GLOSSARY

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 time over which equal payments would pay off the mortgage. This is normally 25 years for a new mortgage.

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.

C.M.H.C. - Canada Mortgage and Housing Corporation. The National Housing Act authorized CMHC to operate a Mortgage insurance fund which protects approved lenders from losses resulting from borrower default.

Certificate of Location - A document specifying the exact location of the building on the property and describing the type and size of the building including additions, if any. In most cases a recent Certificate of Location is needed.

Closed Mortgage - A mortgage agreement that cannot be prepaid, renegotiated, or refinanced before maturity, except according to its terms.

Closing Date - The date on which the sale of a property becomes final and the new owner usually takes possession. The signing of the Act of Sale is done before a Notary.

Conditional Offer - An offer to purchase subject to conditions. These conditions may relate to financing, inspection, or the sale of an existing home. Usually a time limit in which the specified conditions must be satisfied is stipulated.

Conventional Mortgage - A mortgage that does not exceed 75% of the purchase price of the home. Mortgages that exceed this limit must be insured against default, and are referred to as high-ratio mortgages.

Debt-Service Ratio - The percentage of the borrower's gross income that will be used for monthly payments of principal, interest, taxes, heating costs and condominium fees.

Deed - (Certificate of Ownership) 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.

Deposit - A sum of money deposited in trust by the purchaser when making an offer to be held in trust by the vendor's agent, broker, lawyer, or notary until the closing of the transaction.

Equity - The interest of the owner in a property over and above all claims against the property. It is usually the difference between the market value of the property and any outstanding encumbrances.

Firm Offer - An offer to buy the property as outlined in the offer to purchase with no conditions attached.

Fixed-Rate Mortgage - A mortgagefor which the rate of interest is fixed for a specific period of time (the term).

Foreclosure - A legal procedure whereby the lender eventually obtains ownership of the property after the borrower has defaulted on payments.

GDS (Gross Debt Service) Ratio - The percentage of gross income required to cover monthly payments associated with housing costs. Most lenders recommend that the GDS ratio be no more than 32% of your gross (before tax) monthly income.

High Ratio Mortgage - If you don't have 25% of the lesser of the purchase price or appraised value of the property, your mortgage must be insured against paymentndefault by a Mortgage Insurer, such as CMHC.

Home equity - The difference between the price for which a home could be sold (market value) and the total debts registered against it.

Inspection - The examination of the house by a building inspector selected by the purchaser.

Open Mortgage - A mortgage which can be prepaid at any time, without penalty.

Principal - The amount of money borrowed for a new mortgage.

Refinancing - Renegotiating your existing mortgage agreement. May include increasing the principal or paying out the mortgage in full.

TDS (Total Debt Service) Ratio - The percentage of gross income needed to cover monthly payments for housing and all other debts and financing obligations. The total should generally not exceed 37% of gross monthly income.

Variable Rate Mortgage - A mortgage for which the rate of interest may change if other market conditions change. This is sometimes referred to as a floating rate mortgage.