Mortgage Terms

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Mortgage Terms
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Ernest Money is a sum of money paid by a
potential purchaser as proof of her intention to
complete the purchase transaction. Held in trust,
usually by the Listing Agent, and credited to
Purchaser off purchase price. May be forfeited if
Purchaser fails to complete transaction.
Closing Statement is a document which sets out
the financial agreement between the parties, the
costs each must pay, and all other similar
information regarding a transaction (may be joint or
separate for each party).
A Draw is disbursements of money that are made
from a construction loan during the construction of
a house. These are usually made at specified
stages of the construction.
Collateral is property (real or personal) which is
pledged to secure a loan or mortgage. If the debt is
not paid, the lender has the right to sell the
collateral to recoup the outstanding principal and
interest on the loan.
Builder's Risk is an insurance policy issued to builders during
the construction project. These policies normally will cover any
losses due to theft, vandalism, or an act of God. This policy will
expire or be turned over into a regular home owner policy at the
completion of the project.
A Financial Statement is a document which lists  
the assets, income, expenses and debts of a
person or a company to allow a lending institution
to assess that person or corporation's financial
wealth for the purpose of obtaining a loan.
A Certificate of Occupancy is a document issued by the local
municipality indicating that a new dwelling is suitable for
occupation. Generally confirms that the dwelling complies with
local building, safety and health by-laws.
An Origination Fee is a fee charged by mortgage
companies and banks for the service of preparing
and servicing a loan. This is normally 1% of the
loan amount. This fee is not the same as points
Loan Points refer to money that will used to obtain a particular
interest rate for a loan. This is usually calculated at a rate of 1%
of the original loan, which would be stated as 1 point. In order to
lower the loan interest rate, a bank might allow an individual to
pay a specified number of points. For example, paying 2 points
might lower the interest rate ½ percent over a 30 year mortgage.
Mortgage Terms
The value of an item as established by a consideration of how much an independent buyer would pay to an independent
seller in a completely free transaction for the item.

A term describing a property that does not border on any public road.

Lease With Option
A rental contract which allows the tenant to purchase the property during the period of the lease. Payments under the lease
may be credited (in whole or in part) against the purchase price.

The right of the owner of one parcel of land to use all or part of the land of another for a specific purpose. Requires one
property to be in dominant position so as to enjoy the benefit of the easement and one property in position to offer easement

Escrow Account
A form of trust account in which advance payments are held on behalf of the payer until the contract allows their use by the
payee or a third party.

Legal Description
A description of a piece of real estate that is drafted according to legal requirements and which clearly and adequately
establishes the identity of the property so described. Found in most instruments for registration on title to land.
A government body's written permission to do something which is regulated by that body.

Open Listing
An agreement whereby the owner of the property may enlist more than one broker to attempt to sell the property and the
commission is payable only to the successful agent.

Financial Statement
A document which sets out the assets, income, expenses and debts of a person or company to allow a third person to assess
that person or corporation's financial health (i.e. when considering lending money to that person or corporation).

Firm Offer
An offer to purchase delivered to the potential Vendor by a potential Purchaser who will not negotiate any changes to the

A detailed map which sets out lots, streets, common areas and other features of a tract of land.

A blended, periodic payment that is enough to pay off accumulated interest and a portion of the principal.
Walk Through Inspection
A physical examination of the property which usually takes place immediately prior to closing to ensure that no changes have
taken place and no new damage has been done to the property. May also be used to confirm that fixtures and chattels
included in the sale remain on the premises.
An indulgence granted by a local zoning commission or authority to allow a non-conforming use of a property to continue.
The zoning bylaw or ordinance is actually amended as it pertains to the particular property.

Title Search
The act of examining in detail the public records relating to ownership of a parcel of land to ensure that the current owner
has clear title, free of any liens, claims, mortgages or competing and adverse interests. Usually performed by a lawyer,
qualified title searcher, or title insurance company on behalf of a proposed purchaser or mortgagee.

Zero Lot Line
A zoning regulation which allows certain properties to have buildings placed up to the line dividing separate properties

An area of a municipality to which certain rules, regulations, bylaws or ordinances apply.
A sum of money paid by a potential purchaser as proof of her intention to complete the purchase transaction. Held in
trust, usually by the Listing Agent, and credited to Purchaser off purchase price. May be forfeited if Purchaser fails to
complete transaction.

The intrusion across the property line and into one property of an improvement to a neighboring property. May result in a
claim for adverse possession if the encroachment is unchallenged for a long period of time.

Limited Liability
Responsibility or obligation which is restricted to the limits set out in the beginning.

A tenant under a lease.

A landlord under a lease (the owner of the property being rented).

Equity Loan
A loan to a home owner secured against the equity the owner enjoys in the property.
Category Construction Glossary