Homebuying Step by Step: Your Guide to Buying a Home in Canada
Credit bureau: A company that collects information from various sources on a person’s borrowing and bill-paying habits. They provide this information to lenders to help them assess whether or not to lend money to that person. Credit history (or “credit report”): The report a lender uses to determine if a person should get a mortgage. Curb appeal: How attractive a home looks from the street, including features like landscaping and a well-maintained exterior. Deed: A legal document that transfers ownership of a home from the seller to the buyer. Default: Failing to make a mortgage payment on time or to otherwise abide by the terms of a mortgage loan agreement. If borrowers default on their mortgage payments, their lender can charge them a penalty or even take legal action to take possession of their home. Delinquency: Failing to make a mortgage payment on time. Deposit: Money that a buyer places in trust to show they are serious when they make an offer to purchase a home. The deposit is held by the real estate agent or lawyer (or notary in Quebec) until the sale is complete, and then it’s transferred to the seller. Depreciation: A decrease in the value of a home or other possession from the time it was purchased. Down payment: The portion of the home’s purchase price that is not financed by a mortgage loan. The buyer must pay the down payment from their own funds (or other eligible sources) before securing a mortgage. Duplex: A building that contains two separate and complete single-family homes located either adjacent to each other or one on top of the other. Easement: A legal interest in a property owned by another person or company for a specific limited purpose. For example, a public utility company may have an easement that lets them pass through a property. Emergency fund: Money that a homeowner regularly sets aside to pay for emergencies or major repairs. Owners should usually save around 5% of their monthly income for emergencies. Equity: The cash value that a homeowner has in their home after subtracting the amount of the mortgage or other debts owed on the property. Equity usually increases over time as the mortgage loan is gradually paid. Changes in overall market values or improvements to a home can also affect the value of the equity.
Estoppel certificate (or “certificate of status”): A certificate that outlines a condominium corporation’s financial and legal status. (This doesn’t apply in Quebec.) Fixed interest rate mortgage: A mortgage with a locked-in interest rate, meaning it won’t change during the term of the mortgage. FlexHousing TM (or “universal design”): An approach to housing that encourages the design and construction of homes that can be easily and inexpensively modified to keep pace with changes in the needs, mobility or lifestyle of the occupants. Foreclosure: A legal process whereby the lender takes possession of a property if the borrower defaults on a loan. The lender then sells the property to cover the unpaid debt. Freehold: A form of homeownership where the homeowner buys the right to have full and exclusive ownership of a home and the land it sits on for an indefinite period. Freehold is in contrast to leasehold ownership, which gives the homeowner the right to use and occupy the land and building for only a limited defined period. Gross debt service (GDS) ratio: The percentage of a person or household’s gross monthly income that goes to pay the mortgage principal and interest, property taxes and heating costs, plus 50% of any condominium maintenance fees or 100% of the annual site lease for leasehold tenure if applicable. To qualify for a mortgage, the borrower’s GDS ratio must be at or below 32%. Gross monthly income: Total monthly income of a person or household before taxes and other deductions. High-ratio mortgage: A mortgage loan for more than 80% of the value of a property. (That is, where the down payment is less than 20%.) A high-ratio mortgage usually has to be insured against default with mortgage loan insurance provided by CMHC or a private company. Home inspection: A thorough examination and assessment of a home’s state and condition by a qualified professional. The examination includes the home’s structural, mechanical and electrical systems. Home inspector: A professional who examines a home for anything that is broken, unsafe or in need of replacement. The inspector also checks if the home has had any major problems in the past. Home insurance premium: The amount homeowners pay on a monthly or annual basis for home or property insurance. Household budget: A monthly plan that tracks household income and expenses to make sure household members are living within their means and meeting their savings and investment goals.
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