Here is a simple glossary
of mortgage lending and finance related
terms. To find the term you are looking
for quickly, simply click on the letter
below.
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Z
A
Abandonment of Property
-
The act of giving up or proscribing
completely. Yielding, ceding or
giving up totally, especially ceding
permanent control to another.
-
The voluntary relinquishment or
surrender of property, or an
interest in property, without any
intention of resuming enjoyment or
possession, or of vesting it in
anyone else. The disclaiming of a
right, expressly or by implication,
without leaving any evidence of an
intention to reclaim that right.
Thus, abandonment requires two
elements, an intention to relinquish
a right or property and the act by
which the intention is carried into
effect (Roebuck v. Mecosta County
Road Comm’n, 59 Mich App 128, 229
NW.2d 343, 345-6 (1975)).
Abstract of Judgment
When a judgment is made in a lawsuit, a
court document is drafted that states
how much the person who lost the lawsuit
owes. This document can create a lien or
a claim on property when it is filed
with the country recorder where the
property is owned.
Abstract of Title
Registry System: A condensed history of
the title to a parcel of land consisting
of a synopsis of every recorded
instrument affecting the title to that
land arranged in chronological order of
recording.
Land Titles System: A chronological
listing of every recorded instrument
currently affecting the title to that
land.
Acceleration Clause
A clause in a mortgage which provides
that where default has occurred in
making any payment of moneys due under a
mortgage or in the observance of any
covenant in a mortgage and under the
terms of the mortgage, by reason of such
default, all moneys secured thereby
become due and payable.
Acceptance
The offeree's consent to enter into a
contract and to be bound by the terms of
the offer.
Account Agreement
An account agreement is a set of
conditions that outline both your rights
and responsibilities and those of the
bank concerning your bank account. This
agreement must be read, agreed upon, and
signed before your account is activated.
Accounting Method
Accounting method refers to how
individuals or businesses keep their
financial records. A common accounting
method for both individuals and small
businesses is the cash method, even
though businesses with inventory are
required to use the accrual method. See
also "Accrual Method" or "Cash Method."
Accounts Payable
Money owed by a business for goods and
services provided without pre-payment.
Accounts Receivable
Money owed to a business by purchasers
who are not required to make a payment
prior to receiving goods and/or
services.
Accredited Mortgage
Professional
The Accredited Mortgage Professional
(AMP) is Canada’s national designation
for mortgage professionals. Launched in
2004, the AMP was developed by CIMBL as
part of an ongoing commitment to
increasing the level of professionalism
in Canada’s mortgage industry through
the development of educational and
ethical standards. Consumers should know
that the AMP designation sets a single
national proficiency standard for
Canada’s mortgage professionals.
Accrual Method
In business accounting, the accrual
method refers to reporting income in the
year it was earned along with any
expenses incurred, rather than reporting
the income and expenses when payment is
received or made. For example, if you
renovated a basement and billed the
customer in December 2004, the amount
you charged is reported in 2004 as
income even if the customer did not pay
until the following year. Also, if you
own a business that keeps an inventory,
you are also required to use this method
of business accounting.
Accrue
To gather together an amount often over
a period of time.
Accrued Interest
The interest charged for the period of
time that has elapsed since interest was
last deducted.
Action for Possession
A legal remedy available to a mortgagee
when a mortgage is in default.
Action on the Covenant
for Payment
A legal remedy available to a mortgagee
when a mortgage is in default.
Acquiring Financial
Institution
To receive credit for credit card
transactions, merchants must have and
maintain an account with an acquiring
financial institution so that daily
credit card totals can be deposited into
the merchant’s account minus any fees
owed to the acquiring financial
institution.
Acquisition Fee
Some leasing companies charge a fee for
initiating the original loan. This is
similar to mortgage lenders who charge
additional percentage points as an
origination fee. This fee is often not
specified in a contract, but is included
in the cost when calculating monthly
payments.
Acre
A plot of land 180 by 242 feet is equal
to one acre or 43,560 square feet.
Acre Foot
An acre foot is equivalent to 325,851
gallons of material (water or other)
that is needed to cover an acre of land
one foot deep.
Act of God
This term is generally used in insurance
policies and refers an event caused by
natural forces that results in damage to
property. Natural forces can include
hail, rain, tornados, lightning, floods,
and earthquakes.
