Q, R, S, T, U, V, W, X, Y, Z

Q

Qualifying the Borrower
Also known as loan qualification. This is the process of analyzing the buyer’s eligibility for financing.

Quantum Meruit
Latin meaning “as much as he deserved”. Quantum meruit determines the actual value of the services provided when either no contract exists or when doubt is cast as to the amount due for the work performed, but under situations when payment could be expected.

Quick Ratio
A measure of a firm’s ability to pay current assets quickly, calculated by dividing current assets (minus inventories) by current liabilities.

Quiet Enjoyment
The right of a lessee (tenant) to use the leased property without interference from the lessor (owner).

Quiet Possession
The right granted by a lender to the borrower to use the property without interference by the lender until there is a default.

Quit Claim
In conveyancing, to release or relinquish a claim. In mortgages, a form of title transfer of ownership from the owner to the lender. A quit claim is a default remedy.

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R

Real Estate
The physical land and accessories including plant and structures affixed to it.

Real Estate Act
In Alberta, an amalgamation of the Mortgage Broker’s Regulation Act and the Real Estate Licensing Act. It is administered by the Real Estate Council of Alberta (RECA).

Real Estate Automated Valuation System (reavs)
A system that provides an estimation of the value of a residential property based on sales data and the nature of the property in relation to its neighbourhood.

Real Estate Investment Trust (REIT)
An investment trust that specializes in investing in real estate related investments, including mortgages, construction loans and real property in varying combinations.

Real Property
Often called “property”, “real estate”, or “land”. Real property is defined as the interests, benefits, and rights inherent in the ownership of physical real estate. It does not include personal property. In civil law, real property is referred to as immovable property.

Reassessment
The process of creating a new base for property taxation by updating assessments to reflect more current values.

RECA
The Real Estate Council of Alberta. RECA is an independent, non-government agency which regulates industry professionals in the real estate, mortgage, and appraisal industries.

Receipt
A document acknowledging the completion of the repayment agreement under the terms of the contract and the release of the lender’s interest in the property.

Receiver (Mortgages)
An appointee of a court, requested by a lender when the borrower is in default, to receive and account for the rents and profits from mortgaged premises.

Redemption
The duty of a lender, on being paid the principal, interest and costs due by the borrower, to hand to the borrower the title deeds together with an executed re-conveyance of the mortgaged property.

Registry System
The system of land registration in which all interests in land are recorded in chronological order. The registrar assumes no responsibility for the legal effect of the document.

Release of Covenant
An agreement by a lender to terminate the personal obligation of a borrower, usually upon the sale of a property to a new purchaser who is acceptable to the lender, and who has signed an assumption agreement or other appropriate legal documents releasing a guarantor whose covenant is no longer required.

Renewal Agreement
An agreement through which the lender may agree to extend the mortgage loan, possibly on revised terms as to principal repayments and interest rate.

Rent
Periodic payments made by the lessee or tenant to the lessor or landlord in exchange for the use of their property.

Rent Roll
A statement listing the tenants in occupancy, the area or unit occupied by each, their lease expiry dates and rent payable as well as other leasing details that may be required.

Replacement Cost (Real Estate)
The cost of replacing a subject property with one having exactly the same utility.

Replacement Reserve
A cash reserve for the future replacement of fixed assets.

Reputational Costs (Fraud)
Costs associated with potential damage to the reputations of the mortgage professional, lending organization, and mortgage industry. See operational costs and public costs

Rescission
The act of rescinding; the cancellation of a contract and the return of the parties to the state in which they would have been if the contract had not been made.

Restrictive Covenant
A contract between neighbouring landowners restricting the use of one of the properties. It must be negative in nature.

Return on Equity
A measure of how much income is generated by each dollar of equity, calculated by dividing net income after taxes by the owners’ equity.

Revenue or Sales (Income Statement)
Earnings from day-to-day operations of the business.

Reverse Mortgage
This type of mortgage allows older consumers to convert their home equity into monthly cash payment(s), generally for living expenses. A homeowner’s equity is drawn down by either a series of monthly payments or a lump sum payment, from the lender to the homeowner - the borrower. The loan balance is due when the owner/borrower no longer wish to live in the property as their principal residence or upon the death of the borrower. If it is upon the death of the owner, the mortgage balance is usually settled by the heirs who sell the property to meet the outstanding obligation.

