Mortgage and Real Estate Glossary
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- Call Option
- A clause in a mortgage that gives the lender the right to request the balance at any time.
- Canada Deposit Insurance Corporation (CDIC)
- A crown corporation that provides deposit insurance against the loss of deposits made with member financial institutions.
- Canada Education Savings Grant
- Program recently introduced by the federal government whereby it will invest, in the form of grants, along-side parents who save for their children's education through RESPs. The government will top up contributions made to an RESP by 20% up to a yearly maximum of $400 per beneficiary.
- Canada Savings Bonds (CSBs)
- A secure way for Canadians to save. The bonds, which are a form of debt issued by the Canadian government, are cashable, with proper identification, at any time at most Canadian financial institutions.
- Canadian Bankers Association (CBA)
- Professional industry association that provides information, research, advocacy, education and operational support services primarily to the banking industry.
- Canadian Depository for Securities Limited (CDS)
- Agency responsible for the automatic processing and clearing of all securities transactions in Canada.
- Canadian Payments Association (CPA)
- This association, which is composed of several financial institutions and the Bank of Canada, operates a national clearing system for financial institution payments.
- Cancellation Clause
- A provision in a lease or other contract that spells out under what conditions the parties can call off the deal.
- Cap
- The top limit on the amount the interest rate can increase during a single time period of an adjustable-rate mortgage. Every ARM has two caps: a periodic cap, which limits the periodic changes to the interest allowed in the loan agreement, and a lifetime cap, which governs the total increase that can be imposed during the life of the loan.
- Capital
- Money that is used to make money; for example, to buy rental property or a business.
- Capital Adequacy Ratio
- A ratio of total capital divided by risk-weighted assets and risk-weighted off-balance sheet items. A bank is expected to meet a minimum capital ratio of 8.0% unless a higher ratio has been specifically prescribed by the Superintendent of Financial Institutions.
- Capital Asset
- An item that you own for investment or personal purposes, such as stocks, bonds or stamp collections. When you sell a capital asset, depending on the price you earn a capital gain or a capital loss. Gains are taxed at a special rate, and losses can be used in many cases to reduce the amount that is taxed. See also "Capital Gain" or "Capital Loss."
- Capital Expenditure
- The cost of making an improvement to a property.
- Capital Gain Distribution
- You receive capital gain distributions when the fund sells some of its assets and then passes along a portion to you. This distribution that you get is regarded by the IRS as a capital gain, not as ordinary dividends such as the interest you get from your bank account. It is important to separate capital gain distributions from ordinary dividends because capital gains are taxed more favourably. See also "Ordinary Dividends."
- Capital Gain or Loss
- The difference between the price you paid for an investment and the price at which you sell (in other words, the profit or loss you make). Investments that earn capital gains or losses include equity and growth funds.
- Capital Gains
- The profit that an owner makes when selling real estate or other capital asset. Capital gains receive more favourable tax treatment than regular income. Depending on your tax bracket and on how long you held an asset before selling it, you may pay about one-third to one-half less tax than you would have paid on the same amount if you had earned it as salary. See also "Capital Asset."
- Capital Gains Tax
- A tax on profits from the sale of real estate or investments.
- Capital Improvement
- Any permanent structure or other asset added to a property that adds to its value.
- Capital Investments
- Money used to purchase permanent fixed assets for a business, such as machinery, land or buildings as opposed to day-to-day operating expenses.
- Capital Loss
- When you sell an asset for less than you paid for it, or less than its adjusted basis, you have a capital loss. While it's never fun to lose money, when it comes to taxes a capital loss isn't necessarily all bad. You can reduce the amount of income that will be taxed by the amount of your loss, up to $3,000 per year. If your loss is more than that, you can carry the excess, known as capital loss carryover, forward indefinitely until the total loss is used.
- Capitalization
- A way to estimate the value of a rental or commercial property using the rate of return on investment and the property's annual net operating income.
- Capitalization Rate
- The estimated percentage rate of return that a property will produce on the owner's investment.
