Glossary - C

Canadian Real Estate Association (CREA)
The Canadian Real Estate Association (CREA) is the nodal body of real estate firms and agents representing more than 97,000 realty brokers, agents and salespersons functioning through 100 real estate boards and associations across the country. In fact, the CREA is among the leading single-industry trade bodies. The main duty of the CREA is to represent its members at the national level of the Canadian government and function as a regulator or overseer on all national legislations passed by the government related to the real estate industry. Every month the CREA assembles the statistics of existing homes and other properties marketed through the Multiple Listing Service (MLS). This offers the members a general idea regarding the existing housing market in Canada and pursues the marker trends for prices and properties sold. The CREA also makes detailed reports available to its members to help them to analyze the market. Very often the CREA has also taken up strong positions regarding the public's privilege to possess and enjoy property.
In the context of lending business, the expression cap, an alternative term for ceiling, refers to the highest permissible increase in either payment or interest rate for a specific period of time for an adjustable rate mortgage. Cap is basically one of the two categories of ceiling for adjustable rate mortgages. While the life cap puts a ceiling on the maximum and minimum interest rates permitted throughout the entire tenure of the mortgage, the periodic cap restricts the sum that an interest rate is able to charge during one adjustment period. For instance, a one-year adjustable rate mortgage (ARM) may have an initial interest rate of five per cent with a variation of plus or minus 2 per cent periodic adjustment ceiling and a 6 per cent life limit. In the most awful possible instance, the interest rate on the mortgage would be 7 per cent in the second year of the loan, 9 per cent in the third year and 11 per cent, including the five per cent start rate and 6 per cent life cap, until the end of the mortgage's tenure beginning from the fourth year.
Central Mortgage & Housing Corporation (CMHC)
The Canada Mortgage and Housing Corporation (CMHC) is a division of the Government of Canada and functions as the country's national housing agency. The CMHC directly reports to the Canadian Labor and Housing Minister and its board of directors and president are appointed by the federal government. The corporation was established in the post World War II period in 1946 with a view to provide housing for returning soldiers. Since then, the agency has developed into a major national organization and now builds and/ or funds urban renewal projects in urban areas across Canada. Presently, the main mission of the CMHC is to provide mortgage insurance of residential mortgage financing to home buyers in Canada. It is worth mentioning that since 1954 every one in three Canadian home buyer has utilized the insurances offered by the Central Mortgage and Housing Corporation. In addition to providing mortgage indemnity, the CMHC also funds housing projects and renovations, undertakes housing market analysis and finances researches into housing design and technologies in association with the National Research Council of Canada. In addition, the CMHC strives to increase housing finance options in Canada, help the Canadians who are unable to afford housing in the private market, develop building standards and housing construction, and offer the policymakers with the data and analysis they require to maintain a vivacious housing market in Canada.
Chattel mortgage
The term chattel mortgage may be best defined as a capital outlay on assets other than real estate backing a loan. In other words, it may also be said to be a debt secured against items of personal property rather than against land, buildings and fixtures. As per the provisions of the chattel mortgage, a buyer borrows money to purchase movable property, also called 'chattel', from the lender. In turn, the lender/ mortgagee protect the loan with a mortgage over the chattel. The official possession of the chattel is reassigned to the buyer during the purchase and the mortgage is taken out when the buyer has reimbursed the loan in full.
Closed mortgage
A closed mortgage denotes a loan contract that doesn't permit a borrower to repay the loan before its maturity date. In fact, this type of mortgage locks the borrower into paying the loan for a specific period. What is more, a closed mortgage also bolts the interest rate and it does not increase or decrease throughout the term of the loan even though the interest rates in the market may fluctuate. If any borrower attempts to break the terms and conditions of a closed mortgage and wants to repay the loan in full before its maturity date, he or she will have to pay an additional three months' interest on the loan as a penalty. Normally, a closed mortgage is for the duration of five years.