Reversion
A right to future possession retained by an owner at the time of the transfer of his or her interest in real property.

Right of Survivorship (Real Estate)
The right of survivorship comes into effect when land is held in undivided portions by co-owners and one of them dies. In this instance, the deceased’s interest in the land passes to the surviving co-owner, rather than to the deceased’s heirs.

Right-of-way
The right to pass over another’s land according to the nature of the easement.

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S

Sale Holdback
A percentage of the principal amount of the mortgage held back by the lender until the property in question has been sold to a party satisfactory to the lender and until this party has assumed the responsibility of the mortgage by the appropriate legal document.

Sale Leaseback
A technique in which a seller deeds the property to a buyer and the buyer simultaneously leases the property back to the seller, usually on a long-term basis.

Sales
Earnings from day-to-day operations of the business.

Sales Data Report
A quick, no-inspection, computer-based appraisal that estimates a value of good quality real estate in low-risk neighbourhoods. It provides important information but lacks in-depth details that other appraisals provide. The value estimate is based on MLS sales and listing data.

Schedule I, II and III Banks
Schedule I banks, as defined by the Bank Act, have shares that are widely held. Schedule II banks are more closely held. Schedule III banks are foreign bank branches of foreign institutions.

Seasonal Deficiencies
Work necessary to finish a property that cannot be completed immediately because of seasonal or climatic conditions.

Seal
A device used to produce an official stamp as a symbol of authority.

Secondary Financing
Financing real estate with a loan, or loans, subordinate to a first mortgage.

Secondary Mortgage Market
A market where existing mortgages are bought and sold.

Second Mortgage
A mortgage placed on real property which is already encumbered with one mortgage. Determination of first, second, third mortgage, etc. is determined by priority of registration (time and date).

Servient Tenement
The parcel of land over, or through which, an easement runs.

Servitude
The term for an easement in Quebec.

Severance (Real Estate)
The subdivision of a parcel of land.

Shareholder
A shareholder, also referred to as a stockholder, is someone who legally owns one or more shares of stock in a company. The shareholders are the owners of the company.

Shareholder’s Equity
The difference between the assets and liabilities of a corporation, sometimes called net worth.

Sheriff’s Certificate
A signed statement from the sheriff’s office certifying that there are no judgements against the specific land.

Simple Interest
The cost of borrowing money, calculated by applying the interest rate to the original principal amount only. In contrast to compound interest, interest is not charged on interest.

Skip Payment Option
This is an example of a mortgage clause that may be added to an open mortgage. If this clause is part of the mortgage agreement, the borrower has the ability to skip a monthly payment without the mortgage going into default.

Sole Proprietorship
A business owned by a single person and not registered as a corporation. The sole proprietorship has unlimited liability.

Specific Performance
An equitable remedy to compel performance of a real estate or mortgage contract according to the specific terms of the contract.

Standby Commitment
An agreement by a lender to provide a certain amount of takeout mortgage financing on specific terms in the future. This commitment enables the borrower to arrange construction financing from other sources. The commitment is issued for a fee and the lender is willing to disburse the committed funds in the event that a permanent loan on more favourable terms is not obtained.

Standby Fee
A sum of money given by the borrower to the lender to hold a mortgage commitment for a certain period of time. The fee is normally non-refundable.

Standing Mortgage
A mortgage that provides for equal, regular lump-sum payments of principal, usually quarterly, plus accrued interest.

Standing Offers
Proposals which are made to the general public and can be accepted by anyone. Once one person has accepted a standing offer, no one else can accept it unless more than one acceptance was contemplated in the offer.

Starter Home
A small, inexpensive home generally bought by singles or newlyweds, with the intent to sell in a few years.

Statement of Changes in Financial Position
A financial statement that shows how a company obtains and uses its cash.

Statement of Retained Earnings
A financial statement that indicates the amount of earnings that have been kept in the business, either in the form of cash equity or invested in new assets for the company.

Statute Law
Law that has been passed by an Act of Parliament or by a provincial legislature.