Active Income
Active income refers to wages, tips, and
profits from your business or employment
that you partake in. It also includes
portfolio income such as interest and
dividends, but you cannot usually offset
active income with passive losses. See
also "Non-passive Income."
Actual Age
The actual age (usually in years) of a
structure since building was
complete.This differs from effective
age.
Actual Cash Value
The monetary amount that a broker or
dealer has invested in a used vehicle.
This cash value is used for the purchase
and repair of the vehicle.
Add-on Interest
Interest
that is calculated at the beginning of
the loan and added to the principal
amount owing. This means that the added
interest must also be repaid, even if
the loan is paid off early.
Addendum
A change,
revision, or update made to a contract.
Additional Principal
Payment
You can pay extra money in addition to
your required loan payment to help pay
off the principal loan amount faster. By
making the extra payment, you also
reduce the amount of interest paid.
Additional Property
A property that is owned by the person
that is not being financed.
Adjustable Rate Mortgage
(ARM)
An "Adjustable Rate Mortgage" or ARM
refers to the type of mortgage loan
where the interest rate and monthly
payments can be adjusted to rise and
fall with market conditions. The
interest rate and payments can be
adjusted as frequently as once a month
or you can adjust the principal loan
balance or the loan term to reflect the
rate change.
Adjusted Balance
Some credit card companies use the
"adjusted balance" method for applying
finance charges. This means the credit
card company will subtract all of the
payments made during the month and then
add the finance charges to the remaining
balance.
Adjusted Basis
"Adjusted Basis" refers to the amount
used to determine profit or loss from a
sale or property trade. To calculate
this amount for an asset, take the
original amount paid, add improvement
and assessment costs, and then subtract
deductions. Deductions can include down
grading, depreciation, or depletion.
Adjusted Cost Basis
To calculate the "Adjusted Cost Basis,"
take the amount paid for the item, plus
the amount paid for improvements, and
then subtract the losses and
depreciation. The profit or loss is
determined when the owner sells the
item, and determines the difference
between the sale price and the adjusted
cost basis.
Adjustment on Sale
A pro-rated division and distribution of
prepaid or accrued taxes, prepaid
insurance premiums, prepaid rents and
other income and expenses. Apportionment
usually occurs when a property is sold,
and is the manner of determining the
amounts due to and from the parties.
Adjustment Period
The period of time between interest rate
changes in an adjustable-rate mortgage.
Adverse Possession
The right by which someone occupying a
piece of land might acquire title
against the real owner, if the
occupant's possession has been actual,
continuous, hostile, visible, and
distinct for a statutory period. Adverse
possession is not possible under Land
Titles or when Crown property is
involved.
Adverse Use
Using someone's property without their
verbal or formal written permission.
Affidavit
A statement or declaration in writing
and sworn to or affirmed before some
officer who is authorized to administer
an oath or affirmation, such as a notary
public, or commissioner of oaths.
Affinity Card
A type of credit card (usually Visa or
MasterCard) that has an endorsement or
sponsorship agreement with an
organization, charity, or non-profit
group in which a percentage of the sales
transactions made using the card go to
that organization. The logo or
organization name is generally displayed
on the credit card.
Agency
An agency is created when one person,
called the principal, authorizes another
person, called the agent, to act on
behalf of and subject to the control of
the principal.
Agency Closing
The use of a title company or agency to
supervise the closing meeting where the
property is transferred and mortgage is
finalized.
Agent
A person who acts on behalf of another
person (or client) when dealing with a
third party transaction. In real estate,
an agent is a person who conducts
property transactions on behalf of
sellers and buyers. The agent usually
works on commission or for a
pre-determined fee.
Agreed Boundary
In the event of a dispute between
neighbouring property owners, property
lines or an agreed boundary can be drawn
to settle the dispute.
Agreement of Purchase and
Sale
A written agreement between vendor and
purchaser in which the purchaser agrees
to buy certain real property and the
vendor agrees to sell upon terms and
conditions as set forth in that
agreement.
Agreement of Sale /
Balance of Sale
A method of financing a sale, but
different from a mortgage. The buyer
does not receive a deed nor does title
pass to him or her immediately; rather
he or she receives a contractual
interest on a time basis. Payments are
made directly to the seller who in turn
is still responsible for any outstanding
mortgage on the property. The seller who
still holds title may mortgage their
remaining equity.