- Capitalized (CAP) cost
- A leasing term that refers to the price of the car. The lower the capitalized cost, the lower the monthly lease payment. The cap cost is negotiable and can be reduced by a cash down payment, trade-in or a manufacturer's rebate; it can be increased by the loan acquisition fee or costs left over from a previous lease.
- Captive Finance Company
- A finance company related to a specific dealer or manufacturer.
- Caravan
- An outing in which a group of real-estate agents look at houses that have been listed for sale recently.
- Card Holder Agreement
- The written statement that gives the terms and conditions of a credit card account. The cardholder agreement is required by Federal Reserve regulations. It must include the Annual Percentage Rate, the monthly minimum payment formula, annual fee, if applicable, and the cardholder's rights in billing disputes. Changes in the cardholder agreement may be made, with written advance notice, at any time by the issuer.
- Carport
- A roofed parking area that lacks one or more walls.
- Cash Advance Fee
- A charge by the bank for using credit cards to obtain cash. This fee can be stated in terms of a flat per-transaction fee or a percentage of the amount of the cash advance. For example, the fee may be expressed as follows: "2% / $10". This means that the cash advance fee will be the greater of 2% of the cash advance amount or $10. The banks may limit the amount that can be charged to a specific dollar amount.
- Cash Cards
- Cash cards, similar to pre-paid phone cards, contain a set amount of value, which can be read by a special cash card reader. Participating retailers will use the reader to debit the card in increments until the value is gone. The cards are like cash — they have no built-in security, so if lost or stolen, they can be used by anyone.
- Cash Collateral
- The proceeds of cash collected from the sale of liquid assets while in bankruptcy.
- Cash Flow
- The money an investment produces after subtracting cash expenses from income.
- Cash Flow Forecast
- An estimate of when and how much money will be received and paid out of a business. It usually records cash flow on a month-by-month basis for a period of two years.
- Cash Method
- The form of accounting in which you report income in the actual year you receive it and deduct expenses in the year you pay. Most individuals use this method. Under this system, if you built a deck and billed the client in December 1999 but didn't receive the cheque until January 2000, it would be counted as 2000 income, not 1999.
- Cash-out Refinance
- The taking out of a new mortgage on the same property in which the amount borrowed is greater than the amount of the previous mortgage. The difference is taken out in cash.
- Casualty and Theft Loss
- A loss caused by a hurricane, earthquake, fire, flood, theft or similar event that is sudden, unexpected or unusual. You can deduct a portion of personal casualty or theft losses as an itemized deduction.
- Caveat
- A charge or instrument placed on land title.
- Certificate of Occupancy
- Authorization by a local government giving permission for someone to live in or use a building that has just been constructed or renovated.
- Certificate of Sale
- An affidavit issued at a judicial or tax sale that entitles the buyer to the deed to the property purchased after court confirmation.
- Certificate of Title
- A written document stating that the title to a piece of property is legally vested in the present owner.
- Chain of Title
- Legal records that trace ownership of a property from the most recent owner to the original owner.
- Change Frequency
- The scheduled period in which an adjustable-rate mortgage adjusts.
- Change Order
- A document defining an alteration of construction plans.
- Chartered Banks
- Financial institutions regulated under the Bank Act. Chartered banks are designated as Schedule I or Schedule II depending on their ownership.
- Chattel
- Personal property that can be moved.
- Chattel Mortgage
- A loan backed by movable personal property. Generally mobile or trailer homes.
- Cheque Book
- A book with blank cheques. The cheques may be personalized or non-personalized.
- Cheque Clearing
- You write a cheque to pay your telephone bill. The telephone company sends the cheque to its bank to be deposited in its account. The cheque winds its way through the system and, eventually, your account is debited for the amount of the cheque. When that happens, the cheque is said to have "cleared."
- Cheque Hold
- The number of days that a financial institution can legally hold uncollected funds before crediting a customer's account balance and allowing the use of those funds.
- Cheque or Check (U.S.)
- A written order for payment of a certain amount of money.
- Cheque Register
- A book with space for you to note the details of every transaction in your chequing or combination account.
- Cheques Returned with Statement
- All original cancelled cheques are returned to the account holder in monthly statement.
