Glossary

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📅 Last Updated: November 14, 2019

✏️ Written By Caitlin Wood, BA

TERM	DEFINITION
Accounts Payable	Money that is owed in relation to a product or service to a creditor. Because the money is owed to an individual or entity, accounts payable are considered to be an obligation.
Accounts Receivable	Money that is owed in relation to a product or service from a borrower. Because the money is due to an individual or entity, accounts receivable are considered to be an asset.
Accrued Interest	Interest that is earned by an individual, but not yet received. Or, interest that is owed, but not yet paid. Interest is typically earned or payable after a certain period of time, such as a month or a year, which is why it can accrue.
Add-Ons	Any features or services that are applied on top of the base price of a car are considered add-ons. These can include things such as tinted windows, heated seats, leather seats, alarms, and wheel locks, to name a few.
Annual Percentage Rate (APR)	The interest rate you pay over a full year in exchange for borrowing. An APR is expressed annually but is typically charged monthly. You can determine the total monthly interest you’ll pay on debt by multiplying the borrowed amount by the APR and then dividing by 12.
Appraisal	An appraisal involves assessing the value of a property based on current market values and is conducted by an appraiser that is typically assigned by a lender. The appraisal is then used by the lender to determine whether or not to extend a mortgage to a borrower.
Appreciation	The increase in an asset’s value over time. Appreciation is often the result of an increase in demand, weakening supply and/or changes in the economy.
Arrears	Money that should have been paid and is now overdue.
Assets	Anything that has financial value is considered an asset. In order to reap the benefits of an asset, you must also own it as an individual or business. When it comes to debt, usually only real estate, jewellry, vehicles, and investments are considered assets.
Audit	The process of an impartial, independent individual or entity inspecting completed work in relation to a specific framework. Audits are commonly performed on financial statements to ensure that they are accurate, fair and align with accounting rules and regulations.
Balance Sheet	A formal financial statement that communicates the current financial position of a business at a specific point in time. Assets, liabilities and equity are all reflected on a balance sheet as well as net income (or loss) earned over a previous period of time.
Balance Transfer	A balance transfer is a process of transferring current debt owed to one lender to another lender. Balance transfers are most commonly used in relation to credit card debt. The motivation to complete a balance transfer is to get a lower interest rate on outstanding debt.
Ballon Loan	Unlike regular loans, a balloon loan isn’t fully amortized over a particular period of time. Instead, only part of the loan is amortized over the loan’s term and the remainder of the loan becomes due at the end of the loan’s term. The loan’s term tends to be short and this type of financing is considered to be aggressive.
Bankruptcy	When an individual is bankrupt, they are unable to pay their debts to creditors. Declaring bankruptcy is a legal process that involves handing over the bankrupt individual’s finances to a trustee.
Bankruptcy and Insolvency Act (BIA)	A legal, federal act that protects the rights of Canadian individuals who declare bankruptcy. The act also defines the process to follow when bankruptcy occurs. More specifically, the roles that creditors, trustees, and individuals take on during a bankruptcy proceeding in addition to specific conditions in which bankruptcy can be granted.
Base Price	The base price of a car is the cost of the vehicle without any upgrades or added features that can be added after the car is ordered from a dealership. Only standard equipment and the manufacturer’s warranty are included in the base price, but any other fees will be added afterward.
Better Business Bureau (BBB)	A non-profit organization that assigns rankings to businesses, charities and non-for-profit corporations. The BBB collects and stores data regarding companies to set rankings. Their goal is to prevent businesses from failing to meet defined standards of operation.
Book Value	The value of an asset on a company’s books. In other words, the value of the asset on the balance sheet.
Borrower	An individual or entity that takes something (for example money or equipment) with the intention of returning it to the original owner. When the borrower it taking out a loan, there is usually an agreement involved and applicable interest.
Bridge Loan	A bridge loan is a type of short-term loan that may be used to “bridge” the gap between carrying a mortgage on an existing home and covering the mortgage for a new home. These are usually obtained when the closing dates of a home sale and purchase overlap, requiring the seller to continue paying the mortgage on the existing home before it closes while paying the mortgage on a new home.
Broker	A person who buys and sells goods and services on behalf of another person in exchange for a fee.
Budget	A best guess of an individual or entity’s income and expenses for a specific period of time.
Business Credit Report	A detailed report that is meant to provide potential lenders with information to allow them to determine the business’ creditworthiness before extending credit. There is much more information in a business credit report when compared to an individual’s credit report. Business credit reports are generated and regulated by the credit bureau.