Air Miles
Air Miles
is a popular and recognized reward
program that works with
airline-affiliated co-branded cards.
This means that the cardholder earns Air
Miles (points) each time he or she uses
the card. The earnings are then
transferred on a monthly basis to the
cardholder’s account and can be redeemed
for flights, travel discounts, or other
merchandise.
Alienation Clause
A type of acceleration clause that
demands payment of the entire debt upon
sale or other transfer of the title.
Amending Agreement
An agreement between the lender and
borrower which may or may not be
registered on title by the lender in
which the terms of the registered
mortgage are changed.
Alimony
Alimony
is a monthly payment made to an
ex-spouse usually as determined by the
courts. If you are receiving alimony,
payments must be received continuously
for one year to qualify as income for a
loan, mortgage or otherwise.
Allowances
Money set aside by builders for
amenities or services such as driveways,
landscaping, carpeting, and fixtures.
These amenities are usually standard,
but they can have optional designs.
Alternative Minimum Tax
This tax primarily affects high-income
taxpayers who shelter some of their
income from taxation through certain tax
preference items or deductions. It is
often referred to as AMT. If your income
meets the limit, then you have to
recalculate your tax amount that is due
based on the separate alternative
minimum tax rates and tables.
Alternative Mortgage
When a home loan is not a standard
fixed-rate mortgage, it is considered an
alternative mortgage.
Amenities
Amenities are features such as green
space, playgrounds, community centers,
shopping malls, or swimming pools that
make a neighborhood or community more
desirable for living.
Amortization
Term used to describe the time over
which the mortgage is to be paid,
assuming equal payments. The life of a
loan, e.g. a mortgage with a 25-year
amortization period means that if all
regular payments were made on time and
the terms (payment, interest rate)
remained the same, it would take 25
years to reduce the balance to 0.
Amortization Schedule
A table showing the amounts of principal
and interest comprising each level
payment due at regular intervals and the
outstanding principal balance of the
loan after each level payment is made.
Amortized Mortgage
A mortgage requiring regular payments
which include both principal and
interest sufficient to fully repay the
loan by maturity.
Amortization Table
A mathematical formula used to calculate
monthly mortgage payments based on the
borrowed loan amount, the interest rate,
and the loan term.
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Amortization Term
The period of time that is required and
agreed upon to repay (amortize) an
entire mortgage loan.
Amortized Loan
An amoritized loan is a loan where the
interest and principal are both paid off
in their entirety through a series of
scheduled payments over a specified
amount of time.
Amount Due at Lease
Signing
When leasing a vehicle there are
generally costs associated with the
transaction and payment is due before
the customer can take possession of the
vehicle. Such costs can include a
security deposit, title fee, capitalized
cost reduction, monthly payments paid at
signing, and registration fees.
Amount Financed
The amount financed refers to the
principal amount that is borrowed. This
amount can include the entire purchase
cost along with any other items
incorporated into the payments.
Angels
Those private individuals with capital
to invest in business enterprises are
often called angels.
Anniversary Date
The same date in each calendar year
during the term of the mortgage with the
first anniversary date taking place one
year from the date interest is finally
adjusted.
Annual Fee
Banks and credit lenders generally
charge an annual fee for the use of a
credit card levied each year. Annual
fees can range from $15 to $300, and are
billed directly to the customer's
monthly statement. Many credit cards are
now offering incentives to customers by
getting rid of annual fees to make the
cards more appealing.
Annual Mortgagor
Statement
An annual report or statement sent to
the borrower which details the remaining
principal amount owing on the loan and
the amount paid in taxes and interest
for the previous year.
Annual Percentage Rate
(APR)
A yearly interest rate that includes
fees and costs paid to obtain the loan.
Lenders are required by law to disclose
this interest rate. The rate is
calculated in a standard way, taking the
average compound interest rate over the
loan term, so borrowers can compare
loans. In mortgages, it is the interest
rate of a mortgage when taking into
account the interest, mortgage
insurance, and certain closing costs
including points paid at closing. There
is no APR in an automobile lease;
instead, the cost of money is expressed
as the money factor.
