Glossary of Terms Acceptance Fee The fee charged by a lender to prepare loan documents, process, underwrite, make credit checks, inspect and sometimes appraise a property. Also called Commitment Fee; Origination Fee. Aggregate Instalment The monthly amortised instalment of interest and principal for repayment of the loan together with the monthly pro-rated instalment for all property charges. Agreement for Sale A document in which the purchaser agrees to buy certain estate (or personal property) and the vendor agrees to sell under stated terms and conditions.  Also called Sales contract, Sales Agreement; Purchase Contract, Purchase Agreement. Amortized Instalment The combination of interest and principal required in satisfaction of the monthly loan repayment. Applicant A person who formally applies for something. In applications for mortgage financing, each applicant will consent to the process and accept the obligation to repay the loan. Also called Mortgage Applicant; Prospective Mortgagor. Appraisal A formal, written estimation of the current market value of a home.  Also called a Valuation; Valuation Report. Borough Corporations A government regulatory body with the responsibility to establish and enforce health and safety standards within borough districts. Also called Local Authority; Local Health Authority. Borrower A person who receives funds in the form of a loan with the obligation of repaying the loan in full with interest, if applicable.  Also called Mortgagor. Breach of Contract Violation of any of the terms and conditions of a contract without legal excuse. The party which has not breached the contract can usually seek one of three types of remedies: 1/ An action for monetary damages. 2/ An action for specific performance. 3/ Invalidation of the contract. Building Code The local regulations that control design, construction and materials used in construction. Building codes are based on safety and health standards. Building Plans Architectural drawings showing the location, design and specifications for construction or renovation or, where necessary, repair works. Building Plans must be approved by the Town & Country Planning Division and the respective local health authority. Also called Approved Building Plans, Approved House Plans, Approved Drawings. Certificate of Title A legal document issued by the Registrar of Titles for real estate registered under the Real Property Ordinance(RPO)(Tomens System). The RPO is regarded as providing conclusive evidence of present ownership and state of the title to the property as described in the legal document. Also called Title Deed. Chattel Personal Property excluding real estate such as land or house. Closing The conclusion of a transaction. In real estate, closing includes the delivery of a deed, financial adjustments, the signing of legal documents, and the disbursement of funds necessary to the sale or loan transaction. Closing Costs All of the costs to the buyer and seller individually that are associated with the purchase, sale or financing of real property. They include, but are not limited to, pro-rating of agreed items such as taxes and rents, the cost for the preparation of legal documents, stamp duty, insurance policies, and the cost of credit reports and escrow fees. Closing Statement A financial disclosure giving an account of all funds received and expended at the closing, including the purchase consideration, legal fees, stamp duty, hazard insurance, etc. Collateral Property pledged as security for a debt, such as real estate as security for a mortgage. Commitment An agreement, often in writing, between a lender and a borrower to loan money at a future date subject to compliance with stated conditions. Contingency A condition that must be met before a contract is binding. For example, the sale of a house might be contingent upon the seller paying for certain repairs. Completion Certificate Written authorization given by a local borough or regional corporation that allows a newly completed or substantially completed structure to be inhabited. Consent Agreement that a person will allow something to happen. This also implied that the person is aware and fully informed of all the potential risks associated with the action. Also called Informed Consent. Contract of Sale A contract between a purchaser and a seller of real property to convey a title after certain conditions have been met and payments have been made.  Same as Agreement for Sale. Credit Rating A rating given to a person to establish willingness to pay obligations based upon one's past payment history. Credit Report A report to a prospective lender on the credit standing of a prospective borrower, used to help determine credit worthiness. Debt Servicing Ratio Long-term debt expenses as a percentage of monthly income. Lenders use this ratio to qualify borrowers for mortgage loans, typically setting a maximum debt-to-income ratio of 40%. Delinquency Failure to pay instalments as agreed in the terms of the mortgage deed. Down Payment When you borrow money for a home, any lender will ask you to contribute some of your own money to the purchase of the house. A lender will usually require a down payment of at least 20% of the sales price unless the buyer purchases mortgage insurance. Equity The home owner's interest in a property; the difference between fair market value and the current amount the owner owes on the property. Equity Borrowing Equity borrowing refers to the refinancing of a loan where the borrower will take out money on their own home. If a home is appraised at $100,000 and the borrower's outstanding mortgage loan is $60,000, it is possible to enter into a 90% equity mortgage transaction for a loan of $90,000 (90% of $100,000). The new mortgage of $90,000 will pay off the $60,000 loan and leave $30,000 cash to the borrowers. Escrow An amount set up by the lender into which the borrower makes periodic payments, usually monthly, for taxes, hazard insurance, assessments, and mortgage insurance premiums. Eviction Legal removal of a person from his/her land or rental property. Fair Market Value The price at which property is transferred between a willing buyer and a willing seller, each of whom has reasonable knowledge of all pertinent facts and neither being under and compulsion to buy or sell. First Mortgage A real estate loan that creates a primary lien against real property. Foreclosure This is the legal process which allows mortgaged property to be sold to repay the loan in the event that the borrower fails to pay back the loan through agreed mortgage payments. Gross Monthly Income The amount of consistent and stable income that an individual receives each month, averaged over a period of time. This amount includes overtime pay, bonuses, provided that the individual can show a consistent history of receiving such income. Guarantor One who agrees to pay another person’s debt in case that person is unable to make the required payments for that debt. Also referred to