De-mystifying Real Estate Terminology

If you are like most consumers, you may find real estate terminology perplexing and downright frustrating at times. After all, not many people discuss easements or encroachments on a regular basis. However, if you are about to buy a home, it is important to understand this language. To help you get a head start, a list of common real estate terminology is outlined below. Amortization: the number of years it takes to repay the entire amount of a mortgage. Appraisal: an estimate of a property's market value, used by lenders in determining the amount of a mortgage. Appreciation: the increase in a property's value over time. Blended Mortgage Payments: equal or regular mortgage payments, consisting of both a principal and an interest component. Broker: a real estate professional licensed by the province of Manitoba to facilitate the sale, lease or exchange of property. Buy-down: when the seller reduces the interest rate on a mortgage by paying the difference between the reduced rate and market rate directly to the lender - or to the purchaser - in one lump sum or monthly payments. Closing: the real estate transaction's completion, when the deed to the property is transferred from the seller to the buyer. Closing Costs: expenses in addition to the purchase price for buying and selling a property. Some examples of closing costs are legal fees and land transfer tax. Common Elements: the portions of a condominium development owned in common (shared) by the unit owners. Conventional Mortgage: a first mortgage issued for up to 75 per cent of the property's appraised value or purchase price, whichever is lower. Counter Offer: one party's written response to the other party's offer during negotiation of a real estate purchase between buyer and seller. Debt Service Ratio: the percentage of a borrower's gross income that can be used for housing costs, including mortgage payment and taxes (and condominium fees, when applicable). Deed: a legal document that conveys (transfers) ownership of a property to the buyer. Easement: a legal right to use or cross (right-of-way) another person's land for limited purposes. A common example is a utility right to run wires or lay pipe across a property. Encroachment: an intrusion onto an adjoining property. A neighbour's fence, storage shed or overhanging roofline that partially (or even fully) intrudes onto your property are examples of encroachments. Equity: the difference between the price for which a property can be sold and the mortgage(s) on the property. Equity is the owner's "stake" in a property. Land Transfer Tax: payment to the provincial government for transferring property from the seller to the buyer. Lien: any legal claim against a property, filed to ensure payment of a debt. Mortgagee: the lender. Mortgagor: the borrower. Open Mortgage: a mortgage that can be prepaid or renegotiated at any time and in any amount, without penalty. Title: legal evidence of ownership in a property. Title Search: a detailed examination of the ownership documents to ensure there are no liens or other encumbrances on the property, and no questions regarding the seller's ownership claim. Variable Rate Mortgage: a mortgage for which payments are fixed, but whose interest rate changes in relationship to fluctuating market interest rates. If market rates go up, a larger portion of the payment goes to interest. If rates go down, a larger portion of the payment is applied to the principal. Vendor Take-Back Mortgage: When a seller uses equity in his or her property to provide some or all of the mortgage financing in order to sell the property. Zoning Regulations: strict guidelines set and enforced by municipal governments regulating how a property may or may not be used. For more information about real estate terms or how to buy a home, contact a real estate office in your community.