Business Credit Score	A number that represents a business’ creditworthiness based on information within the credit report. The credit bureau calculates and regulates business credit scores.
Canadian Housing and Mortgage Corporation (CMHC)	A governing body in Canada that oversees and executes several federal housing projects in relation to the National Housing Act.
Cash Advance	A cash withdrawal from a credit card. Cash advances are a very expensive form of financing as the interest rate on the borrowed amount is higher and there is often a flat fee. In addition, interest becomes effective immediately after you withdraw the cash, instead of after the balance due date.
Cash Flow	The cash that comes in and goes out of a business. Cash flow is poor when more cash is going out than in. Cash flow is good when more cash is coming in than out.
Cash-Back Mortgage	A cash-back mortgage allows borrowers to obtain the mortgage principal and a percentage of the loan amount in cash, which can come in handy to cover the cost of certain expenses, such as making home improvements or paying for car repairs. Rates on these types of mortgages tend to be higher compared to other home loans.
Certified Pre-Owned (CPO)	CPO cars refer to used cars that have been certified, either by the dealership selling the car or the manufacturer of the vehicle. This gives consumers confidence knowing they are buying a used vehicle that is in good condition. When a used car is obtained by a dealership, it is inspected by a certified mechanic. The car is then repaired if it meets the required standards and is then ready to be sold as a CPO vehicle.
Clear Title	A clear title means that the owner of the car has a free and clear title and no longer carries a balance owing on a car loan. There are no liens of the title or levies from creditors.
Closed Mortgage	A closed mortgage allows borrowers to prepay only a certain amount of the principal without being charged a prepayment penalty fee. Fixed-rate closed mortgage prepayment penalties are usually 3-months’ worth of interest or the interest rate differential, whichever of the two is greater.
Closing Costs	Before a real estate transaction closes, certain closing costs will need to be paid, which can include real estate commissions, lawyer fees, land transfer taxes, appraisal fees, home inspection fees, adjustments, and others.
Co-Borrower	An individual who shares an obligation of something that was borrowed with one or more people. All co-borrowers listed on an agreement are fully responsible for repaying the obligation.
Collateral	Any asset that is used to secure debt. In the event that the borrower defaults on the loan, the lender has the right to seize the asset and sell it to cover the owed amount. Collateral is also commonly referred to as security.
Collection Agency	A third party hired by a creditor to collect outstanding debts from a borrower. A collection agency is usually hired after the creditor has made various attempts to collect the debt from the borrower on their own without success. Collection agencies tend to be more aggressive with their actions to collect debts.
Collections	If a creditor has been trying to collect a borrower’s debt without success, they may sell the debt to a collection agency. When this happens, the borrower’s account is classified as “in collections”. Any type of debt can go into collections including library fees, medical fees and credit card debt. Accounts in collections can negatively impact your credit score and report in the long term.
Compound Interest	Earned interest that is added to the principal amount when interest for the next period is calculated. In other words, compound interest is interest earned on interest.
Conditional Offer	A conditional offer is not yet final and means that there are certain conditions that must be fulfilled by the buyer, seller, or both before the sale is considered “firm.” For instance, an offer could be conditional on the home being inspected, which the buyer must be satisfied with.
Construction Mortgage	A construction mortgage allows borrowers to finance the cost of construction of a new home or major renovations.
Consumer Proposal	A formal offer proposed by the borrower to the creditor to resolve owed debts. Consumer proposals may request that the borrower pay a portion of the owed balance that is considered to be a full payment or extending the due date of the debt. These tactics can be used exclusively or in conjunction along with other negotiation methods. The creditor can either accept or deny the proposal.
Consumer Reporting Act	A governing body that oversees credit reporting agencies to ensure that personal information is collected, maintained and reported in a responsible fashion. The Consumer Reporting Act also ensures that individuals have the right to know what information is being reported in relation to them and who the information is being reported to. If any of the reported information is incorrect, you have the right to have it corrected under this act.
Cosigner	An individual who agrees to make your loan payments and otherwise be responsible for your debt in the event that you default on the loan. Using a cosigner is a popular option for individuals who have trouble securing debt on their own.
Cost of Borrowing	All of the costs a borrower incurs when borrowing an asset or money. Examples of borrowing costs include legal fees, interest, loan origination fees and penalties.
Counsellor	Someone who is trained to provide guidance on personal, social or psychological issues. In relation to finances, counsellors help people learn how to manage their finances appropriately and make informed financial decisions.
