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  Addendum – When a contract is varied, this is added to the original contract, stating the additional terms.

Agent or Realtor – Representative of buyer or seller in relation to the purchase or sale of a property. Some agents will represent buyers or sellers exclusively and other agents will act for both buyers and sellers.

Amortization – A schedule of loan repayments for the full term of a loan. This schedule should breakdown the amount of the repayment that goes towards the principal loan sum and the amount that goes towards interest.

Annual Percentage Rate (“APR”) - Not to be confused with the Mortgage Rate. APR is the yearly cost of the mortgage. This rate takes into account initial interest that is paid and it is generally a higher figure than the Mortgage Rate.

Appraisal or Valuation – An assessment by a qualified third party of the value of a property. This is normally paid for by the buyer and required by the mortgage company.

Adjustable Rate Mortgage (“ARM”) or Variable Rate Mortgage – A mortgage where the interest rate may go up or down in accordance with the financial markets.

Assessment – The value of the property for the purpose of property taxes.
Closing – Finalize the mortgage and transfer the deed for the property from the buyer to the seller.

Closing Costs – In addition to the down payment or deposit, parties must budget for closing costs. These costs include title insurance, closing company fees, loan origination fees, discount points, attorney fees and recording fees. Depending upon the location and value of the property, these costs could amount to 5-6% of the value of the property.

Contingencies – When a buyer agrees to purchase a property subject to certain conditions e.g. subject to a satisfactory inspection or obtaining a mortgage.

Condominium – A property consisting of the interior walls inward and possibly a part of the common area.

Debt to Income Ratio – Ratio of borrower’s debt against borrower’s gross income.

Equity - Difference between the value of the property and the amount owed in relation to the property. Negative equity describes the situation when the amount owed is greater than the value of the property.

Escrow – Funds held by a third party and not assessable to the buyer or the seller. The lender will require that home insurance and property taxes are paid into an escrow account, on a monthly basis, before they become due so that the property is always covered.

Fixed Rate Mortgage – A mortgage loan with a rate that is fixed for the duration of the mortgage.

Foreclosure – If a borrower defaults upon the repayment under the terms of their mortgage loan then the lender may take action to repossess and resell the property.

Homeowner’s Association – A group of owners. Normally, they have bylaws governing the use of properties in a community and they may require the payment of an annual subscription.

Lien - A claim placed against a property. This often occurs if there is a debt in relation to the property that has not been paid.

Loan Origination Fee – An administration fee due to the lender at closing.

Lock- in – The lender agrees to lock-in the interest rate that will be payable on the mortgage. Lock-in agreements have an expiration date – normally, 90 days.

LTV (“Loan to Value”) –A ratio showing the value of the mortgage as a percentage of the value of the property.

PMI (“Private Mortgage Insurance”) – The borrower must pay this insurance if they are paying a down payment of less than 20% of the value of the property. This insurance does not protect the borrower. It protects the lender in the event of an act of default by the borrower.

Points – 1% of the loan value is equal to 1 point. Points are normally paid at the time of closing. A lender may charge a point for the loan origination fee and additional “discount” points can be paid to reduce the interest charges on the mortgage.

Prequalification or Preapproval– The lender conducts a credit report and then informs the borrower of how much they can borrow based upon their income.

Recording – Registering deeds and/or mortgage information with the local public records office.

Title Insurance – Insurance cover to protect a buyer’s legal title to a property. Tile insurance may be the responsibility of the buyer or seller, depending upon local custom.

Warranty –A guarantee in relation to the home and/or items within the home. Warranties will apply to most new homes.

Zoning – Planning laws that govern how defined areas of land can be used.