Real Estate Terminologies/Vocabulary
Thinking to sell or buy your Vancouver home?
Here are some Legal Terminologies you should know that will help you understating your contracts and other documents during the home selling and home buying process.
Your realtor and Layer will be able to help you understanding all these Legal Terminologies, ask questions when you are not sure about something…
Amortization:
The Life of the Mortgage Loan that required to completely pay off a mortgage if all conditions are met and all payments are made on time.
Appraisal:
An estimate of the current market value of a home.
Appraiser:
A certified professional who estimates the value of the property.
Appreciation:
An increase in the value (price increase) of a home from the day it was purchased.
Assumption Agreement :
A legal document that requires for buyer to take over the mortgage of the builder or the previous owner/ seller.
Mortgage Assumption:
Mortgage assumption means buyer takes over the mortgage payments of the seller’s existing mortgage.
Blended payments:
Blended payments are a way of repaying a mortgage by making regular payments of principal and interest blended) over the amortization period. Borrower pays back the same set amount of principal each month, plus a gradually decreasing interest payment.
Building Location Certificate / A Surveyor’s Certificate:
A document that describes the legal boundaries and measurements of a property, shows if there are any. Registered charges such easements, rights-of-way, or covenants.
Closing date:
The date when the sale of the property is finalized and the buyer (new owner) takes possession of the home.
Closing costs:
Closing cost are the other costs that a buyer pays beside the house price that they purchased. These are legal fees, property transfer tax, appraisal, cost of mortgage, GST (if applicable), Land title registration…etc.
Closed mortgage:
This option prevents borrowers from prepaying off their mortgage without penalties before the end of the term, except its permitted in mortgage agreement, usually lenders provides limited prepayment options and borrowers will pay penalty if they try to go beyond those limitations. Typically, they set out in the mortgage agreement when and what lump sum amount you can pay during the term towards your principal reduction.
Commitment Letter:
A legal document that borrower will receive from lender which specifies that lender approved the mortgage loan of a specific amount, under specific terms and conditions to the borrower.
Compound interest:
Interest calculated on both the original principal and the interest that has already been accrued on that principal amount is called the compounded interest.
Conditional offer:
An offer to purchase a home that includes one or more conditions for example; subject to a new first/second mortgage being made available to the buyer, subject to inspecting and approving the property and/or site inspection report, subject to the buyer approving the Property Disclosure Statement, getting a fire insurance approval. must be met before the sale can be officially completed.
Conventional mortgage:
A mortgage loan means buyer putting down payment 20% or more of the purchase price, in this case buyer doesn’t have to have mortgage insurance.
Counteroffer:
When seller rejects the initial offer made by the potential buyer and makes counteroffer that states that seller will accept buyer’s offer but with the stipulated changes usually different price, closing date are common changes that occurs.
Credit Report:
The credit report shows the financial history of a person, all the lenders required the credit report before they process the mortgage loan application for anyone.
Deed:
A deed is a legal document that transfers ownership of a property from the seller to the buyer. It states legal names of both parties and describes the subject property and the signatures of the seller.
Depreciation:
A decrease in the value of a property from the day it was purchased.
Deposit:
Money that a buyer places in trust to show that they are serious when they make an offer to purchase a home. The deposit is held by the real estate brokerage trust or lawyer/ notary until the sale is completed, after it’s goes to the seller as a part of purchase price
Distressed Property
Properties are listed as distressed when the owners have defaulted on their loans or are about to. As a buyer, you might be able to get a good deal on a short sale or a foreclosure, as banks usually list them below market value to try and recoup some of their loss.
Mortgage Default:
Failure in making mortgage payment on time. When borrower is in default lender will charge them penalty, lender can take possession on the subject property if borrower keep denying on payment and don’t respond or act according to mortgage agreement.
Equity:
The cash value that a homeowner own in their home after deducting the mortgage outstanding balance and/or other debts owed on the property (if any). As home owner continues making regular payments towards the mortgage principal and interest, Equity increases over time.
Fixed Mortgage Rate:
Fixed mortgage rate means that the interest rate and payment will stay same for the entire term. Most of the borrowers prefer the fixed rate mortgage because no risk of their mortgage payments increase during duration of the mortgage.