Credit	The extension of money, goods or services with trust that the individual will repay the owed amount in the future. In today’s world, trust of repayment is determined through an assessment of creditworthiness using a credit application.
Credit Application	A formal application, required by the majority of lending institutions, that gathers information from the applicant for the assessment of creditworthiness. The form will request information such as personal identification, income and expenses, residency, existing debt, and employment.
Credit Bureau	A governing body that collects credit information about individuals and sells it to other entities that are in the business of extending credit for a fee. Credit bureaus are also referred to as consumer reporting agencies and credit reporting agencies. In Canada, there are two credit bureaus, TransUnion and Equifax.
Credit Card	A financial product that allows cardholders to purchase goods and services using credit. The amount spent in a particular period becomes due at a specific date. If the amount is not paid on that date, interest will come into effect. Credit cards are a physical, plastic card.
Credit Counselling	A professional advisory service that helps individuals create a plan to repay their debt and improve their credit. Credit counselling agencies are typically not-for-profit in Canada, sometimes even a public service. For-profit credit counselling agencies exist in Canada as well.
Credit Limit	When a creditor extends credit to a consumer it comes with a credit limit, this is the maximum amount the consumer can borrow.
Credit Rating	Credit bureaus collect information about your personal finances and rate you to give potential lenders an easy way to assess your creditworthiness at first glance. There is a rating system in place for consistency and to protect from bias. Credit ratings are different from credit scores but are often used interchangeably. Your credit score actually determines what credit rating you’re given. As an example, if you have a credit score of 850, you’d be given a credit rating of “excellent”.
Credit Repair	The act of improving your credit score by removing inaccurate information from your credit report and working on healthy, responsible financial habits.
Credit Report	A credit report contains information regarding your credit history and includes things such as your credit score, payment history, financial debts, record of debt payment, and any black marks on your credit. Credit reports can be obtained from credit bureaus, such as Equifax and TransUnion.
Credit Risk	The level of risk associated with a borrower defaulting on debt repayment. If the risk of the borrower defaulting is high, then credit risk is high, and vice versa.
Credit Score	A three-digit number that is calculated by credit bureaus using a mathematical rating system and information from your credit report. A credit score falls anywhere between 300 and 900, with 900 being the absolute best. Lenders might have minimum credit score requirements for extending credit which is why it’s important to maintain a healthy credit score.
Credit Union/Caisses Populaires	A type of bank that is owned by its members and operates for the benefit of their members. Credit unions are subject to provincial regulation and tend to be small in size and community-oriented. Because of these features, credit unions tend to be a superior way of investing, banking and lending. Credit unions are referred to as Caisses Populaires in Quebec.
Creditworthiness	By assessing the historical information associated with a consumers’ finances, creditworthiness is the amount of trust a lender places on a borrower in relation to the repayment of extended credit. Creditworthiness is assessed using a combination of credit report, credit score, credit rating and application information.
Dealership	Auto dealerships are businesses that are authorized to sell new or used automobiles to consumers and serve as a direct dealer for automakers
Dealership Financing	Consumers can obtain dealer financing to help fund the purchase of a vehicle. A contract is signed with a dealership that requires a consumer to pay for a specific amount plus interest and funding fees over a certain period of time. Dealers will send the details of the consumer’s financials to various lenders to find one that will approve the loan.
Debt	Amount of money an individual has borrowed (from lenders and credit card companies) and is in the process of repaying.
Debt Consolidation	The process of rolling over multiple debts into one, single loan or repayment plan. The reason why individuals consolidate debt is to get a lower overall interest rate and to focus on one monthly payment as opposed to many.
Debt Management Program	A type of debt consolidation program that utilizes the services of a credit counselling agency to ensure an ideal repayment plan. Usually, a debt management program will help you achieve a lower monthly payment and more timely payments to lenders.
Debt Ratio	Your debt ratio determines your ability to pay off a mortgage by measuring your debt relative to your income. Lenders look at debt ratios to assess a borrower’s ability to make mortgage payments. A high debt ratio means your debt load is too high relative to your income. Gross debt service ratio refers to your debt that does not include a mortgage payment, and total debt service ratio refers to your total debt including mortgage payments.
Debt Service Coverage Ratio	The ratio of operating income available for use to debt servicing. Debt servicing includes interest, principal and lease payments. The main goal is to determine whether or not a business is producing enough cash to cover their debt obligations.
