Glossary of Terms

We understand where you are coming from. When you are buying a home, you need to understand the terms and paperwork involved.  The Eximus Real Estate Team wants to make your experience smooth and simple.  Here are a few of the commonly used terms involved in buying and financing a property, and their definitions. 

If you have any questions about the terms listed below, or need a definition that is not listed below, please contact us at any time at 604-850-5040.

We want you to understand every part of the buying process and to be comfortable with all the steps involved in buying your dream home.


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 Number of years designated to repay the mortgage loan.

Appraisal The process of determining the value of a property, usually for lending purposes. This value may or may not be the same as the purchase price of the home. The bank is responsible for the appraisal arrangement.

Blended Payments Payments consisting of both a principal and an interest component, paid on a regular basis (i.e. weekly, bi-weekly, monthly) during the term of the mortgage. Over the term of the mortgage, the principal portion of payment increases, while the interest portion decreases, but the total regular payment usually does not change.

Canada Mortgage and Housing Corporation (CMHC) The National Housing Act (NHA) authorized Canada Mortgage and Housing Corporation (CMHC) to operate a Mortgage Insurance Fund which protects NHA Approved Lenders from losses resulting from borrower default. The premium is paid by the purchaser.

Closed Mortgage A mortgage agreement that cannot be prepaid, renegotiated or refinanced before maturity, unless a prepayment penalty is paid.

Closing Costs Various expenses associated with purchasing a home. These costs can include, but are not limited to, legal/notary fees and disbursements, property land transfer taxes, as well as adjustments for prepaid property taxes or condominium common expenses, if any.

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

Conditional Offer An offer to purchase subject to conditions. These conditions may relate to financing, 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 80% 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 (see below).

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.  The deposit is held in trust by the seller's agent, broker, lawyer or notary until the closing of the transaction.

Equity The owner’s interest 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 loans.

Fire Insurance Before a mortgage can be advanced, the purchaser must have arranged fire insurance. A certificate or binder from the insurance company may be required on closing. Fire insurance should be effective as of closing date, not possession date.

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

Fixed Rate Mortgage A mortgage where the interest rate will not change 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.

Gross Debt Service (GDS) 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 A mortgage where the purchaser does not have 25% of the lesser of the purchase price or appraised value of the property.  This type of mortgage must be insured against payment default by a Mortgage Insurer, such as CMHC.

Holdback An amount of money required to be withheld by law by the lender during the construction or renovation of a house to ensure that construction is satisfactorily completed at every stage.

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.

Interim Financing Short-term financing to help a buyer bridge the gap between the closing date on the purchase of a new home and the closing date on the sale of the current home.

Maturity Date Last day of the term of the mortgage agreement.

Mortgage Life Insurance A form of reducing term insurance recommended for all mortgages. In the event of the death, accidental dismemberment or terminal illness of the owner or one of the owners, the insurance can pay the balance owing on the mortgage. The intent is to protect survivors from loss of their home.

Mortgage Critical Illness Insurance Critical Illness Insurance is available as an enhancement to Mortgage Life Insurance. Mortgage Critical Illness Insurance is underwritten by the Canada Life Assurance Company. Complete details of benefits, exclusions and limitations are contained in the Certificate of Insurance. It is recommended for all mortgages.

Open Mortgage A mortgage which can be prepaid at anytime, without penalty.

Payment Frequency The choice of making regular mortgage payments every week, every other week, twice a month or monthly.

P.I.T. Principal, interest and taxes. Together, these make up the regular payment on a mortgage if you elect to include property taxes in your mortgage payments

Porting This allows you to move to another property without having to lose your existing interest rate. You can keep your existing mortgage balance, term and interest rate plus save money by avoiding early discharge penalties.

Prepayment Charge A fee charged by the lender when the borrower prepays all or part of a closed mortgage more quickly than is set out in the mortgage agreement.

Prepayment Option The ability to prepay all or a portion of the principal balance. Prepayment charges may be incurred on the exercise of prepayment options.

Pre-Approved Mortgage Preliminary qualification by the lender of the borrower's application for a mortgage to a certain maximum amount and rate. Generally issued for a limited time only. Subject to limitations and final approval.

Principal The mortgage amount actually borrowed.

Refinance Renegotiating an existing mortgage agreement. This may include increasing the principal or paying out the mortgage in full.

Renewal At the end of a mortgage term, the mortgage may "roll over" on new terms and conditions acceptable to both the lender and the borrower. This is known as renewing a mortgage. If satisfactory terms cannot be agreed upon, the lender is entitled to be repaid in full. In this case, the borrower may seek alternative financing.

Prepayment Option The right to prepay all or a portion of the principal balance. Prepayment charges may be incurred on the exercise of prepayment options.

Second Mortgage This is usually at a higher interest rate and can represent the difference between the appraised value of the property and first mortgage financing plus the down payment.

Security In the case of mortgages, real estate offered as collateral for the loan.

Site Survey A legal document specifying the exact location of the building on the property and describing the type and size of the building including additions, if any.

Term The length of the current mortgage agreement. A mortgage may be amortized over a long period (such as 25 years) with a shorter term (six months to five years or more). After the term expires, the balance of the principal then owing on the mortgage can be repaid or a new mortgage agreement can be entered into at the then current interest rates.

Title Search A document setting out instruments registered against the title to the property - e.g. deed, mortgages, etc.

Total Debt Service (TDS) 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.