- Child Support
- Monthly payments that contribute to the care of a child. Payments must be received continuously for one year to be counted toward qualifying income for a loan.
- Child Tax Credit
- A tax break allowed individuals who claim eligible dependent children on their tax returns.
- Circuit Breaker
- An electrical device that is used to turn power off and on in sectors of a building, and to limit the flow of electricity through a circuit for safety. In taxes, a credit to reduce property taxes for elderly and/or permanently disabled; state-financed property tax credit that decreases as an individual's income increases; usually elderly and/or permanently disabled qualify.
- Claim
- A creditor's assertion of a right to payment from a debtor or the debtor's property.
- Classic Card
- Brand name for the standard card issued by VISA.
- Classified Property Tax
- A local government's levy on real estate that varies depending on the use of the property. Usually, commercial property is taxed more heavily than residential property where a classified property tax exists.
- Clear Title
- Title not burdened by liens or legal questions.
- Clearing and Settlement
- The process whereby banks collect or pay out for items drawn on or paid into accounts in their institution. This process enables banks to accept each other's cheques and bank drafts for deposit. The Canadian Payments Association operates Canada's clearing system.
- Client-based
- Customers use money management software and their own computers to access the bank using a modem and a phone line.
- Closed Mortgage
- Closed mortgages involve a strict repayment schedule of a specific amount with optional limited lump sum payments and payment increases.
- Closed-account Fee
- A fee charged for shutting down an account. Sometimes charged if the account is closed before a certain time period has passed.
- Closed-end Lease
- The most common type of car lease. The lessee may return the car at the end of the lease term, pay any end-of-lease costs, such as the disposition fee, and the lease agreement is over. In a closed-end lease, the lender assumes the risk of predicting the value of the vehicle (its residual value) at the end of the lease's term. Closed-end lease payments are somewhat higher than open-end lease payments.
- Closely Held
- Schedule II banks may be closely held, i.e., one party (owner) may hold more than 10% of the outstanding shares. Schedule I banks are prohibited from this type of ownership.
- Closing
- In real estate, the delivery of a deed, the payment of the purchase price, the signing of notes, and the paying of closing costs, which completes a real estate transaction.
- Closing Costs
- The miscellaneous expenses involved in closing a real estate transaction that are over and above the purchase price. Some of the closing costs include title insurance, appraisal fee.
- Cloud on Title
- A claim on title to property that could impair the ability to transfer ownership.
- Cluster Development
- A doctrine by which a local government specifies the population density of a planned development, and the developer has the option of making some areas of the development more densely populated than others.
- CMHC
- The Canadian Mortgage and Housing Corporation: this is a Federally run institution that provides banks and lenders with mortgage insurance. Not to be confused with life or property insurance. In the event of default or foreclosure CMHC assumes responsibility of the property and reimburses the bank/lender the entire mortgage amount. This insurance is required generally when you have less than 25% equity or down payment. This insurance is paid by the property owner in advance but usually added to the mortgage amount. See also "G.E. Capital."
- Co-branded Card
- A type of affinity card issued through a partnership or alliance between a bank and another retail company. For instance, a large department store may co-brand a card with a bank. The card would have two brand names on it — the bank's name and the store's name. Usually, the attraction of the card is special deals with the retail partner. Many — particularly the ones affiliated with airlines that offer air miles — are popular enough to command a hefty annual fee.
- Co-housing
- Also called cohousing, cooperative housing and community housing, an arrangement in which dwelling units have access to a shared space with a large kitchen, dining hall, laundry and children's play areas.
- Co-maker
- Any party that co-signs a promissory note. All co-makers assume responsibility for the loan if any of the other co-signers renege.
- Co-signer
- A person who signs a promissory note that is also signed by one or more other parties. All parties take responsibility for the debt if any of the others renege.
- Coinsurance
- A policy in which the insurer and insured share costs incurred after the deductible is met.
- Collateral
- Any property pledged as security for repayment of a debt.
- Collection
- The efforts used to bring a delinquent mortgage, or other debt current, and the filing of necessary notices to proceed with foreclosure when necessary.