Debt Settlement	The process of paying an agency to negotiate your debts with creditors. The goal is to reduce the total amount you owe that will be seen as full payment. Debt settlement can help you reduce the amount you owe, but it can also hurt your credit score because creditors often don’t want to negotiate unless there have been many missed payments or collection records indicate that you can’t repay your debt.
Debtor	An individual or entity that owes a sum of money to a creditor.
Deed	A deed is a document signed by the seller that transfers ownership from the seller to the buyer.
Default	Failing to make payments toward your debt for a lengthy period of time. Lenders have their own individual ways of classifying default, it may be as little as 60 days or as long as a year. Defaulting on debt can impact your credit negatively, especially if the defaulted account is sent to collections.
Deferment	The act of pushing something off to a later time. In terms of finances, this means paying a debt later than when it’s due or creating an arrangement where the customer receives the product or service now but pays later.
Delinquency	Failure to pay the minimum payment on a loan or account on or before the agreed-upon payment date. Delinquency is typically categorized in 30, 60, 90 or 120 days since lenders typically have monthly payment cycles. Delinquent accounts may eventually turn into defaulted accounts.
Dependent	An individual who relies on another individual for financial support. Usually, this refers to a family member, common-law partner or spouse who is unable to financially support themselves.
Depreciation	The decrease in an asset’s value over time. Depreciation is most commonly a result of wear and tear from use, but can also be a result of a decrease in demand, increasing supply and/or changes in the economy.
Depreciation	Depreciation refers to the decline in the value of a vehicle. Immediately after purchase, a vehicle will become less valuable as soon as it is used. Put another way, depreciation is the rate at which an automobile loses its value over time
Discharged Bankruptcy	The act of releasing a bankrupt individual from all or most of his or her debts. Sometimes not all debt is included in a bankruptcy, these debts would not be forgiven as a result of a discharge. For example, alimony, child support, and certain student loans cannot be discharged.
Down Payment	A down payment is the money that is put toward the purchase price of a home. The required down payment will depend on a number of things, such as the type of mortgage being taken out and the cost of the house.

TERM	DEFINITION
Earned Income	Money that is received or receivable resulting from finished, paid work.
Employer Identification Number (EIN)	A number used to identify a business regardless of whether they are a sole proprietorship, partnership, corporation or other non-personal entity. An EIN is the American version of a Canadian business number.
Equity	The market value of an asset you own less the amount still owed (including any additional fees to sell or repay debts) on the loan used to purchase the asset if any. Equity increases when you pay down the debt as well as when the value of the asset increases. Equity can be calculated at any point in time and is also referred to as lendable value or net value.
Escrow	Something, such as money, a document or an asset, kept in the custody of a neutral, third party until a specific condition has been met.
Extended Warranty	Vehicles come with a manufacturer’s warranty when purchased, but buyers can choose to purchase an extended warranty. This serves as a form of insurance policy on the vehicle to cover the cost of potential repairs in the future. An extended warranty is usually good for a certain period of time and/or mileage.
FICO Score	A credit score created by the Fair Isaac Corporation. FICO scores are used by lenders to determine a borrower’s creditworthiness before extending credit. Scores range between 300 to 900.
Financial Advisor	Someone who is employed to provide financial services or guidance on financial issues to their clients.
Financial Statements	Formal records depicting the financial position and activities of a business, individual or entity. Financial statements are very structured and are subject to rules and regulations. Usually, financial statements include a balance sheet, income statement and statement of cash flows.
Firm Offer	An offer goes “firm” after all conditions have been satisfied and signed off by all parties. A sale can also be immediately firm if no conditions are included.
Fixed Expense	A cost that does not fluctuate when there is an increase or decrease in business activity, such as sales or production. Examples of fixed expenses include a full-time employee’s salary, rent and insurance, among others.
Fixed-Rate Mortgage	A fixed-rate mortgage means that the interest rate does not change throughout the entire mortgage term. Even if posted interest rates go up or down during the term, your rate will be locked in and stay the same until the term ends.
Foreclosure	Foreclosure is an unfortunate situation in which a homeowner loses possession of the title of their home as a result of mortgage payment defaults. When mortgage payments are missed, the foreclosure process may begin after a certain number of days have passed. In this case, the lender can take over the home under a “power of sale,” after which the homeowner may still have a chance to make good on their mortgage payments and bring their debt up to par. Otherwise, the lender may make efforts to sell the property to recover any money they are owed.
Fraud	Intentional actions that are wrongful or criminal in nature that result in financial or personal gain for the individual who performed the actions.
