Common Terms in the Home Buying Process

Understanding key terms in the home-buying process will help you make informed decisions. Here are some essential definitions:

1. 1. Amortization: The duration allocated for repaying a mortgage loan, typically up to 25 years in Canada.
   2. Balanced Market: A situation where the number of buyers and sellers is relatively equal, leading to stable prices and reasonable offers.
   3. Bridge Financing: A temporary loan that helps homeowners purchase a new property before selling their existing one.
   4. Buyer's Market: A market condition where more homes are available than buyers, providing buyers with greater negotiating power.
   5. Closing Costs: Additional expenses incurred during the property transfer process, including legal and administrative fees.
   6. Condominium Ownership: Ownership of an individual unit within a shared property, with shared responsibility for common areas.
   7. Comparative Market Analysis (CMA): An assessment of similar properties to determine a home’s market value.
   8. Home Inspection: A thorough examination of a property's condition to identify any potential issues before purchase.
   9. Deposit: A deposit ($20,000 or more) provides security to the seller that the buyer has a stake in the agreement. It demonstrates to the seller that the buyer is serious about purchasing the home and has enough funds to finalize the transaction. It also forms part of your down payment, but is paid in advance of the completion of the contract.
   10. Down Payment: The upfront payment made toward the purchase price of a home, with a minimum requirement of 5% in Canada.
   11. Dual Agency/Multiple Representation: When one real estate agent represents both the buyer and seller in a transaction, requiring consent from both parties.
   12. Equity: The difference between a property's market value and the remaining mortgage balance.
   13. Fixed-Rate Mortgage: A loan with a consistent interest rate over a set period, typically five years.
   14. Pre-Approval: Allows you to know the MAXIMUM amount of mortgage you can qualify for
       • Determines what your mortgage payments will look like
       • Locks in a desirable rate for a fixed amount of time
   15. Land Transfer Tax: A tax paid to the Provincial, and, in some instances, the Municipal government upon transferring property ownership, varying by region and property size.
   16. Mortgage Loan Insurance/ CMHC Loan Insurance: Required when the down payment is less than 20%, protecting lenders in case of payment default.
   17. Offer: A formal agreement to purchase a home, often including conditions such as financing or inspection.
   18. Sellers Market: A market condition where less homes are available than buyers, providing sellers with greater negotiating power.
   19. Status Certificate: The status certificate is a recent collection of relevant information such as the condos by-laws (rules about things like pets, fitness facilities, swimming pools, barbecues, smoking, etc.), a current budget for the condominium, a recent reserve study (we’ll talk about that in a moment), and whether any lawsuits may be pending against the condo.
       • With this information at-hand, a status certificate can help you make your purchase decision and anticipate any issues such as:
       • • Anticipated increases in maintenance fees
       • • Any major future repairs you may be liable for a share of
       • • The overall financial health of the condo
       • • Any special assessments that may be costly down the road
   20. Variable Rate Mortgage: A mortgage with an interest rate that fluctuates with market changes
   21. Vendor Take Back (VTB): occurs when the seller of a property becomes part of the financing lender(s) for an interested buyer.