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20 Real Estate Terms Every Aspiring Homeowner Should Know
Buying your first home can be like learning a new language: there are so many terms you’ve never heard before that it’s enough to make your head hurt. But we, along with the Canada Mortgage and Housing Corporation (CMHC), suggest that you learn some of these real estate terms and what they mean if you’re an aspiring homeowner. The more you know, the better prepared you'll be.
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1. Adjustable Mortgage Interest Rate
1/201. Adjustable Mortgage Interest Rate
1/20Photo Credit: Getty Images
With an adjustable mortgage interest rate, the interest rate and mortgage payment both vary, depending on market conditions. A mortgage with this kind of interest rate is known as an adjustable-rate mortgage (ARM), a variable-rate mortgage or a tracker mortgage.Real Estate20 Real Estate Terms Every Aspiring Homeowner Should Know1. Adjustable Mortgage Interest Rate
PHOTO 1 of 20READ LESS -With an adjustable mortgage interest rate, the interest rate and mortgage payment both vary, depending on market conditions. A mortgage with this kind of interest rate is known as an adjustable-rate mortgage (ARM), a variable-rate mortgage or a tracker mortgage.Photo Credit: Getty Images
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2. Amortization
2/202. Amortization
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In real estate, amortization refers to paying off your mortgage. In other words, it refers to making regular payments until your debt to the bank or mortgage lender has been paid in full.Real Estate20 Real Estate Terms Every Aspiring Homeowner Should Know2. Amortization
PHOTO 2 of 20READ LESS -In real estate, amortization refers to paying off your mortgage. In other words, it refers to making regular payments until your debt to the bank or mortgage lender has been paid in full.Photo Credit: Getty Images
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3. Appraisal
3/203. Appraisal
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An appraisal is the process of determining how much the property is worth, so that the lending institution can determine how big your loan should be. In Canada, an appraisal can only be done by a member of the Appraisal Institute of Canada or the Canadian National Association of Real Estate Appraisers. A real estate agent can give you an idea of what the property is worth, but this is a market evaluation rather than an appraisal.Real Estate20 Real Estate Terms Every Aspiring Homeowner Should Know3. Appraisal
PHOTO 3 of 20READ LESS -An appraisal is the process of determining how much the property is worth, so that the lending institution can determine how big your loan should be. In Canada, an appraisal can only be done by a member of the Appraisal Institute of Canada or the Canadian National Association of Real Estate Appraisers. A real estate agent can give you an idea of what the property is worth, but this is a market evaluation rather than an appraisal.Photo Credit: Getty Images
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4. Assumption Agreement
4/204. Assumption Agreement
4/20Photo Credit: Getty Images
When, as a buyer, you sign an assumption agreement, you assume responsibility for the existing mortgage on the home. The seller won’t have any obligations under the mortgage anymore.Real Estate20 Real Estate Terms Every Aspiring Homeowner Should Know4. Assumption Agreement
PHOTO 4 of 20READ LESS -When, as a buyer, you sign an assumption agreement, you assume responsibility for the existing mortgage on the home. The seller won’t have any obligations under the mortgage anymore.Photo Credit: Getty Images
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5. Blended Payment
5/205. Blended Payment
5/20Photo Credit: Getty Images
A blended payment includes the principal amount and the interest, and the total amount remains the same. So, you pay the same amount every month. Over time, the principal portion of the amount will increase while the interest portion will shrink.Real Estate20 Real Estate Terms Every Aspiring Homeowner Should Know5. Blended Payment
PHOTO 5 of 20READ LESS -A blended payment includes the principal amount and the interest, and the total amount remains the same. So, you pay the same amount every month. Over time, the principal portion of the amount will increase while the interest portion will shrink.Photo Credit: Getty Images
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6. Closing Costs
6/206. Closing Costs
6/20Photo Credit: Getty Images
Closing costs are the additional fees that you need to pay on the closing date, when the transaction is finalized and you officially become the new owner of the home. They include legal fees, transfer fees and disbursements, which are fees your lawyer has paid on your behalf and needs reimbursement for.Real Estate20 Real Estate Terms Every Aspiring Homeowner Should Know6. Closing Costs