as co-signing a loan. Hazard Insurance An insurance contract that pays for loss on a home from certain hazards, such as fire. Home Improvements Any improvements to an existing home, including repair, replacement or upgrade works. Extensive works must be checked for approval by the relevant regulatory bodies. Indemnify To compensate another for loss or damages. Interest Money paid for the use of money -- that is, money paid for a loan. Joint & Several Liability A legal principle that makes each of the parties to an obligation, liable for non-observance of the stated terms and conditions. Joint Tenancy Shared ownership in property between two or more persons. If one person dies, the real estate becomes the property of the surviving owner or owners. Judgment A notice to appear in court as a result of a lender’s claim action for payment. Judgment Debtor A person who owes money as a result of judgment in favor of a lender. Judgment Search An investigation into the legal registration of judgments against individuals. Lender Any person or institution that provides money to a borrower. Letters of Administration Legal documentation issued by a court that shows an administrator’s legal right to take control of assets in a deceased person’s name. Letter of Employment A document signed by the borrower's employer verifying his/her position and salary.  Also called Job Letter; Verification of Employment. Liability A legal obligation or a debt to another person or institution. Lien A claim on the property of another as security against the payment of a just debt. Lis Pendens Latin for ‘a suit pending’. Used to refer to a lawsuit which is pending. Loan An amount of money a borrower will take out from a lender to pay for a purchase. Loan-to-Value Ratio The relationship between the amount of a home loan and the total value of the property. For example, if you receive a loan of $80,000 on a home that costs $100,000, the loan-to value ratio is 80%. Management Company An organization of homeowners residing within a particular development whose major purposes is to maintain and provide community facilities and services for the common enjoyment of the residents.  Also called Homeowners Association. Market Value The highest price that a willing buyer would pay and the lowest a willing seller would accept. Memorandum An informal note or instrument embodying something the parties desire to have in written evidence. Mortgage The transfer of interest or right of claim in real property given as security for the payment of a loan or other obligation. This is the most common method of financing real estate transactions. Mortgage Deed The legal form which documents the particulars of a mortgage loan granted and the conditions and stipulations for observant during the term of repayment. Mortgagee A lender (person or institution) to whom interest or right of claim in property is conveyed as security for a loan. Mortgage Indemnity A policy that allows mortgage lenders to recover part of their financial losses if a borrower fails to full re-pay a loan. Mortgage insurance makes it possible to buy a home with as little as 5% down.  Also called Mortgage Insurance. Mortgage Investor Any person or institution that invests in mortgages. By buying mortgage loans from lenders, the mortgage investor gives the lender funds that can be used for more lending. Mortgage Life Insurance A type of term life insurance. The amount of coverage decreases as the mortgage balance declines. In the event that the borrower dies while the policy is in force, the debt is automatically paid by insurance proceeds. Mortgage Underwriter He/she who performs the analysis of the risk involved in making a loan to a potential home buyer based on credit, employment, assets, and other factors; and the matching of this risk to an appropriate rate and term or loan amount.  Also called Mortgage Officer, Loan Officer, Underwriter. Mortgagor One who borrows money and transfers interest or right of claim in the property to the lender, by way of a mortgage, as security for repayment of the amount borrowed. Negotiable Instrument A written document that serves as a contract by which one person promises to pay to another person. Cheques and promissory notes are negotiable instruments. Offer To present a contract for consideration. Offer of Mortgage Loan An offer of the particulars and conditions for mortgage financing for the consideration and agreement of the borrower. Power of Attorney A legal document authorizing one person to act on behalf of another. Prepayment A payment in advance of its due date. Prepayment penalty Money charged for early repayment of debt. Pre-qualification Qualifying a borrower for a loan amount before looking for a home. Final approval subject to appraisal of property and confirmation of current finances. Principal The original balance of money loaned, excluding interest. Also, the remaining balance of a loan, excluding interest. Probate The process by which the property left by a deceased person is handed over to the Beneficiaries. This includes proving the validity of the Will and appointing an Executor for settling the estate. Purchasing The acquisition of property by agreement between a buyer and a seller. Rate A percentage of the monthly mortgage payment paid to the lender. Real Estate Broker The seller of the house pays the real estate broker to attract potential buyers and help negotiate the contract between the seller and the buyer. The broker identifies available properties for buyers and shows them homes that meet their criteria. Refinance Obtaining a new mortgage loan on a property already owned. Often to replace existing loans on the property. Regional Corporation A government regulatory body with the responsibility to establish and enforce health and safety standards within towns/villages. Also called Local Authority; Local Health Authority. Repossession A lender’s taking away of property from a debtor who has defaulted on loan payments. Reschedule Re-arrangement of the terms and conditions for repayment of a loan Second (2nd) Mortgage A mortgage made subsequent to another mortgage and subordinate to the first one. Settlement The paying off of a mortgage loan. Tenants in Common Ownership in real estate by two or more persons, allotted as equal shares. If one individual dies, his/her share in the property passes to the beneficiaries of his/her estate. Title The evidence of the right to or ownership in property. In the case of real estate, the documentary evidence of ownership is the title deed. Title may be acquired through purchase, inheritance, gift, or through foreclosure of a mortgage. Title Search Investigation into the chain of ownership in property. Valuer The valuer decides the market value of a home based on its condition and the selling prices of comparable homes recently sold in the area. His / her job is to compute a fair estimate of market value to help the lender decide a reasonable loan amount.  Also called an Appraiser or Valuator.