The Docks Homebuyer Glossary
Buying homes involves jargon that most of us do not use on a regular basis. The homebuyer process is stressful enough, and we don’t want you feeling out of the loop with real estate terms. Below is a list of words we’ll often use throughout the process.
A
Agreement of Purchase and Sale (APS): A legally binding contract between the buyer and seller outlining the terms and conditions of the home sale.
Amortization Period: The total time it takes to pay off a mortgage, typically ranging from 15 to 30 years in Canada.
Appraisal: An assessment of a property’s value by a licensed professional, often required by lenders to ensure the home’s value supports the loan amount.
Asking Price: The initial price set by the seller when listing their property for sale.
B
Borrowing Capacity: The maximum amount of money a lender is willing to loan you based on your income, debt, and credit score.
Bridge Loan: A short-term loan used to bridge the gap between the sale of an existing home and the purchase of a new one.
Buyer’s Market: When there are more homes for sale than buyers, giving buyers more negotiation power.
C
Certificate of Location: A document provided by a land surveyor that shows the boundaries of a property and confirms there are no encroachments.
Closing Costs: Expenses beyond the purchase price, including legal fees, land transfer taxes, and title insurance, typically amounting to 1.5%-4% of the home's price.
Closing Date: The date when the ownership of the property is transferred from the seller to the buyer.
CMHC Insurance (Mortgage Default Insurance): Insurance required when a buyer has less than a 20% down payment, protecting the lender if the buyer defaults on the mortgage.
Conditional Offer: An offer to purchase a home that includes specific conditions (e.g., financing approval, home inspection) that must be met for the sale to proceed.
Condominium (or strata): You own the unit you live in and share ownership rights for the common areas of the building along with the development’s other owners.
Conventional Mortgage: A mortgage where the borrower’s down payment is at least 20% of the home’s purchase price.
D
Debt Service Ratio: A percentage used by lenders to evaluate your ability to repay your debt, typically including your mortgage payments, property taxes, and other debts. It’s often broken into Gross Debt Service (GDS) and Total Debt Service (TDS).
Deed: A legal document that transfers ownership in the real property to the purchaser. This is often called a “Transfer. This document is registered as evidence of ownership.
Deposit: An upfront payment made when submitting an offer, showing the buyer’s serious intent to purchase. It forms part of the down payment.
Depreciation: The decrease in value of something because it is now worth less than when you bought it.
Down Payment: The portion of the home’s purchase price paid upfront by the buyer, with the rest covered by a mortgage.
E
Easement: An interest in land owned by another person that benefits the person who has the easement, for a specific limited purpose (i.e. right of way permitting passage over a particular strip of land) such as with public utilities.
Equity: The difference between the property’s current market value and the remaining mortgage balance.
F
Fixed-Rate Mortgage: A mortgage with an interest rate that remains constant throughout the loan term.
First-Time Home Buyer Incentive: A program by the Canadian government to help first-time buyers reduce their monthly mortgage payments through shared equity.
Freehold Ownership: Ownership of the entire property, including the land, as opposed to shared ownership models like condos.
G
Gross Debt Service Ratio (GDS): A ratio that calculates the percentage of your income that goes toward housing costs (mortgage payments, property taxes, utilities, etc.).
Gross Income: The total income you earn before taxes and deductions.
H
Home Buyers' Plan (HBP): A Canadian government program that allows first-time homebuyers to withdraw up to $35,000 (or $70,000 for a couple) from their RRSPs to use as a down payment.
Home Inspection: A professional evaluation of a home’s condition, identifying potential issues or repairs before purchase.
Home Warranty: Coverage that protects new homeowners from major repair costs within a specified period after purchase (often applies to new builds).
I
Interest: The cost of borrowing money. Interest is usually paid to the lender in regular payments along with repayment of the principal (loan amount).
Interest rate: The price paid for the use of money borrowed from a lender.
Insurance (Mortgage Insurance): A policy that protects the lender in case the borrower defaults on the mortgage. Required for high-ratio mortgages with less than 20% down.
L
Land Transfer Tax: A tax levied by provincial or municipal governments when a property is transferred to a new owner.
