Real Estate Definitions
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Parking A term that refers to depositing cash in a high-yield money market account until it is transferred to another account to pay bills. Passbook A book used to record all banking transactions for a designated account. Passive Activity An activity in which a person does not materially participate such as real estate rentals and limited partnerships. Passive Loss Loss incurred from a passive activity. Passive loss rules limit the amount of passive loss that can be deducted to the total of a person's other income from passive activities. Payee Refers to the person being given a cheque to cash for funds that are owed. The name of the person (payee) is filled in on the front of the cheque. Payment Adjustment Period The time period where payments on an adjustable-rate mortgage (ARM) may fluctuate. Payment Cap A contractual limitation on the amount of the monthly payment of an adjustable-rate mortgage or other variable rate loan. Payroll Taxes A tax based on wages and salaries that is deducted from employees pay cheques. PC Banking A banking service that enables bank customers to access their account information and perform certain bank transactions using a personal computer and a modem. Penalty In mortgage terms, a penalty is a set rate or length of time the penalty will be charged based on the remaining loan amount. The penalty is usually three months interest or interest rate differential. Penalty Rate A rate charged to a borrower after he or she makes two late payments. The rate is generally several percentage points higher than the card's current annual percentage rate. With some cards, a single late payment triggers the penalty rate. Per-diem Interest Interest that is charged daily which usually refers to the partial month's interest that the buyer pays on the mortgage covering the period from the day of closing to the end of the month. Per Item Charge A fee charged to account holders who exceed the allowable number of free transactionsor for their accounts. Or, the balance in an account does not meet the average monthly balance required to waive the fee. Periodic Rate The interest rate in relation to a specific amount of time. For example, the monthly periodic rate is the cost of credit per month whereas the daily periodic rate is the cost of credit per day. Periodic Rate Cap In an adjustable-rate mortgage (ARM), this limit restricts how much an interest rate can fluctuate from one adjustment period to the next. Personal Consumption Spending The amount that is spent collectively by households on goods and services. Personal Disposable Income Personal income that is left after subtracting personal income tax payments. Also called "take-home pay." Personal Finance Manager Specialized computer programs that enable bank customers to work off-line and plan various personal finance activities. When customers are finished planning their transactions, they dial in and complete their transactions for real. Personal Identification Number (PIN) A number or pass code that is selected by an account holder and is used with a bank card to access his or her bank accounts through banking or Interac machines. A PIN is unique to the account holder, should be kept confidential, and generally consists of four to six digits. Personal Loan A loan made for personal, family, or household purposes as opposed to a business loan or a long-term mortgage loan used to finance real estate purchases. Personal Property Property that is movable and not permanently attached to a dwelling or structure. Personal Property Taxes Tax paid on real property, intangible, or tangible property. To differentiate between real property and personal property, the tax assessing official must consider the manner in which property is attached to or secured at the location. Also called property taxes. Personal Savings 1. Money that is put aside, usually in a savings account, which is used for personal reasons at a later time. 2. The difference between personal disposable income and personal consumption spending. Personalized Cheque A cheque that has an individual's name, address, and account number printed on it. PI An acronym for principal and interest which are components of a monthly mortgage payment. PIT An acronym for principal, interest, and taxes which are components of a monthly mortgage payment. PITI An acronym for principal, interest, taxes, and insurance which are components of a monthly mortgage payment. Plat A map that shows a parcel of land and how it is subdivided into individual lots. Plat maps also show the locations of streets and easements. Point A point equals 1 percent of a mortgage loan. Some lenders charge "origination points" to cover the expenses of making a loan. Some borrowers pay "discount points" to reduce the loan's interest rate. Point of Sale An electronic payment system used for purchasing retail goods and services where the funds are immediately debited from the customer's bank account when a credit or debit card is swiped, a PIN is entered, and the customer gives approval. Also known as POS. Portfolio A collection of investments. Portfolio Lender A company or lender that underwrites mortgage loans and keeps the records instead of selling the mortgages on the secondary market. porting A portable mortgage allows you to transfer the terms and conditions from an existing property loan to a new property loan. Possession 1. In real estate, the term refers to the direct occupancy, use, or control of a property after signing all of the papers at closing and receiving the keys to the house. 