Canadian Real Estate Terms You Should Know
Whether you’re getting ready to buy a new home or are in the middle of selling a property, you probably have questions. A lot of them, like what is land transfer tax? Or do I need bridge financing? To help you through the process, we’ve put together this handy list of common Canadian real estate terminology. From amortization to variable rate here are the real estate terms you should know.
Real Estate Terms You Should Know
Amortization: The period of time allotted to completely pay off a mortgage. In Canada, the maximum amortization period is usually 25 years.
Appraisal: An estimate of the current market value of a home. The appraisal is completed by a certified professional appraiser who is often hired by the bank.
Appreciation: The increase in the value of a property over time.
Closed Mortgage: A mortgage that cannot be paid off or renegotiated before the end of the term without a penalty.
Closing Costs: The costs buyers have to pay in addition to the purchase price of the home. Learn more about closing costs here.
Closing Date: The date on which the sale of a property becomes final and the new owner takes possession of the home.
CMHC: Canada Mortgage and Housing Corporation. A corporation that administers the National Housing Act for the Canadian government and also provides mortgage loan insurance.
Conditional Offer: An offer to purchase a home that includes conditions that must be met before the sale is complete (for example, getting a mortgage or home inspection).
Counteroffer: If a buyer’s offer to purchase a home is not accepted, the vendor may counteroffer with amended items such as a higher price, fewer conditions, or a new closing date.
Deed: A legal document signed by both the vendor and purchaser to transfer ownership of a home.
Default: Failing to meet the terms of a mortgage agreement. If you fail to make your mortgage payments, your lender can take legal action to take possession of your home.
Deposit: The buyer makes an up-front payment to the seller when they accept the purchase offer. The seller’s agent or lawyer holds the deposit in trust until the deal closes, then applies it to the purchase price.
Down Payment: The portion of the price of a home that is paid by the buyer and not financed by the mortgage. The minimum down payment in Canada is 5% of the total purchase price of the home.
Status of Certificate: A certificate that outlines a condominium corporation’s financial and legal status.
Dual Agency: When one real estate agent (or brokerage) represents both the homebuyer and the seller.
Equity: The difference between a home’s market value and the amount owing on the mortgage. This is the portion of the house you have paid for.
Fixed-Rate Mortgage: A fixed-rate mortgage locks the interest rate for a pre-determined amount of time. When the term expires, you can stay with the same lender or switch to a different one.
Freehold Ownership: A form of ownership whereby you own the property and assume responsibility for everything inside and outside the home.
Foreclosure: A legal process where a lender takes possession of your property if you default on the loan.
Home Inspection: The home inspection is a thorough examination of the home and property by a hired professional to identify any existing or potential problems.
Lender: The bank or institution that provides the mortgage loan. Lenders can include banks, trust companies, credit unions, and finance companies. Only Approved Lenders can offer CMHC-insured mortgages.
Maturity Date: The final day of the term of the mortgage. You must either pay the mortgage loan in full or renew it on this day.
MLS (Multiple Listing Service): A service offered by Canadian Realtors with descriptions of most of the homes that are available for sale across the country.
Mortgage Broker: A mortgage broker can work with many different lenders to help find you a mortgage with the best terms and rates for your needs.
Mortgage Loan Insurance: If the down payment is less than 20% of the home’s purchase price, you must obtain mortgage loan insurance. It protects the lender in case of payment default.
Net Worth: Your financial worth, calculated by subtracting your total liabilities (everything you owe) from your total assets (everything you own).
Open Mortgage: You can pay off or renegotiate a mortgage at any time without a penalty. The interest rate on an open mortgage is usually higher than on a closed mortgage.
Principal: The amount that you borrow for a loan.
Property Taxes: Taxes charged by the municipality where a home is located, usually based on the value of home.
Purchase Offer: A written offer that sets out the terms under which a buyer agrees to buy a home. If the seller accepts the offer, it becomes a legally binding contract.
Real Estate Agent or Realtor®: A licensed professional who represents buyers and/or sellers in real estate transactions. Learn what a Realtor® can do for you!
Refinancing: Replacing an existing loan with a new one. Typically to secure more favourable terms such as a lower interest rate.
Reserve Fund: The condominium corporation maintains a fund for major repairs and the replacement of common elements.
Survey: 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 your land for a specific purpose.
Term: The mortgage’s conditions, including interest rate, remain fixed for an established length of time.
Title Insurance: Protects the buyer and lender against losses related to the property title or ownership, such as existing liens against the property, encroachment issues, title fraud, and errors in surveys and public records.
Variable Rate Mortgage: A variable rate mortgage fluctuates with the bank’s prime rate. The monthly payments remain the same, but the proportion of the payment going toward principal versus interest can change.
This helpful list of Canadian real estate terms you should know covers the most common terminology you might encounter during your real estate transaction. But there are always more questions with every purchase. Contact us to see just how valuable the help of an experienced Ottawa real estate agent is when buying or selling your home.