- Collusion
- A secret, deceitful agreement by two or more parties to defraud others.
- Combination Account
- An account that is part savings and part chequing. You may write cheques and you will be paid interest if you have enough money in the account.
- Combined Loan-to-value (CLTV)
- The relationship between the unpaid principal balances of all the mortgages on a property (first and second usually) and the property's appraised value (or sales price, if it is lower).
- Commercial Bank
- A financial institution that provides a broad range of services, from chequing and savings accounts to business loans and credit cards.
- Commercial Banking
- Commercial banking centres serve small- and medium-sized businesses such as franchising, leasing and cash management services.
- Commercial Paper
- Unsecured notes issued by companies and maturing within nine months. Typically, commercial paper is issued only by the larger and more credit worthy companies.
- Commercial Property
- A parcel in a district zoned for business.
- Commingling
- The mixing of money from different sources so that the sources can't be distinguished.
- Commission
- An agent's fee for negotiating a real estate or loan transaction, often expressed as a percentage of the selling price.
- Commitment
- An agreement, often written, in which a lender promises to lend money on certain terms for a specified period.
- Commitment Fee
- A sum paid by a borrower to a lender in exchange for a promise to lend money on certain terms for a specified period.
- Commitment Letter
- A formal offer by a lender which states the terms under which it agrees to lend money to a home buyer. Also known as a "loan commitment." This letter will indicate the contingencies that must be cleared prior to funding the loan.
- Common Area Assessment
- A levy against individual unit owners in a condominium or planned unit development to pay for upkeep, repairs and improvements to the property's common areas, such as corridors, elevators, parking lots, swimming pools and tennis courts.
- Common Areas
- Those portions of a building, land, and amenities owned (or managed) by a planned unit development, or condominium project's homeowners' association, or a cooperative project's cooperative corporation that are used by all of the unit owners who share in the common expenses of their operation and maintenance. Common areas include swimming pools, tennis courts, and other recreational facilities, as well as common corridors of buildings, parking areas, means of ingress and egress, etc.
- Common Law
- Traditional, unwritten law based on English custom.
- Common-interest Development
- A housing area in which owners belong to a homeowners association that owns and maintains common areas.
- Community Bank
- Community bank: A bank, often with branches, that is locally owned and operated, and is not part of a bank holding company. Also referred to as an independent bank.
- Community Property
- Possessions, real estate and profits that a husband and wife receive during the marriage, excluding gifts and inheritances. Upon divorce, community property is distributed equally.
- Comparables or Comps
- Refers to "comparable properties," which are used for comparative purposes in the appraisal process. Comps are recently sold properties that are similar in size, location and amenities to the home for sale. Comps help an appraiser determine the fair market value of a property.
- Comparative Market Analysis
- A method of estimating a property's value by comparing the sales prices of similar properties that have sold recently.
- Competent
- Legal ability to make decisions and enter into contracts.
- Compound Interest
- Interest that is determined by adding the interest earned in the current period to the principal and computing the next period's interest on this "compounded" total amount.
- Compounding Method (CM)
- Used in Bank rate tables. These include: S—Simple interest. A—Compounded annually. H—Compounded semi-annually. Q—Compounded quarterly. M—Compounded monthly. D—Compounded daily.
- Condemnation
- 1. Legal process in which a government acquires private property for public use. 2. A declaration by a government agency that a property is unfit for use.
- Conditional Commitment
- A promise by a lender to make a loan if the borrower meets certain requirements.
- Condominium
- A structure of two or more housing units. The interior space of the units are individually owned. The balance of the property (land, building and other amenities) is owned in common by the owners of the individual units.
- Condominium Conversion
- Changing the ownership of an existing building (usually a rental project) to the condominium form of ownership.
- Confirmation
- Once approval is given, all of the debtors' pre-petition debts are discharged (eliminated) as provided by the plan.
- Conforming Loan
- A mortgage that meets the requirements to be eligible for purchase or securitization by one of the government-sponsored enterprises such as Fannie Mae, Freddie Mac and Ginnie Mae. Requirements include size of the loan, type and age.