PHOTO 6 of 20READ LESS -Closing costs are the additional fees that you need to pay on the closing date, when the transaction is finalized and you officially become the new owner of the home. They include legal fees, transfer fees and disbursements, which are fees your lawyer has paid on your behalf and needs reimbursement for.Photo Credit: Getty Images
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7. Conditional Offer
7/207. Conditional Offer
7/20Photo Credit: Getty Images
A conditional offer is an offer to purchase but is subject to certain specified conditions. For example, you offer to purchase the home if you can get a mortgage arranged. There is usually a time limit within which you need to meet the specified conditions.Real Estate20 Real Estate Terms Every Aspiring Homeowner Should Know7. Conditional Offer
PHOTO 7 of 20READ LESS -A conditional offer is an offer to purchase but is subject to certain specified conditions. For example, you offer to purchase the home if you can get a mortgage arranged. There is usually a time limit within which you need to meet the specified conditions.Photo Credit: Getty Images
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8. Counteroffer
8/208. Counteroffer
8/20Photo Credit: Getty Images
When you make an offer on a home, the seller may decide not to accept it and to counteroffer instead. The counteroffer will include changes to your original offer, such as the price or the closing date, and your original offer isn’t valid anymore. You’ll be given a specified time limit within which to accept or reject the counteroffer.Real Estate20 Real Estate Terms Every Aspiring Homeowner Should Know8. Counteroffer
PHOTO 8 of 20READ LESS -When you make an offer on a home, the seller may decide not to accept it and to counteroffer instead. The counteroffer will include changes to your original offer, such as the price or the closing date, and your original offer isn’t valid anymore. You’ll be given a specified time limit within which to accept or reject the counteroffer.Photo Credit: Getty Images
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9. Deed
9/209. Deed
9/20Photo Credit: Sarah Joy/Wikimedia Commons
A deed, also known as a transfer, is a legal document that says that you are now officially the owner of the property.Real Estate20 Real Estate Terms Every Aspiring Homeowner Should Know9. Deed
PHOTO 9 of 20READ LESS -A deed, also known as a transfer, is a legal document that says that you are now officially the owner of the property.Photo Credit: Sarah Joy/Wikimedia Commons
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10. Equity
10/2010. Equity
10/20Photo Credit: Getty Images
Equity is the difference between the market value of your home and the amount you still owe on it. If you sell the home at a profit, equity will be the money you receive after you’ve paid off your mortgage.Real Estate20 Real Estate Terms Every Aspiring Homeowner Should Know10. Equity
PHOTO 10 of 20READ LESS -Equity is the difference between the market value of your home and the amount you still owe on it. If you sell the home at a profit, equity will be the money you receive after you’ve paid off your mortgage.Photo Credit: Getty Images
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11. Fixed Mortgage Interest Rate
11/2011. Fixed Mortgage Interest Rate
11/20Photo Credit: Getty Images
A fixed mortgage interest rate is one that remains the same throughout the term of the mortgage. It doesn’t fluctuate according to market conditions. A mortgage with a fixed mortgage interest rate is called a fixed-rate mortgage (FRM).Real Estate20 Real Estate Terms Every Aspiring Homeowner Should Know11. Fixed Mortgage Interest Rate
PHOTO 11 of 20READ LESS -A fixed mortgage interest rate is one that remains the same throughout the term of the mortgage. It doesn’t fluctuate according to market conditions. A mortgage with a fixed mortgage interest rate is called a fixed-rate mortgage (FRM).Photo Credit: Getty Images
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12. Freehold
12/2012. Freehold
12/20Photo Credit: Getty Images
A freehold title gives you full, exclusive ownership of the property for an indefinite time period. In contrast, a leasehold gives you the right to the land for only a certain period of time.Real Estate20 Real Estate Terms Every Aspiring Homeowner Should Know12. Freehold
PHOTO 12 of 20READ LESS -A freehold title gives you full, exclusive ownership of the property for an indefinite time period. In contrast, a leasehold gives you the right to the land for only a certain period of time.Photo Credit: Getty Images
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13. Lien
13/2013. Lien
13/20Photo Credit: Getty Images
A lien is a claim against the property for money owed. For example, you may grant the bank a lien on the property when you take out a mortgage. If you don’t repay your mortgage, the bank then has the right to seize your property. You can also grant a lien to a contractor such as a builder and when you don’t pay for their work, your home may be auctioned off so that they can be paid.Real Estate20 Real Estate Terms Every Aspiring Homeowner Should Know13. Lien
