Terms You Should Know

Deciding on a lender for your mortgage is one thing, but understanding them when they explain your mortgage is another. 

Before going to talk to a lender, it is important to have as much knowledge as possible of the terminology they will use.

Real Estate Terms

Agreement of Purchase and Sale

A contract by which one party agrees to sell and another agrees to purchase. The contract may be conditional (certain conditions must be fulfilled) or firm (no conditions attached).

Amortization

The period of time required to reduce the mortgage debt to zero when all regular blended payments are made on time and provided the terms (payment and interest rate) remain the same. Often an amortization period is for as long as 25 years. This does not mean that the lender is lending money for 25 years, but that they are calculating the payment schedule as if it will take you that long to pay back the principal plus interest. The longer the amortization period, the more money you will pay in interest.

Chattels

Personal property which is tangible and moveable (e.g., appliances, blinds, light fixtures, etc.)

Mortgage

A mortgage is a security for a loan on the property that you own (or would like to own). It is paid back in regular mortgage payments, which are usually blended payments. This means that the payment includes the principal (amount borrowed) plus the interest (the charge for borrowing money). The payment may also include a portion of the property taxes; this is something that you have the decision to arrange.

Mortgage Term

Lenders will only loan you money for a specific period of time called the mortgage term. These terms typically range from six months to five years, although there are longer terms available through some lenders. When the term is completed, the remaining principal amount is payable in full, unless you renew the mortgage (or arrange new financing) for another term.

Permanent Fixtures

Permanent improvements to property that may not be removed upon the sale of the property (e.g., furnace, central air conditioning, windows, etc.).

Real Estate Abbreviations

Below is a list of commonly used real estate abbreviations that you should be familiar with when purchasing your home.

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