Annual Percentage Yield (APY)
The percentage disclosed on
interest-bearing deposit accounts that
reflect the total interest to be earned
based on an institution's compounding
method, assuming funds remain in the
account for a 365-day year. This
disclosure is required by Truth in
Savings regulations.
Annuity
A periodic payment made to a policy
holder by an insurance company for a
certain length of time.
Anticipatory Breach
In a contract, when one party reneges on
the agreement, the other party is
notified and is no longer responsible
for fulfilling their end of the
agreement.
Application
A
document or form that is filled out by a
prospective borrower to qualify for a
loan. The application requires the
borrower to provide detailed information
about his or her financial situation.
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Application Fee
Lenders charge a fee to process the
application or document as filled out by
a prospective borrower to qualify for a
loan. The application generally details
the financial situation of the borrower
and must be reviewed before a loan
decision can be made.
Appointment of a Receiver
A legal remedy available to a mortgagee
when a mortgage is in default.
Appraisal
A market
value estimate for a parcel of real
estate that is made by a competent
professional who is knowledgeable about
local real estate prices and market
trends.
Appraisal Fee
A cost charged by professionals who are
hired to offer educated opinions about
the monetary worth or value of a
property.
Appraisal Report
An independent assessment of the
property by a qualified individual. A
statement giving an opinion of value of
an adequately described property, as at
a specific date and supported by
pertinent data.
Appraised Value
An educated opinion or estimate
regarding the value (monetary worth) of
a property.
Appraiser
An appraiser determines the market value
of a house based on its condition and
the selling price of comparable houses
recently sold in the area.
Appreciation
Appreciation refers to the increase in
the value of a property or item over
time.
Approval
An
assessment or judgement made by a lender
regarding the ability of a borrower to
repay a mortgage loan. Being approved
also helps the borrower when home
shopping because the lender will confirm
the amount the borrower can obtain to
purchase a home.
Appurtenance
A right used with the land for its
benefit.
Arm's Length Transaction
A transaction between unrelated parties.
A transaction freely arrived at in the
open market unaffected by abnormal
pressures as might be true in the case
of a transaction between related
parties.
Arbitration
The determination of a dispute by a
disinterested third party.
Arbitration
A method used to resolve disputes that
requires an impartial third party to
make a reasonable and fair decision for
all parties involved. The impartial
third party must be agreed upon by all
sides involved in the dispute before a
decision can be made.
Architect
A person who designs structures and
buildings.
Architectural Fees
Fees paid to a person who designs
structures or buildings
Arpent
An area equal to approximately 0.845
acres. This measurement was
traditionally used in France, Quebec,
and Louisiana. Today, hectares and acres
are more commonly used to measure area.
As is Where is
The buyer makes the purchase at his or
her own risk.
Asbestos
A fire-resistant element that once was
commonly used for insulation in
buildings, but was discovered to cause
health issues in the lungs. This
material is no longer used and is
typically removed from buildings when it
is discovered.
Asking Price
The amount of money the seller requests
for the property or item. This is not
the same as the appraised value.
Assessment
(assessed Value)
A value placed upon property (land and
buildings) for taxation purposes.
Assessment Roll
An annual list of the assessed values of
all properties in a municipality, which
includes the name of the property owner
or tenant and their address. Assessment
rolls are usually delivered to a
municipality before the end of the year.
The term "roll" comes from ancient times
and refers to the way information used
to be stored - on paper or parchment,
rolled up into cylinders.
Asset
Any item
or possesion of monetary value that is
legally owned by a person. Assets can
include real or personal property, and
enforceable claims against others
including bank accounts, stocks, mutual
funds, etc.
Asset Case
A bankruptcy proceeding where there are
non-exempt assets that might be
accessible to pay creditor's claims.
Assignment
Assignment refers to the transfer of a
mortgage from one person to another
person.
Assignee
One who takes the rights or title of
another by assignment.
Assignment of Lease
The absolute or conditional transfer of
the rights of either party to a lease.
Assignment of Mortgage
The transfer of ownership of a mortgage
from one party to another.
Assignment of Rentals
A contract whereby the mortgagor grants
the mortgagee the right to collect
future rents on a given occurrence,
normally default. Normally taken as
additional security on rental loans.
Assignor
One who transfers or assigns the rights
or title to another.
