As promised in our previous home buyer's dictionary post, we're back to define more terms you're likely to encounter as you dive into the depths of the home buyer's journey.
Whether you're headed to the bank to discuss a mortgage loan, placing an offer to purchase, or talking business with your real estate agent, the last thing you want is to be thrown off by a term you don't yet understand.
Allow us to be of service, and read on to learn about 20 more terms you should know as a home buyer.
1. Lending Value
A number that's either the purchase price or the appraised value of a property, whichever is less. This would be typically used for mortgage purposes as the amount a lender will lend against.
2. Lien
A claim made against a property in order to ensure a debt is paid.
3. Offer to Purchase
A document in which the buyer stipulates all the necessary terms for purchasing a property. If the seller accepts the Offer to Purchase, it becomes a legally binding contract.
4. Option Agreement
A document that describes an agreement in which the prospective buyer has the right, but not obligation, to be the first person with the option of buying a property.
These agreements are time-contingent and require a deposit from the prospective buyer, but if he or she decides to not purchase the property within the allotted time period, the agreement is considered void and the deposit money is typically not refunded.
5. PIT
An acronym that stands for Principal, Interest, and Taxes – the payments made to the mortgage issuer on a regular basis.
6. PITH
An acronym that stands for Principal, Interest, Taxes, and Heating. These costs are used to calculate the Gross Debt Service (GDS) ratio*.
*This term is covered in a previous post of defined terms.
7. Portability
An option included in some mortgage agreement that allows the borrower to transfer their mortgage to another property without being required to pay any fees.
8. Pre-Approved Mortgage
Mortgage pre-approval is an agreement by a lender to approve a borrower for a mortgage of a specified monetary amount.
9. Principal
The total amount of money borrowed for a mortgage (excluding interest.)
10. Property Purchase/Land Title Transfer Fee
A fee paid to the city/provincial government to transfer the ownership of a property.
11. Refinance
Mortgage refinancing is when homeowners replace their current mortgage with a new one (usually with better terms and/or interest rate, allowing homeowners to pay off their mortgage faster).
12. Second Mortgage
Borrowing an additional mortgage on a home that already has one mortgage. This loan could be used for things like home repairs and improvements.
13. Seller's Market
An assessment that the number of buyers seeking to buy property is significantly higher than the amount of property available on the market, giving sellers a significant advantage when negotiating prices.
14. Title
A freehold title is a document giving the holder indefinite ownership of property. A leasehold title is a document that gives the holder the right to use and live on the property for a stipulated period of time.
15. Zoning Bylaws
Laws that stipulate how land can be used.
There you have it!
While you may not need to know the nitty-gritty details of every term and concept we've covered so far, having a basic knowledge of these things before you start your home buying process can help you feel more prepared. When it comes to making an investment as important as your home, your biggest asset will be your confidence.