2. Something that is owned. Power of Attorney When one party authorizes another party to act on his or her behalf in business dealings. For example, someone with power of attorney can sign cheques or other legal documents for the person who gave authorization. A written document is required to prove that power of attorney has been granted. Power of Sale If loan default occurs, the mortgagee has the right to force the sale of the property without judicial proceedings. Pre-Approval A process used by mortgage lenders to determine the loan amount they would give to a potential buyer based on an extensive review of the buyer's credit history. Lenders issue pre-approval letters to strengthen a buyer's position when bidding on a home, because it instills confidence in a seller that the buyer is able to obtain the money needed to purchase the property. Pre-approval Letter A written document that details how much a lender will give a potential home buyer based on the current interest rates and the buyer's credit history. The letter is issued by a lender or a mortgage broker and is used to instill confidence in a seller because it verifies that the buyer can obtain the funds needed for the transaction. Pre-Authorized Payments Monthly payments that are automatically taken from a person's account with approval or authorization from that person. Pre-computed Loan With a pre-computed loan, the interest owed over the life of the loan is calculated using a standard amortization table. After signing for this type of vehicle loan, the borrower is obligated to pay back principal plus the full amount of interest that will accrue over the entire term of the loan. Pre-qualification An informal process where a lender gives an estimate of how much a person can borrow to purchase a property. This estimate is based entirely on financial information provided by the potential borrower. Pre-qualification is not the same as pre-approval because it is not legally binding or even accurate since the person's financial information is not verified. Pre-sold Home A house that is sold prior to construction as opposed to a house built on spec. Prepaid Expenses Recurring costs such as taxes, insurance, and interest that are paid at the time of closing. However, these costs cannot be financed. Also known as prepaid items or prepaids. Prepaid Interest Interest that is paid before it is due to save the borrower money on taxes. Prepaids Property related expenses or costs that are paid prior to their due date and are usually prorated upon sale. These expenses can include taxes, insurance, rent, etc. Preparation Charges An additional fee that a buyer may be charged purely for the profit of a dealer. Some dealers will attempt to pass the preparation fee onto the buyer even though the dealer has already been paid by the manufacturer for the cost of preparing the vehicle for sale. prepayment Paying on the balance of a loan before it is due. Mortgage prepayments decrease the total amount of interest paid over the life of the mortgage. Penalties may or may not apply. Prepayment Clause A provision in a loan agreement that stipulates the amount of principal a borrower can prepay ahead of schedule without penalty as well as the prepayment penalty for larger prepayments. Prepayment Penalty A fee or cost charged to the borrower for paying off the loan before the end of the term. Previous Balance Some credit card issuers base finance charges on the amount owed by the account holder at the end of the previous billing cycle. Prime Lending Rate The rate of interest charged to creditworthy bank client for loans offered by chartered banks. Prime Rate The rate suggested by the Bank of Canada on which most banks base their prime mortgage lending rate. Principal In mortgage terms, principal is the original balance of loaned money on an outstanding loan and fees, excluding interest. Also the remaining balance of a loan, excluding interest. Principal and Interest The interest owed on a loan and the amount paid towards the principal make up the monthly loan payment amount. Principle of Conformity The belief that a dwelling will draw a fair market price if it is located with similar dwellings of the same size, style, and condition. Principle of Progression The belief that the value of a smaller dwelling will increase if it is located among larger and more expensive dwellings. Principle of Regression The belief that a larger and more expensive dwelling will lose value if it is located near smaller low-priced dwellings. Probate Sale A court supervised property sale that occurs after the owner passes away. Profits from the sale are divided among creditors and heirs as determined by the court. Production Home Homes that are mass produced as part of housing developments. Promissory Note A written promise made by a borrower to repay a loan by a specified date. Property Report 1. A legal document prepared by a surveyor that shows the locations of all visible public and private improvements relative to property boundaries. 2. A legal disclosure that developers of timeshare properties are required to give to prospective buyers. Property Tax A levy or tax imposed by a municipality on real estate and personal property. The amount of tax varies depending on the property value. Property Taxes Taxes that are paid by the owner of real property which are based on the property's value. Property Value The worth or amount of money a real property is sold for depending on the price negotiated by a buyer and seller. Provision for Credit Losses The amount deducted from income that is equal to the amount a bank adjusts its loan balances to reflect anticipated losses on the loans. Purchase Agreement A written contract between the buyer and seller of a property that states the buyer's intention to pay a specific amount for the property by a certain date. The buyer and seller must both sign the agreement if and when the offer is accepted. Also called a purchase contract. Purchase Contract A written contract between the buyer and seller of a property that states the buyer's intention to pay a specific amount for the property by a certain date. The buyer and seller must both sign the agreement if and when the offer is accepted. Also called a purchase agreement. Purchase Option 1. In real estate, an agreement where a portion of monthly rent can be credited toward the eventual purchase of the property. 2. The portion of a vehicle lease that determines how much a lessee pays the lessor at the end of the lease to buy the vehicle. The price is usually the residual value. Purchase Price In real estate, purchase price refers to the total selling price of a property which includes the down payment and the principal on the loan. |
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