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The transaction associated to buying or selling a home involves a host of terms specifically tied…

to the process. We’ve amassed a Glossary of Terms to help make the sale of your home go as smoothly as possible.

Amortization Period

The actual number of years it will take to repay a mortgage loan in full.  This may go beyond the term of the loan.  For example mortgages often have five year terms but 25 year amortization periods.

Appraised Value

The estimated value of the property offered as security for a mortgage loan.  This appraisal is done for mortgage lending purposes and may be less than the purchase price of the property.

Closed and Open Mortgages

A closed mortgage agreement does not provide for payout before maturity.  A lender may permit payout under certain circumstances but will levy a penalty charge for doing so.  An open mortgage permits for prepayment/repayment at any time without penalty.

Closing Date 

The date on which the sale of the property becomes final and the new owner takes possession.

Conventional Mortgage

A mortgage loan that does not exceed 80% of the lesser of the appraised value or the purchase price of the property.  A mortgage that exceeds that limit must be insured.  Some exceptions apply.

Down Payment

The amount of money  (usually in the form of cash) put forward by the purchaser.  It represents the difference between the purchase price and the amount of the mortgage loan.

Equity

Equity is the difference between the price for which a property could be sold and the total debts registered against it.

High Ratio Mortgage

A mortgage loan that exceeds 80% of the lesser of the appraised value or purchased price of the property.  This mortgage must be insured and borrowers must pay an application fee and the insurance premium (which may be added to the mortgage) to the insurer.  Some exceptions apply.

Loan-to-Value Ratio

The ratio of the loan to the appraised value or purchase price of the property, whichever is less, expressed as a percentage.

Maturity Date

The last day of the term of the mortgage agreement.  The mortgage agreement must then be renewed or the mortgage balance paid in full.

Offer to Purchase

A formal, legal agreement that offers a certain price for a specified property.  The offer may be firm (no conditions attached) or conditional (certain conditions must be fulfilled).