Statutory Right of Way
A special type of easement granted by provincial legislation that permits a landowner, crown corporations or municipalities, to use another’s land. One example of such a right of way is the right of a water authority to lay water pipe under an individual’s land.

Subject Property
The property that is being appraised.

Subordinate
Subject to, or junior to.

Subordination
The act of one party acknowledging by written recorded instrument that a debt due is inferior to the interest of another in the same property. Subordination may apply not only to mortgages but also to leases, real estate rights, and any other type of debt instrument.

Subprime Transactions
Classification of lending based on the payment risk that the lender faces. Subprime deals (also known as B and C deals) face a higher risk that the amount of money lent will not be repaid, compared to prime deals (also known as A deals). Many in the industry now refer to these lenders not as “subprime lenders” but as “alternative lenders”.

Subrogation
Replacing one person with another in regard to a legal right, interest, or obligation. An example of this would be a mortgage holder’s selling his rights and interest to another.

Submortgage Broker
The term used in British Columbia to describe a licensed individual employed by a broker and working as a mortgage originator.

Subscription Policy (Insurance)
A single insurance policy that states that two or more insurance companies are sharing the risk.

Surety
The guarantee provided for the performance of someone else.

Survey
A survey sets out the legal description of a mortgaged property, allowing confirmation that any building sits within the described boundaries of the land. Land boundaries, areas, and improvements are determined and plotted on the survey. Surveys are also used for identifying easements.

Surveyor’s Certificate
A formal statement signed, certified, and dated by a surveyor giving the pertinent facts about a particular property and any easements or encroachments affecting it. Such certificates are no longer available in Ontario.

Syndication
A group of lenders that share in the principal disbursement of a large loan to spread risk or to comply with statutory restrictions on loan size.

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T

Take-out Loan
A first mortgage loan that is committed and expected to be made upon completion of a property with the loan proceeds to be used to repay an interim or construction loan.

Target Market
The clients or customers that are sought after by a business. They typically share similar demographic characteristics.

Tax Account
An account that is created by a lender to hold property taxes collected as part of the mortgage payments on behalf of the homeowner. The lender will then remit the taxes to the municipality from this dedicated account.

Tax Certificate
A certificate from the appropriate taxing authority giving the status of real estate taxes or other assessments affecting the property.

Tenants in Common
An ownership of property by two or more people, each of whom has an interest in the property. Tenants in common may have different shares in the property. Unlike the case in joint tenancy, a tenancy in common does not end because one party chooses to sell his or her interest. Instead, the purchaser simply becomes the new tenant in common.

Term
In a mortgage, the term is the actual length of time for which the money is loaned. The term is usually shorter than the amortization period. At the end of the term, the outstanding debt must either be refinanced at current market rates or paid off in full.

Term Mortgage
A non-amortizing mortgage under which the principal is paid in its entirety at the maturity date. A term mortgage is sometimes called a straight loan.

Third Mortgage
A mortgage placed on real property which is already encumbered with a first and second mortgage. Determination of first, second, and third or subsequent mortgage is by priority of registration (time and date).

Time (Unities)
All joint tenants must receive their interests at the same time.

Title
The legal evidence that shows the rightful owner of land.

Title (Unities)
All joint tenants must obtain their interest from the same document.

Title Fraud
A range of fraudulent activity regarding the ownership of property. One form of title fraud involves taking out a mortgage against a home that the fraudster does not own. The fraudster assumes the homeowner’s name and credit history but absconds with the loan proceeds.

Title Insurance Policy
A contract by which the insurer, usually a title insurance company, agrees to pay the insured a specific amount for any loss caused by insured defects to the title of a property, for which the insured has an interest as purchaser, lender or otherwise.

Title Search
An examination of public records to determine the state of title.

Torrens System
The Land Titles System as originated in Australia by a Mr. Torrens in 1858. The Torrens system is a system for the registration of land title, indicating the state of the title, including ownership and encumbrances, without the necessity of an additional search of the public records.

Total Debt Service Ratio (TDS)
One of the ratios used to determine whether or not a borrower is able to carry the debt load for a mortgage. The ratio is calculated as the percentage of annual income required to cover housing costs (GDS) plus any other loans that an individual has, such as those resulting in credit card and car payments. There is a maximum amount associated with this ratio to ensure that borrowers can afford to carry the debt.