- Consent Judgment
- A judge's legally binding approval of a written agreement by the parties of a lawsuit.
- Consideration
- A thing of value that is negotiated as part of a contract.
- Construction Budget
- Money that the builder sets aside for building a structure.
- Construction Loan
- A short-term interim loan for financing the cost of construction. The lender makes payments to the builder at periodic intervals as the work progresses.
- Construction to Permanent Loan
- A loan that pays first for construction, then for a long-term, traditional mortgage, as distinct from a construction loan followed by a separate mortgage loan.
- Constructive Receipt
- The concept that a taxpayer does not actually have to take possession of money for it to be taxable. The most common occurrence of this is when savings account interest is reinvested rather than sent to the account holder as a separate payment. In this case, the account holder constructively received the interest because the earnings were credited to his account and could have been taken out at the owner's discretion. As such, the earnings are taxable.
- Consumer Bankruptcy
- A bankruptcy case filed to reduce or eliminate debts that are primarily consumer debts.
- Consumer Credit
- Loans for personal or household use as opposed to business or commercial lending. Loans are generally unsecured, not backed by collateral.
- Consumer Credit Service
- A service that offers counselling about how to work out a realistic budget and debt repayment plan and work with creditors. The goal is to ensure that debts are paid back over time.
- Consumer Debts
- Debts incurred for personal, as opposed to business, needs.
- Consumer Price Index
- An index that measures movements in the average price of products and services typically consumed by Canadian families.
- Contiguous Lots
- Pieces of real estate that are next to each other.
- Contingency
- A condition that must be met for the property sale to go through, such as a satisfactory home inspection or approval for a mortgage.
- Contract
- An agreement between two or more parties. In real estate parlance, the contract is the legal document by which buyer and seller make offers and counteroffers. The real estate contract describes the property, includes or excludes items in the property, names the price, apportions the closing costs between the parties and sets forth a closing date. When buyer and seller agree on terms and sign the same document, the property is said to be "under contract." More formally known as agreement for sale, purchase agreement or earnest money contract.
- Contract for Deed
- An agreement for sale of property in which the buyer takes possession while making payments, but the seller holds title until full payment is made. Also called a land contract.
- Contract to Purchase
- A document in which a property's buyer and seller approve the price and other terms of the transfer of title. Also known as an agreement of sale, a purchase contract or a sale contract.
- Contractor
- One who constructs or oversees construction of a house or a large renovation.
- Contractual Lien
- A legal claim against property as a result of a voluntary contract, such as a mortgage.
- Controlled Growth
- A set of restrictions set by local government that governs the amount, type and density of new construction.
- Conventional Mortgage
- A mortgage that is not insured or guaranteed by CMHC or GE Capital.
- Conversion Clause
- A provision that may appear in an adjustable-rate loan agreement allowing the loan to be changed to a fixed-interest rate loan, usually for an additional charge.
- Convertible ARM
- An adjustable rate mortgage (ARM) that can be converted to a fixed-rate mortgage under specified conditions.
- Convertible Mortgage
- An adjustable-rate home loan which the borrower has the option at specified times of changing into a fixed-rate loan.
- Conveyance
- A document that transfers title to property.
- Conveyance Tax
- A tax on the transfer of real property.
- Cooperating Broker
- A real-estate broker who finds a buyer for a property and initiates a negotiation and shares in a commission.
- Cooperative
- A residential project owned by a cooperative corporation. Residents own shares in the cooperation, which in turn gives them the right to live in the project.
- Cooperative Mortgage
- A loan that allows the borrower to buy shares of a co-op.
- Cooperative or Co-op
- A type of multiple ownership in which a corporation owns property (usually an apartment building) and the occupants own shares in the corporation equal to their portion of the building.
- Corporate Banking
- Banking services for large firms.
- Corporate Relocation
- A situation in which an employer transfers an employee and pays moving expenses.
- Corrective Work
- Repairs or maintenance that a buyer requests be done on a house before closing.
- Correspondent Bank
- A bank that holds deposits of another bank, usually a smaller bank, and in turn provides certain banking services that may not be readily available to the smaller bank.