Closing costs
The term closing costs refers to all the expenses and fees spent by a buyer in a real estate deal over and above the price of the real property or by a borrower in mortgage loans. In other words, it refers to the funds required at the time of closing - loan origination fees, attorney fees, discount points, registration fees and pre-paids. In the context of real estate, closing costs include, but are not restricted to, attorney fees, origination fees, lender fees, appraisal costs, land survey, title search fees, title insurance fees, pro-rated property taxes and recording fees. Usually, the closing sum up to two to five per cent of a home's purchase price and do not include the down payment made by the buyer. It is important to mention here that when a buyer is eventually all set to purchase his or her dream home, they ought not to forget that they have sufficient money to pay for all these costs to be able to complete or close the purchase.
Collateral mortgage
A collateral mortgage is one that secures a loan by means of some sort of written note of indebtedness, such as a promissory note. The borrower is free to utilize the money obtained by a collateral mortgage to purchase a property or for any other reason like renovating his or her home or even going on a vacation.
Compound interest
When the interest on the principal loan amount as well as the interest on it is accumulated, it is known as compound interest. Compound interest may be calculated daily, monthly, quarterly, semi-annually, or annually on the principal amount to which interest earned till date has been added. In cases where compound interest is applied, the interest enhances in a binary system, rather than the linear system as in the instance of simple interest. It may be noted that the terms compounded and calculated are one and the same when they are used in relation to the interest paid on a mortgage loan.
Condominium mortgages
It is a good proposal to acquire a condominium mortgage irrespective of how well off the buyer is and all that he or she can pay for. Even if the buyer has sufficient money for an out-and-out condominium purchase, he or she should still try to obtain a condominium mortgage because this provides them with the flexibility that they might require if it transpires that they do not want to continue residing in a particular condo. Thus, when they secure a mortgage, they would not be committing such large sums of their money to something that might not be viable.
Nevertheless, financing a condominium is often very difficult and entails several exceptional exigencies and carefulness which differentiates between a condominium mortgage and buying a single family home. In other words, a condominium financing is distinct as the buyer is simply purchasing living space in a part of a building that shared by many other owners. In effect, this means that the buyer shares ownership of specific common areas and are usually conditional on the prerequisites established by the home owners' association. Therefore, when a borrower applies for a condominium financing the lending procedure is likely to be influenced by some factors, including the proportion of the developer's overall project is completed, the percentage of units that have already been sold and occupied, the percentage of units owned by investors, approval of the project from FHA, VA or Fannie Mae, whether the construction is new or a conversion of an old structure, requirements by the home owners' association and the type of condominiums the project includes - new, conversion, fractional use or condotels.
Contingencies refer to the condition that need to be fulfilled prior to an action is set off, an agreement is implemented, a plan is executed or a provision is put into effect. In matters pertaining to real estate, almost all offers regarding home purchases enclose contingencies and before a deal can only be closed when the buyer as well as the seller fulfill or relinquish their respective contingencies. Such stipulations are associated with aspects such as the purchaser's appraisal and endorsement of the property inspections or the buy's capability to secure the credit funding specifically mentioned in the agreement. It is advisable that all homer buyers should make it completely sure that offers regarding purchase of a home includes a loan contingency.
Contingent contract
This term denotes a contract or agreement with a prerequisite or stipulation that needs to be settled prior to finalizing a contract.
Generally speaking, a contract denotes an agreement entered into by two or more legally eligible parties where the stipulations require one or more parties to pledge to perform something or abstain from doing some legal or general acts. Contracts are of two types - unilateral where only one party is bound to perform something, or bilateral where all the concerned parties have a legal binding to act or refrain from doing something as per the stipulations in the agreement. In other words, a contract refers to an exchange of pledges which when breached will invite legal action or remedy.
In matters pertaining to real estate, a contract refers to an agreement between two or more individuals or entities where an offer relating to the purchase of a real property is presented and accepted benefiting each concerned party. Such agreements may be official, informal, written, oral or simply implicit. However, some contracts need to be in writing so that they can be implemented.