Garnishment/Garnish	If you owe debts that you are not repaying, your lender can request a court order that has the power to remove funds directly from your bank account to pay off the owed debt. The name of this court order is a garnishment. There are restrictions as to how much can be garnished from your wages.
Grace Period	A set, specific period of time after a due date when a payment can be made without consequences.
Gross Debt Service Ratio	A gross debt service ratio is the measure of housing-related debt relative to a borrower’s income. GDSR is a factor that lenders consider when determining whether or not to approve a mortgage application.
Gross Profit	The amount of money earned after considering expenses directly related to producing a product or service. Gross profit is typically calculated on a company’s income statement by taking revenue and subtracting cost of goods sold.
Guarantor	In the event that a borrower defaults, a guarantor is a person who agrees to repay the debt on the borrower’s behalf.
High-Ratio Mortgage	A high-ratio mortgage refers to a mortgage in which the principal is greater than 80% of the property’s value. That means more than 80% of the home’s value must be borrowed in order to buy a home, while the down payment is less than 20% of the property value. High-ratio mortgages require mortgage default insurance to be paid.
Home Buyers’ Plan (HBP)	The First-Time Home Buyers’ Plan (HBP) is a government incentive program that allows first-time homebuyers to withdraw up to $25,000 from their Registered Retirement Savings Plan (RRSP) – or $50,000 in total for first-time home buyers and their partner – to buy or build a home. The full amount withdrawn must be repaid within 15 years.
Home Equity	The equity in a home represents the value of the property, less total outstanding debt, that the owner actually owns outright. It is calculated by subtracting the total mortgage loan amount still owed by the property’s value.
Home Equity Line of Credit (HELOC)	Using the equity in your home, you can secure a line of credit that uses the equity as collateral. The credit limit is usually equivalent to a particular percentage of your home’s value and there is a set date when the loan must be repaid. If you default on this kind of loan, the lender can repossess your home and sell it to cover the owed debt. Since there is a high risk with this type of financing, it is typically used to finance big purchases such as home improvements, education, or medical expenses.
Home Inspection	Many conditions can be inserted into a purchase agreement, including a home inspection. The home inspection allows buyers some time to have the property assessed by a professional to uncover any potential issues with the home before the buyer is obligated to complete the purchase.

TERM	DEFINITION
Identity Theft	The fraudulent act of obtaining another person’s private identification information and using it for financial or personal gain.
Incentive Stock Option (ISO)	A company benefit that gives an employee of that company the right to buy stock shares at a lower price than the fair market value. There is also the added benefit of a tax break on any profits earned from the stock share purchase.
Income Statement	A formal financial statement that communicates the income, expenses and net income (or loss) for a business over a particular period of time.
Incorporated	The state of being formed into a legal corporation.
Inflation	A general increase in prices of goods and services in addition to a decrease in the purchasing power of a nation’s currency.
Inquiry	Whenever an entity, including yourself, requests a copy of your credit report, an inquiry is recorded. A hard inquiry is a request from a lender or any other individual that is assessing your creditworthiness. A soft inquiry is a request by you to view your own credit report. A large number of hard inquiries can indicate financial struggles to a potential lender.
Installments	A payment schedule that breaks up an owed amount of money into several equal amounts, otherwise known as installments, which are paid over an agreed period of time.
Interest	Interest is added to the principal amount of the mortgage and is paid to the lender in exchange for access to the funds needed to complete a real estate purchase. Interest is charged from the moment the money is received to the moment the term expires.
Introductory Rate	A special promotional interest rate offered by credit card issuers for a specific period of time, such as a few months to a year. The goal with these rates is to attract new customers.
Land Transfer Tax	Land transfer taxes are charged by the province in which the property is being purchased, as well as in certain municipalities. It is a type of tax that is based on the purchase price of the property, though these taxes vary by province. First-time homebuyers are sometimes exempt from paying the entire land transfer tax amount and may be eligible for a rebate.
Lease	A contract that allows an individual the right to use or occupy a property for a specified period of time in exchange for a monthly payment. Leases are common for a property like apartments and vehicles. The individual on the lease does not own the asset at the end of the lease’s term, it is strictly for rental purposes.
Liability	The state of being responsible for something particular. In the business world, this typically refers to legal and financial responsibilities.
Licensed Insolvency Trustee (LIT)	An individual who is licensed by the Superintendent of Bankruptcy in Canada and is authorized to administer consumer proposals, bankruptcies and manage assets held in a trust. Their profession involves helping and educating people who struggle with debt problems.