Trading Down
Typically, ‘empty nesters’ or aging people sell their existing homes and buy smaller homes with the aim reducing the cost of home ownership and helping to fund retirement.

Trailer Fee (Mortgage Financing)
A fee that a lender may pay to a mortgage originator for sourcing a mortgage with that lender. The fee is paid annually and continues for as long as the borrower keeps the mortgage with that lender. This practice is relatively new to the mortgage industry but has a long standing history in the mutual fund industry.

Transfer of Charge
Assignment of a mortgage.

Trust Company
A commercial bank or other corporation that manages, holds, or invests assets for the benefit of others.

Trust Companies Act
A federal act regulating trust companies.

Trust Deed
A written instrument duly executed, sealed, and delivered, conveying or transferring property to a trustee. A trust deed usually, but not necessarily, covers real property.

Trustee
An individual who is given legal responsibility to hold property in the best interest of or “for the benefit of” another.

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U

Unconscionable Transactions
Similar to Undue Influence. This situation occurs when there is a disproportion of power between individuals, with the weaker individual in the control of the stronger individual, and acting under that person’s direction in an unreasonable or unfair manner.

Underwriting
This is the process undertaken by lenders and insurers to verify the mortgage application information and supporting documentation submitted, make an assessment of risk on both the applicant(s) and the property, and approve or decline the mortgage loan.

Undue Influence
Unlike duress, undue influence has subjective boundaries; it occurs when one party suffers pressure (non-physical force such as manipulation or persuasion) to enter a contract against his or her wishes or interests. Evidence of such control may result in invalidation of the agreement by the courts.

Unenforceable Contract
Similar to void contracts, unenforceable contracts cannot be acted upon. Typically, oral contracts are unenforceable.

Unilateral Mistake
One party is mistaken while the other party is aware of it and makes no attempt to rectify it.

Unities
In common law, unities are the four conditions required to create and maintain a joint tenancy. They are time, title, interest, and possession.
Title
All joint tenants must obtain their interest from the same document.
Time
All joint tenants must receive their interests at the same time.
Possession
Each interest is an undivided interest in the whole of the property.
Interest
All joint tenants must have the same interest (extent, nature, duration) in the land.

Usury Rate
The maximum legal rate of interest, discounts, or other fees that may be charged for the use of money.

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V

Valuation Date
The date used for establishing the assessed value of all properties in a jurisdiction; formerly called a “base year”.

Variable Rate Mortgage
is the type of mortgage, also referred to as adjustable rate mortgage, is the opposite of a fixed rate mortgage. The interest rate on this loan may change during the term of the mortgage reflecting changes in the current market rates.

Vendor Take-Back Mortgage (or Seller Take-Back Mortgage)
A mortgage in which the vendor uses his or her own equity to provide some or all of the mortgage financing in order to sell the property.

Vendor’s Lien
A notice registered on title by the vendor, protecting the vendor for the unpaid balance of the purchase price. It is usually collaterally secured by a mortgage.

Vendor’s Warranty
A guarantee that implies a home will be built in the appropriate way so that it is suitable for human habitation. If this guarantee is not met, the purchaser is entitled to damages for warranty violation.

Vicarious Performance
The subcontracting or delegating of a contractual obligation to a third party.

Void Contract
A contract or agreement that has no legal force or validity.

Voidable Contract
A contract that has the capability of being made void by one of the parties involved but is valid until rescinded.

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W

Warranty
Warranties are assurances that are not vital to the contract (unlike conditions), such that a violation of warranty will not result in the termination of the contract.

Working Capital
An indication of how much money would remain once all current liabilities were paid. It is calculated by determining the difference between current assets and current liabilities.

Writ
A form of written command in the name of sovereign, state, court, etc. issued to an official or other person and directing him or her to act or abstain from acting in some way.

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X


Y

Yield to Maturity
A percent returned each year to the lender on actual funds borrowed, considering that the loan will be paid in full at the end of maturity.

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Z

Consumers     Glossary   Q-Z