay off their mortgage sooner.

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Manufactured Home - A single-family home that is built in a factory and then transported to a chosen location and placed onto a foundation.

Maturity Date - The last day of the term of a mortgage. The mortgage loan must either be paid in full, renegotiated or renewed on this day.

Mobile Home - A home that is built in a factory and transported to the place where it will be occupied. While mobile homes are usually placed permanently in one location, they can be moved again later if desired.

Modular Home - A single-family home that is built in a factory and typically shipped to a location in two or more sections (or “modules”) to be assembled onsite.

Mortgage - A contract between a borrower and a lender where the borrower pledges a property as security to guarantee repayment of the mortgage debt.

Mortgage Broker - A professional who works with many different lenders to find a mortgage that best suits the needs of the borrower.

Mortgage Life Insurance - Insurance that protects the family of a borrower by paying off the mortgage if the borrower dies.

Mortgage Loan Insurance - Insurance that protects a lender against default on a mortgage. Mortgage loan insurance is provided by CMHC or a private company and is usually required for any mortgage where the down payment is less than 20% of the purchase price or lending value of a home. Mortgage loan insurance helps Canadians purchase homes earlier and at interest rates that are comparable to buyers with a larger down payment.

Mortgage Loan Insurance Premium - The amount homebuyers have to pay to CMHC or another insurer to insure their mortgage against default if their down payment is less than 20% of the purchase price. The CMHC premium is calculated as a percentage of the mortgage loan and is based on factors like the size and source of the down payment. In general, the smaller the down payment is, the higher the insurance premiums will be. Premiums can typically be paid separately or included in the regular mortgage payments to the lender.

Mortgage Payment  - A regularly scheduled payment that usually includes both the loan principal and the interest.

Mortgage Pre-approval (or “Commitment Letter”) - A written notification from a lender to a borrower that says a mortgage loan of a specific amount is approved under specific terms and conditions.

Mortgage Term - The length of time that the conditions of a mortgage, such as the interest rate and payment schedule, are in effect. Terms are usually between 6 months and 10 years. At the end of the term, the mortgage loan must either be paid in full, renewed or renegotiated, usually with new conditions.

Mortgagee - The legal term for the lender of a mortgage.

Mortgagor - The legal term for the borrower of a mortgage.

Multiple Listing Service® (MLS®) - A comprehensive system for relaying information to REALTORS® about properties for sale.

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Net Worth - The total financial worth of a person, calculated by subtracting liabilities (everything the person owes) from assets (everything the person owns).

New Home Warranty Program - A program available in all provinces and some territories guaranteeing that any defects in a new home will be repaired at no cost to the buyer within the period covered by the warranty.

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Offer to Purchase - A written contract that sets out the terms and conditions under which a buyer agrees to buy a home. If the offer is accepted by the seller, it becomes a legally binding agreement.

Ongoing Costs - The monthly expenses that come with owning a home, including mortgage payments, property taxes, home insurance, utilities, ongoing maintenance and repairs.

Open House - A set period of time when potential buyers can come to look at a house or apartment that’s for sale without an appointment.

Open Mortgage - A flexible mortgage loan that lets a borrower pay off or renegotiate their loan at any time, without having to pay penalties. Because of this flexibility, open mortgages usually have a higher interest rate than closed mortgages.

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Partially open mortgage - A mortgage that allows the borrower to pre-pay a specific portion of the mortgage principal at certain times with or without penalty.

Payment Schedule - The schedule a buyer agrees to follow to pay back their mortgage loan. In most schedules, mortgage payments are made weekly, every two weeks or once a month.

PITH - An acronym that stands for mortgage Principal and Interest payments, property Taxes and Heating costs, all the main costs paid by a homeowner on a monthly basis.

Power of Attorney - Delegated written authority to a person allowing that person to act on the behalf of another person.

Power of sale - A provision that gives a lender the power to sell a property if the borrower defaults on their mortgage. The ownership of the property changes hands after the sale is completed.

Prepayment Option - The ability to make extra payments, increase your payments or pay off your mortgage early without incurring a penalty.

Prepayment Penalty - A fee charged by your lender if you pay more money on your mortgage than the pre-payment option allows.

Principal - The amount a person borrows for a loan (not including the interest).

Property (or home) insurance - Insurance that protects the owners in case their home or building is damaged or destroyed by fire or other hazards listed in the policy.

Property taxes - Taxes that are charged by the municipality based on the value of the home. In some cases, the lender will collect property taxes as part of the borrower’s mortgage payments and then pay the taxes to the municipality on the borrower’s behalf.

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R (formerly - An online service that provides descriptions of most of the homes for sale across the country. Homes on the site can be searched by location, price, size or a number of other features.

REALTOR® - A trademarked name describing real estate professionals who are members of a local real estate board and the Canadian Real Estate Association.

Refinancing - Renegotiating your existing mortgage agreement. May include increasing the principal or paying out the mortgage in full. See a Mobile Mortgage Specialist  to get started.

Reserve Fund - A sum of money put aside by a condominium corporation for the repair or replacement of common elements such as the roof, windows, boiler, hallway carpets and other common assets and areas.

Row House (or “townhouse”) - A row house is one of several similar single-family homes that are joined side by side and share common walls.

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Second Mortgage - Additional financing, which usually has a shorter term and a higher interest rate than the first mortgage.

Security - Also called “collateral.” Property that is pledged to guarantee a loan or other obligation that can be claimed by the lender if a loan isn’t repaid. With a mortgage, the home being purchased is used as security for the loan.

Semi-Detached Home - A home that is attached to another home on one side.

Single Detached Home - A free-standing home (that is, not attached to any other homes on either side) intended to be occupied by a single family.

Stacked Townhouse - Two-storey homes stacked one on top of the other, usually in groups of four or more.

Survey (or “certificate of location”) - A document that shows the legal boundaries and measurements of a property, specifies the location of any buildings and states whether anyone else has the right to cross over the property for a specific purpose.

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Title - A document that gives the holder legal ownership of a property.

Title Insurance - Insurance against losses or damages that could occur because of anything that affects the title to a property (for example, a defect in the title or any liens, encumbrances or servitudes registered against the legal title to a home).

Title Search - A detailed examination of the ownership documents to ensure there are no liens or other encumbrances on the property and no questions regarding the seller’s ownership claim.

Total Debt Service (TDS) Ratio - The percentage of a person or household’s gross monthly income that goes to pay the mortgage principal and interest, property taxes and heating costs, plus all other debt obligations such as car payments, personal loans or credit card debt. To qualify for a mortgage, the borrower’s TDS ratio must be at or below 40%.

Townhouse (or “row house”) - A townhouse is one of several similar single-family homes that are joined side by side and share common walls.

Transfer Taxes - Payment to the provincial government for transferring property from the seller to the buyer.

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Variable Interest Rate Mortgage - A mortgage where the interest rate fluctuates based on the current market conditions. The payments will generally remain the same, but the amount of each payment that goes toward the principal or the interest on the loan changes as interest rates fluctuate.

Vendor Take-Back Mortgage - A situation where sellers use their equity in a property to provide some or all of the mortgage financing in order to sell the property.

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Zoning regulations - Strict guidelines set and enforced by municipal governments regulating how a property may or may not be used.

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