Assumability
The ability of a mortgage to be taken
over from the original borrower by a new
borrower.
Assumable
A loan or obligation that can be taken
over from the original borrower by a new
borrower.
Assumption of Mortgage
The act of assuming liability for an
existing mortgage on a property by the
purchaser of that property. With
builders' loans, the assumption is
usually evidenced by written agreement.
Assumption Clause
A provision in a mortgage contract that
enables the buyer to assume or take
responsibility for the existing mortgage
loan from the seller.
Assumption Fee
Lenders will charge a fee to update
mortgage records when a buyer assumes an
existing mortgage from the seller.
ATM Access Fee
A fee charged for an account holder to
access the ATM system and conduct
banking activities such as cash
withdrawls. This fee is charged in
addition to any individual account fees
already paid by the account holder to
their financial institution. See also
"Automated Teller Machine."
ATM Alliance
An alliance between banks and/or credit
unions that is designed to avoid or
minimize surcharges for non-bank
customers at ATM machines. Customers
from one bank that belongs to the
alliance can use surcharge-free ATMs at
all alliance banks. See also "Automated
Teller Machine."
ATM Card Fee
This is not a debit card fee. It can be
an annual or monthly fee charged on top
of individual account fees to obtain an
ATM card. The fee may also be charged
per card or per account. For example, if
an account is held jointly, the bank may
charge for the second person to hold a
card or it may charge one fee for all
the cards on an account. See also
"Automated Teller Machine."
ATM Surcharge
A fee charged to someone using a
bank-owned ATM because he or she does
not hold an account with that bank. It
is a good idea to review what your bank
charges you to use another bank's ATM
system to avoid paying additional
surcharges to your bank. See also
"Automated Teller Machine."
Attachment
The seizure of property by court order.
Attornment of Rents
The agreement of a tenant to pay rent to
a new landlord, especially a mortgagee
who has commenced a legal action.
Audit
An examination of a taxpayer's income
tax return or other transactions bearing
tax consequences. Audits range from a
simple letter from the agency to a
detailed review of individual or
business tax filings and records.
Authorized User
An authorized user is a person with
permission to use a credit card account
belonging to someone else. The card
bearer is the one who must grant the
permission for use.
Automated Valuation Model
(AVM)
AVM stands for Automated Valuation
Model. The AVM Product is a highly
sophisticated valuation model and
methodology that MPAC has developed to
render a monthly "real-time" estimate of
market value for essentially all
residential properties in the province
of Ontario.
Automated Banking Machine
(ABM)
See "Automated Teller Machine (ATM)."
Automated Teller Machine
(ATM)
An interactive terminal that allows
customers with valid accounts from
either a banking or other financial
institution to conduct various
transactions including money
withdrawals, deposits, bill payments,
and transfers. Customers require a
magnetically encoded card and P.I.N.
(personal identification number) to use
the terminal and may be subject to a
surcharge. These terminals are
interconnected to allow customers access
to their accounts from anywhere in the
world.
Automatic Payment
An agreement giving authorization to
various companys or lenders to make
specified withdrawals from a person's
bank account to make payments towards
bills or loans. For example, regular
monthly payments such as car or mortgage
payments can be set up to automatically
be withdrawn from your account each
month or as specified in your
authorization agreement.
Average Annual Yield
The average yield per year over the life
or term of the investment, assuming all
principal and interest remain on deposit
until maturity.
Average Daily Balance
The method used by most credit card
companies to calculate your due payment.
An average daily balance is determined
by adding each day's balance and then
dividing that total by the number of
days in a billing cycle. The average
daily balance is then multiplied by a
card's monthly periodic rate, which is
calculated by dividing the annual
percentage rate by 12.
Average Tax Rate
The average tax rate is the real rate of
taxes paid after taking federal tax
brackets into account. There are
different tax rates for different income
levels; you pay lower rates on the first
part of your income, more on the later
earnings. As you pass each income level,
the money above that level is taxed at
the next higher rate. Therefore, your
average tax rate is less than the top
rate you pay on a portion of income.
Aviation Easement
An agreement granting the right to fly
airplanes over property, even if doing
so causes damage, inconvenience, or loss
of property value to the property owner.
This type of agreement usually restricts
the property owner from building or
growing anything over a defined height.