Foreclosure:
It’s a legal process when lender takes possession of a property due to borrower’s defaults on a mortgage payment. The lender then sells the property to cover the outstanding debt, borrower receives the left-over amount from sales proceeds if any after covering the debt.
Freehold:
Freehold homeownership gives the homeowner the right to have full and exclusive ownership of a property and the land it sits on for an indefinite period. Owner has freedom to use the property as they want (as local municipal, regulation allowed) and free to sell when they want.
Home Insurance Premium:
The amount homeowners pay on a monthly or annual basis for home insurance.
Interest:
Cost of borrowing money from bank or any lender. Lender provides the loan amount to the borrower and receive the interest in return. The borrower pays it back by regular installments of interest and principal.
Land registration:
A set system that record legal interests of someone in land, including ownership and disposition of land.
Land surveyor:
A professional who surveys a property and provides a land survey/certificate of location which shows the measurements of land and boundaries of interests in land.
Land transfer tax:
Buyer pays land transfer tax to municipalities when they purchase a property, it’s calculated by percentage of the purchase price.
Leasehold:
Like the word “Lease” hold explains itself it’s the agreement to lease someone’s property for specified time period.
Lender:
A person or an institute/company who lends the money to borrower for specific period of time and receive the interest in return. For example, a bank, trust company, credit union…
Lien:
A claim filed against a property by another person or company for money that the current or previous owner owe them.
Lump sum pre-payment:
Lump sum pre-payment allows the borrower to pay down their mortgage faster. Most of the lender allows the borrower to make specified lump sum payments towards the mortgage principal with or without paying penalties. This helps the borrower to save on interest.
Maturity date:
The last day of the term of a mortgage. Borrower must either payoff their mortgage in full or renegotiate and renew their mortgage on this day.
Median Days on Market
The median days on market is the midpoint of how many days it took for homes in that area to sell. If it’s 30 days, then half of the homes sold quicker and half took longer than 30 days. If you compare the Vancouver and neighboring city real estate you’re considering to its area’s median days on market and if you find that it’s been on longer, the sellers might be willing to take a lower offer.
Mobile home:
Mobile Home/ Manufactured homes are home that built in a factory in mass production and transported where it will be occupied. They can be moved to one location to another. They cost less BUT not many lenders offer mortgage on these kind homes.
MLS:
Multiple Listing Service is a database system available to member brokerages and their realtors to post their listings to make them available to all other realtors and their clients (home buyers and sellers).
Modular home:
A single-family home that is built in a factory and typically transported to a location in sections (modules) to be assembled onsite. They are usually built with a wood floor system and are intended to place on a concrete foundation, either with basement or crawlspace.
Mortgage life insurance:
An Insurance which protects the family of a borrower in the case of borrower’s death by paying off the outstanding mortgage.
Mortgage loan insurance:
An Insurance that protects a lender in the case if borrower default on a mortgage. Its required from borrower to purchase Mortgage loan insurance if they are putting down payment less than 20% of the purchase price.
Mortgage term:
The length of time that the conditions of a mortgage agreement, such as the interest rate and payment frequency, are in effect. On the expiry date of the term, the mortgage loan must either be paid in full or renegotiated and renewed with new term and conditions.
Net worth:
The difference between someone’s assets (all that they own) and liabilities (all that they owe)
Net worth = Assets (own) – Liabilities (owe)
Notary:
Takes care of legal dealings during home buying process like reviewing the contracts and make sure buyer getting what they agreed upon when they signed.
Ongoing costs:
The monthly, yearly costs that buyer have to pay after owing a property like, mortgage payments, property taxes, home insurance, utilities, ongoing maintenance
Open house:
Realtor advertised a specific day and time when potential buyers can come to view the subject property without setting an appointment.
An Active Versus Pending Status
An active status on a home means the owners are accepting offers, while a pending status indicates that they’ve already accepted an offer. If you know it’s the house for you, you can still place a bid in case the first offer falls through.
Principal Amount of Mortgage:
The actual loan amount that borrower borrow from lender (borrower pay interest on top of this amount)
*****Above information is a simply to provide the basic knowledge about buying real estate in Vancouver and area. By no means it should be consider a legal advice.
604-349-9149 | sold@balwinderparhar.ca
