Real Estate Definitions
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Abandonment When the condition of ownership for a property becomes a burden or is troublesome to the owner, he or she may choose to become a nonpayer and abandon the property. In the event of "abandonment," creditors can seek to recover their money as the property is no longer part of the estate. 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 An abstract of title is a historical account of all transactions conducted on the title to a specific property or piece of land. This title covers the property from the first sale to the present and is used by the title company to produce a title binder. Acceleration Clause Mortgage documents may contain an Acceleration Clause to protect the lender in the event of a default. The clause enables the lender to make the entire principal amount of a mortgage due in the event of a default by speeding up the payment date. Acceptance Acceptance refers to the formal written approval when a property seller accepts the offer made by the buyer for purchasing the property. 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 CAAMP (formerly 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 Interest which has already been earned, but has not yet been paid. 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 Period The period of time between interest rate changes in an adjustable-rate mortgage. Adverse Possession This refers to a person or persons getting title to a piece of property or land by simply using it without any objection from the legal title holder. Adverse Use Using someone's property without their verbal or formal written permission. Affidavit A sworn written statement that is authorized by an official such as a notary public or commissioner for 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 generally exists because of a relationship between two parties where one party acts on behalf of the other. For example, an agent will represent a client and conduct transactions with a third party on that client's behalf. 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 Sale A legally binding document that details the agreement between a property buyer and the property seller. This document specifies the agreed price and any other terms of the title transfer or sale. 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 This clause stipulates that the borrower must pay the mortgage in full upon transfering the property. 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 Amortization refers to the process of gradually paying down the principal of a loan. Each payment toward the principal reduces your loan by that amount. This is different than an interest-only loan payment where the principal balance is never reduced. Amortization for a mortgage loan in Canada is normally 25 years, but can be as few as 5 years. amortization period The amount of time it will take to pay off a mortgage by making routine payments. Amortization Schedule A schedule or table that details the life of the loan or the amortization. This schedule includes the principal amount owing at the origination of the loan, period payments, interest paid on each payment, principal reduction on each payment, and the final balance. CanEquity has created a mortgage rate calculator to generate a sample amortization schedule to give clients a better understanding of how amortization works. Amortization Table A mathematical formula used to calculate monthly mortgage payments based on the borrowed loan amount, the interest rate, and the loan term. 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. 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. 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. 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 A detailed evaluation a property's value that is typically conducted by a professional. The report is then based on an inspection of the property and a review of nearby, comparable properties along with their values. Appraised Value An educated opinion or estimate regarding the value (monetary worth) of a property. Appraiser A person who is qualified by education, training, and work experience to estimate the value of real and personal property. 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. 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. Assessed Value The government (local, provincial, or state) provides an assessed value of a property's worth for tax related purposes. Assessment Rolls Assessment rolls are simply lists of taxable property. Assessments Local or special taxes that are imposed upon properties that have or will benefit from an improvement made in the area. 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. Assignor A person who transfers property to another person. 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. Assumable Mortgage An existing mortgage that can be taken over or "assumed" by the buyer from the seller when a property is sold. 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." 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 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. |
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