PHOTO 13 of 20READ LESS -A lien is a claim against the property for money owed. For example, you may grant the bank a lien on the property when you take out a mortgage. If you don’t repay your mortgage, the bank then has the right to seize your property. You can also grant a lien to a contractor such as a builder and when you don’t pay for their work, your home may be auctioned off so that they can be paid.Photo Credit: Getty Images
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14. Maturity Date
14/2014. Maturity Date
14/20Photo Credit: Getty Images
The maturity date is the last day of the term of the mortgage. It’s the day on which you must have paid the loan in full or you must have reached a new agreement with the lending institution.Real Estate20 Real Estate Terms Every Aspiring Homeowner Should Know14. Maturity Date
PHOTO 14 of 20READ LESS -The maturity date is the last day of the term of the mortgage. It’s the day on which you must have paid the loan in full or you must have reached a new agreement with the lending institution.Photo Credit: Getty Images
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15. Mortgage Loan Insurance
15/2015. Mortgage Loan Insurance
15/20Photo Credit: Getty Images
In Canada, any residential loan with a loan-to-value ratio of more than 80% has to have mortgage loan insurance. This protects the lending institution such as the bank against losses if you fail to pay your mortgage.Real Estate20 Real Estate Terms Every Aspiring Homeowner Should Know15. Mortgage Loan Insurance
PHOTO 15 of 20READ LESS -In Canada, any residential loan with a loan-to-value ratio of more than 80% has to have mortgage loan insurance. This protects the lending institution such as the bank against losses if you fail to pay your mortgage.Photo Credit: Getty Images
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16. Notary
16/2016. Notary
16/20Photo Credit: Getty Images
A notary usually administers oaths, certifies documents and can attest that the signatures on a legal document are real but cannot advise on legal matters. In Quebec, however, a notary also handles the legal matters related to buying a home.Real Estate20 Real Estate Terms Every Aspiring Homeowner Should Know16. Notary
PHOTO 16 of 20READ LESS -A notary usually administers oaths, certifies documents and can attest that the signatures on a legal document are real but cannot advise on legal matters. In Quebec, however, a notary also handles the legal matters related to buying a home.Photo Credit: Getty Images
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17. Offer to Purchase
17/2017. Offer to Purchase
17/20Photo Credit: Getty Images
An offer to purchase is the contract setting out the terms under which you agree to buy the home. If the seller accepts your offer to purchase, it becomes a legally binding contract between you and you must both meet the terms and conditions specified in the document.Real Estate20 Real Estate Terms Every Aspiring Homeowner Should Know17. Offer to Purchase
PHOTO 17 of 20READ LESS -An offer to purchase is the contract setting out the terms under which you agree to buy the home. If the seller accepts your offer to purchase, it becomes a legally binding contract between you and you must both meet the terms and conditions specified in the document.Photo Credit: Getty Images
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18. Principal
18/2018. Principal
18/20Photo Credit: Getty Images
The principal is the amount that you borrow from the lending institution. It doesn’t include interest, so when you budget for your mortgage payments, you need to budget for the principal amount as well as interest.Real Estate20 Real Estate Terms Every Aspiring Homeowner Should Know18. Principal
PHOTO 18 of 20READ LESS -The principal is the amount that you borrow from the lending institution. It doesn’t include interest, so when you budget for your mortgage payments, you need to budget for the principal amount as well as interest.Photo Credit: Getty Images
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19. P.I.T.H.
19/2019. P.I.T.H.
19/20Photo Credit: Getty Images
P.I.T.H. stands for principal, interest, taxes and heating. This amount is used in calculating the gross debt service (GDS) ratio and the total debt service (TDS) ratio.Real Estate20 Real Estate Terms Every Aspiring Homeowner Should Know19. P.I.T.H.
PHOTO 19 of 20READ LESS -P.I.T.H. stands for principal, interest, taxes and heating. This amount is used in calculating the gross debt service (GDS) ratio and the total debt service (TDS) ratio.Photo Credit: Getty Images
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20. Vendor Take-Back Mortgage
20/2020. Vendor Take-Back Mortgage
20/20Photo Credit: Getty Images
With a vendor take-back mortgage, the seller finances the mortgage. So, when you buy the home, you make your mortgage payments directly to the seller rather than to the bank or other financial institution.Real Estate20 Real Estate Terms Every Aspiring Homeowner Should Know20. Vendor Take-Back Mortgage
PHOTO 20 of 20READ LESS -With a vendor take-back mortgage, the seller finances the mortgage. So, when you buy the home, you make your mortgage payments directly to the seller rather than to the bank or other financial institution.Photo Credit: Getty Images
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