Conventional mortgage
A conventional mortgage is a common mortgage loan of up to a maximum of 75 per cent of the lending value of the property for which the lender does not need an insurance against the credit. Each monthly payment in a conventional mortgage may be divided into two segments - while one part goes towards paying the principal loan amount, the other part is towards the interest on the principal amount. The rate of interest in conventional mortgages may be either fixed rate mortgage where the interest rate remains the same all through the term of the mortgage, or adjustable rate mortgage where the interest rate may fluctuate.
Convertible mortgage
A convertible mortgage denotes a temporary credit, typically for a period of six months or one year, and enables the borrower to go in for a longer term at any point of time without having to pay a fine. In other words, a convertible mortgage offers the borrower the suppleness to switch over from a short-term mortgage to a long-term mortgage. Often this type of mortgage is beneficial for the borrower, especially when the interest rates are abysmally low.
Cooperatives (co-ops)
In the context of real estate, the term co-operative denotes a multi-unit residential complex whose ownership is held by a corporation that is owned and controlled for the gain of individuals residing in the building. These individuals are stakeholders of the corporation and every one of them possess a proprietary lease. In such instances, the corporation allocates shares of its stock to each apartment on the basis of their size and attributes. In effect, this signifies that the stakeholder doesn't own the real space, but only a share in the cooperation. In addition, compared to condominiums, it is more difficult to finance as well as sell cooperative apartments.
In matters pertaining to real estate, the term co-owners refer to persons owning a common property, but they are not necessarily partners. The difference between partners and co-owners are basically three. While partnership usually entails and relies on sharing profits and losses, co-ownership does not essentially include this factor. Secondly, partnership is set up following an agreement among the different parties, but co-ownership does not require any agreement among the different owners of the property. Thirdly, a partner is unable to transfer his or her interest in the property without the approval of the other concerned parties, but a co-owner is able to do this. Co-ownership of a property is an imperative topic as the type of co-ownership mentioned on a title deed is likely to influence issues such as estates, personal accountabilities and successions in the event of any legal case.
A covenant is defined as a written, solemn and binding agreement between two or more persons in which one party gives an undertaking that something has been done or will be done or specifies the genuineness of particular facts. Also called restrictive covenant, it is basically a clause that is incorporated into a contract requiring one party to perform or refrain from doing specific things. Often the clause serves as a restriction on a borrower by the lender. In this case, the party making the promise is called the covenanter and the person to whom the pledge is made is called the covantee.
Broadly speaking, a co-signer, also called co-maker, is one who concurs to take up the loan liabilities if the original borrower turns out to be a defaulter in making the periodic mortgage payments. The co-signer is the person, other than the borrower, who signs a promissory note and assumes equal obligation for the loan. The co-signer, however, only takes on the personal liability and does not have any ownership interest in the mortgaged property. Unlike co-mortgagors, the co-signers only serve as compensating factors. For instance, a friend or relative may rescue the borrower by co-signing a mortgage, thereby being equally indebted for it. Individuals who have had a not so bright credit history may often requires the help of a co-signer to secure a mortgage loan no matter who stable their financial status may be at present. Although a co-signer is not able to better one's credit report, he or she may definitely improve the possibilities of securing a mortgage loan for a borrower. In this case, co-signers should be aware of the fact that co-signing for other's loan may create an adverse effect on their own credit worthiness as the loan turns out to be a contingent liability against their borrowing capacity.
Credit card
Credit line
Credit line, also known as a 'line of credit', refers to a credit account that enables a reverse mortgage borrower to be in charge of the timing as well as the sum of the loan advances. It also denoted the sum obtainable to be advanced to a mortgagor as per the stipulations of the mortgage agreement.
Credit report
A credit report, also known as a 'credit history', is a record of an individual's past borrowings and repayments and also includes information regarding late payments, defaulting as well as bankruptcy. Lenders value this report to determine a potential borrower's credit value or reputation. One has to pay to obtain this report that is utilized to find out the individual's capability to deal with all types of credit and also to repay loans in a timely manner. Sellers who are offering financing for buyers need to obtain the permission of the buyers before availing the latter's credit report.
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