Important Terms for the First (or even second) Time Home Buyer
If you’re a first-time home buyer or you’re looking to make a move for the first time in 20 years, this glossary of terms is for you. It’s important to be knowledgeable and stay up-to-date with not only the real estate market, but all of the jargon that comes along with it. Have a look at our list so that when it’s time to buy your next dream home you’re prepared to sign on the dotted line.
Amortization: the process of decreasing the principal amount of a loan over a certain period of time.
Amortization period: the amount of time it takes to entirely pay off a loan amount.
Bridge financing: a temporary loan that “bridges” the break between the sale price of a new home and a home buyer’s new mortgage, in the event the buyer’s home has not yet sold.
Chattels: tangible and movable personal property in a home (example: furniture, window coverings, etc.)
Closing date: the date on which parties consummate the purchase contract and the property’s ownership is transferred to the buyer.
CMHC: Canada Mortgage and Housing Corporation, whose mandate is to help Canadians access a variety of housing options.
Conditional offer: an offer to purchase that is subject to conditions, which may include financing, sale of the buyer’s property, etc.
Cooperating agent: the sales representative on the buying side of a real estate transaction.
Deposit: an amount paid to the seller toward the mortgage given in advance to secure the property.
Disbursements: expenses charged by your lawyers for out-of-pocket expenses that you would otherwise be required to pay if you handled the transaction yourself.
Fixed vs. variable rate mortgage: a fixed mortgage rate remains constant throughout the term. With a variable rate mortgage, the rate will change depending on the prime lending rate set by the Bank of Canada.
Fixtures: physical property that is permanently attached to a property, where the removal would damage the property.
High ratio mortgage: a mortgage in which a borrower places a down payment of less than 20% of the property’s purchase price.
Irrevocable date: the date and time a person receiving an offer has to either accept or counter offer an agreement.
Land transfer tax: a government imposed tax paid by the purchaser of a property on closing. The land transfer tax applies whenever a property is transferred from one owner to another, and is calculated based on the selling price of a house.
Lien: the right to keep possession of property belonging to another person until a debt owed by that person has been paid.
Mortgage commitment: a document provided to the seller which states written proof that a bank is willing to give the buyer a specific advanced sum in the form of a mortgage loan in order to complete the purchase of a property.
Mortgage insurance: an insurance policy compensating lenders or investors for losses in the case of the default of a mortgage loan.
Mortgage pre-approval: a process in which a potential home buyer fills out a home mortgage loan application and submits documentation that gets verified to confirm exactly the type of loan and amount the qualify for.
Possession date: the date on which the purchaser is entitled to possession of the property.
Sign back/counter offer: an offer that is made in response to a previous offer by the other party. Making a counter offer automatically rejects the first offer, and requires an acceptance under the terms of the counter offer in order to finalize the contract.
Title: an investigation into public records that determine and confirm a property’s legal ownership, and find out what claims are on the property such as any outstanding loans or property taxes.