- Cost Basis
- The price you originally paid for an investment. This is also known as the basis or tax basis. The cost basis includes any commissions or fees you paid when you purchased the investment.
- Cost of Goods Sold
- An expense that appears on a business's income statement and represents the cost of the inventory sold during the period.
- Cost-plus Contract
- An agreement in which a construction contractor receives a fee based on a percentage of all costs paid for labour and materials.
- Counteroffer
- Rejection of a purchase offer by submission of another offer with different terms (such as price or closing date). A step in the negotiating process.
- Covenant
- A promise made in a contract or property deed.
- Creative Financing
- An innovative or unusual way of structuring a home loan that allows the buyer to buy the house.
- Credit
- Money that a lender gives to a borrower on condition of repayment over a certain period.
- Credit Bureau
- A company that collects and sells information about how people handle credit. It issues credit reports that list how individuals manage their debts and make payments, how much untapped credit they have available and whether they have applied for any loans. The reports are made available to individuals and to creditors who profess to have a legitimate need for the information.
- Credit Card
- A plastic card with a coded magnetic stripe that, when signed, entitles its bearer to a revolving line of credit, with a credit limit and interest rate determined by the borrower's income and credit report.
- Credit History
- The financial worthiness of a borrower. The history of whether the borrower has met financial obligations on time in the past.
- Credit Insurance
- A policy that pays off the card debt should the borrower lose his job, die or become disabled. The structure of protection for a revolving credit card debt is calculated each month to cover only the debt that existed at the last billing cycle.
- Credit Life Insurance
- A type of life insurance that helps repay the loan if the consumer becomes disabled. It is optional coverage. When taken out, the cost of the policy is sometimes rolled into the loan principal amount.
- Credit Limit
- The maximum amount of charges a cardholder may apply.
- Credit Line
- The maximum amount of money available in an open-end credit arrangement such as a credit card, or overdraft protection.
- Credit Rating
- A judgment of someone's ability to repay debts, based on current and projected income and history of payment of past debts. Sometimes expressed as a number called a credit score.
- Credit Report
- A report on a loan applicant's willingness and ability to make payments in a timely manner in the past. This report is provided to the bank by an outside agency.
- Credit Reporting Agency
- An organization that prepares reports that are used by lenders to determine a potential borrower's credit history. The agency obtains data for these reports from a credit repository as well as from other sources.
- Credit Repository
- An antiquated term for a credit bureau.
- Credit Risk
- The risk of loss one assumes under a financial contract that a borrower or a counter-party to a loan or other credit-related contract may default or fail to perform its obligations.
- Credit Score
- A number, roughly between 300 and 800, that reflects the credit history detailed by a person's credit report. Lenders calculate this number with the assistance of computer systems as part of the process of assigning rates and terms to the loans they make.
- Credit Union
- A non-profit, cooperative financial institution owned and controlled by the people who use its services, usually a group such as employees in the same company or industry. Credit unions historically have been able to offer lower rates and fees and still operate in the black. Credit unions rely on a financial reserve to absorb unexpected losses from loan defaults or other financial setbacks, and the majority of credit unions carry federal deposit insurance that protects individual accounts up to a specified amount in the event the credit union fails.
- Creditor
- One who is owed money.
- Credits
- Tax credits are much like credits you get from a store. You use the credit to reduce the amount of the tax you owe. Tax credits are more valuable than deductions because they directly reduce the amount of tax you owe, rather than reducing the amount of income that is taxed.
- Cul-de-sac
- A dead-end street, often with a broad circle at the end with houses arrayed around it; from the air a cul-de-sac looks like a lollipop.
- Curable Defect
- A problem with a property that can be remedied. Peeling paint is a curable defect, but location in a crime-ridden neighborhood is not.
- Curb Appeal
- The look of a house when viewed from the street.
- Current Year Tax
- Tax payable in the same year, such as property tax.
- Custom Builder
- A contractor that constructs or remodels houses based on plans submitted by the client.
- Custom Home
- A house built according to plans from an architect hired by the owner.