Legal Fee: The cost of hiring a lawyer to handle the legal aspects of the home purchase, including preparing the sale documents and completing the title transfer.
Lien: A legal claim against a property for unpaid debts, which must be resolved before the home sale.
Lump sum prepayment: An extra payment, made in lump sum, to reduce the principal balance of your mortgage, with or without penalty.
M
Market Value: The estimated price a property would fetch in the current real estate market.
MLS® (Multiple Listing Service): A database used by real estate professionals to list and access properties for sale.
•Mortgage: A mortgage is a security interest given in the property you are purchasing which secures repayment of the loan related to the property. That security interest is discharged on payment of the principal and interest owning on the loan in accordance with the mortgage document.
Mortgage Broker: A licensed professional who helps homebuyers find the best mortgage products by connecting them with various lenders.
Mortgage Default Insurance: Insurance that protects the lender if the borrower defaults on their mortgage, required when the down payment is less than 20%.
Mortgage Pre-Approval: A conditional agreement from a lender specifying the maximum loan amount a buyer qualifies for based on financial assessment.
Mortgage Term: The length of time a mortgage agreement is in effect, often ranging from 1 to 5 years in Canada.
N
New Home Warranty Program: Coverage if an item under the warranty needs to be repaired within the specific warranty period. The repair will be made by the organization that provided the warranty.
Net Worth: The total value of a person’s assets minus their liabilities (debts).
Notary Public: A professional who is authorized to authenticate legal documents related to the sale of a property, such as the deed.
O
Offer to purchase: A written contract setting out the terms under which the buyer agrees to buy the home. If the Offer to Purchase is accepted by the seller, it forms a legally binding contract that binds the people who signed to certain terms and conditions.
Open House: A scheduled period when a property for sale is open for potential buyers to view without an appointment.
Open Mortgage: A mortgage that allows the borrower to pay off part or all of the loan without penalty before the end of the term.
Operating Costs: The expenses that a homeowner has each month to operate a home. These include property taxes, property insurance, utilities, telephone and communications charges, maintenance and repairs.
P
Possession Date: The date when the buyer takes legal ownership and occupancy of the property.
Pre-Approval: A lender’s conditional approval for a mortgage amount, based on financial assessment.
Principal: The original loan amount borrowed, excluding interest.
Property Insurance: Insurance that you buy for the building(s) on the land you own. This insurance should be high enough to pay for the building to be re-built if it is destroyed by fire or other hazards listed in the policy.
Property Tax: An annual tax assessed by the local government based on the property’s value.
R
Registered Retirement Savings Plan (RRSP): A tax-advantaged savings plan that can be used for the Home Buyers' Plan (HBP) to help first-time buyers with their down payment.
Rate Hold: A promise from a lender to lock in an interest rate for a set period (usually 30-120 days), even if rates rise during that time.
Realtor or real estate agent: A person who acts as an intermediary between the seller and the buyer of a property.
Reserve Fund: A savings account for a condominium corporation to cover unexpected maintenance and repairs.
Right of Rescission (Cooling-Off Period): In some provinces, buyers can cancel their agreement to purchase a new-build condo within a set timeframe.
S
Seller’s Market: When there are more buyers than homes available, increasing competition and prices.
Single-family detached home: Free-standing home for one family, not attached to a house on either side.
Single-family semi-detached home: Home for one family, attached to another building on one side.
Status Certificate: A document detailing a condo’s financial health, bylaws, and potential issues.
Survey or Certificate of location: A document that shows property boundaries and measurements specifies the location of buildings, fences, and other improvements on the property and states easements or encroachments, at a specific point in time.
T
Title Insurance: Insurance that protects homeowners and lenders from title-related issues like fraud or existing liens.
Total Debt Service (TDS) Ratio: The percentage of gross income required to cover all debts, including housing costs.
Townhouse / Townhome: Also called a row house, a townhouse is one unit of several similar single-family homes, side-by-side, joined by common walls.
V
Variable-Rate Mortgage: A mortgage with an interest rate that fluctuates based on market conditions.
Z
Zoning: Municipal regulations that dictate how a property can be used (e.g., residential, commercial).
We hope this information was helpful. If any questions come up in the homebuyer process, please let us know, and we’re happy to support!