Lien	A legal claim on the property of an individual to ensure that debt will be repaid. For example, a lien is placed on a vehicle that is being financed and will only be removed once the loan has been paid off in full.
Loan	An amount of money that is borrowed by one entity from another with the expectation that the amount will be paid back. Interest is typically applied on the owed amount.
Loan-to-Value Ratio (LTV)	The ratio of what amount was borrowed to purchase an asset in relation to the market value of that asset. The formula would be: the total amount borrowed for the purchase divided by the total selling price of the asset. The borrowed amount can differ from the selling price if the individual makes a down payment, for example. In general, the lower the LTV, the more favourable the terms of the financing will be.
Long-Term Debt	Debt that must be repaid over a period of twelve months or longer.
Lump-Sum Payment	A large, singular payment made at a specific point in time as opposed to numerous small payments spread out over various points in time.

TERM	DEFINITION
Market Value	The amount that an asset is worth or can be sold for in a particular market place.
Maturity Date	The maturity date is the date when the mortgage term ends. It is at this point that the mortgage must either be paid in full, refinanced, or renewed for a new term.
Micro-Loan	A small amount of money lent to new businesses with a low-interest rate. Micro-loans are typically issued by individuals as opposed to large lending bodies like banks or credit unions.
Minimum Payment	The lowest amount of money you are required to pay towards a credit card or other debt by a specific date to avoid a particular penalty.
Mortgage	A mortgage is a loan that is provided by a lender to help a homebuyer complete a home purchase. Lenders provide a certain amount of money required to cover the cost of a home’s purchase price while charging interest on the principal amount. The loan is collateralized by the property itself. The mortgage must be repaid according to the terms of the contract. If the loan amount cannot be repaid according to the terms, the lender has the right to repossess the property and sell it to recoup any losses.
Mortgage Broker	A mortgage broker is a professional who works on behalf of the borrower and finds the best mortgage product and lender among their network of lenders.
Mortgage Default Insurance	Mortgage default insurance is designed to protect the lenders when a borrower is unable or unwilling to repay their mortgage. This is applicable to high-ratio mortgages where the down payment amount is less than 20% of the purchase price of the property and does not apply to conventional mortgages. Borrowers are responsible for this payment.
Mortgage Discharge	A mortgage discharge is issued by the lender when the mortgage is paid off in full by the borrower. When the mortgage is fully repaid, it is discharged from the title to the property and certifies that the property is completely free from the mortgage debt
Mortgage Life Insurance	Mortgage life insurance is an optional policy that borrowers may take out. It is designed to reduce or pay off the mortgage amount (up to a certain amount) in the event of the borrower’s death.
Mortgage Payment	A mortgage payment is the regular payment borrowers are required to make to pay off their home loan. These payments can be made monthly, semi-monthly, biweekly, or weekly, and include both principal and interest.
Mortgage Pre-Approval	A mortgage pre-approval involves having your credit and finances checked out before you formally apply for a mortgage once you agree to purchase a particular home. It allows you to find out how much can be afforded, how much the lender is willing to lend, and the interest rate that may be charged. Pre-approvals expire within 90 to 120 days after they are issued and are not a guarantee of final mortgage approval.
Mortgage Principal	The mortgage principal represents the amount of money borrowed from a lender and does not include the interest portion.
Mortgage Statement	Lenders typically submit a mortgage statement to borrowers on a yearly basis that details the status of the mortgage, including how much has been paid and the principal on the mortgage that still remains.
Mortgagee	The mortgagee is a mortgage lender.
Mortgagor	The mortgagor is the borrower.
MSRP (Manufacturer’s Suggested Retail Price)	Car manufacturers will offer recommendations on how much a car should be priced at the retail level, known as the manufacturer’s suggested retail price, or MSRP. The purpose of the MSRP is to standardize pricing in the automobile industry so that there is not a lot of fluctuation in price from one dealership to another.
Multiple Listing Service (MLS)	The Multiple Listing Service (MLS) is a database of listings where real estate professionals market properties they have for sale and search for properties for sale for their clients.
Offer	The offer represents the purchase agreement that the buyer submits to the seller and that the seller can either accept, reject, or negotiate with the buyer. The offer includes the offer price, deposit amount, closing date, conditions, and other items pertinent to the transaction.
Open Mortgage	An open mortgage allows borrowers to repay their loan amount in part or in full without incurring any prepayment penalty fees. Open mortgages tend to have higher interest rates compared to closed mortgages but are more flexible.
Overdraft	A negative bank account balance caused by withdrawing more money than what is in the account.
Partnership	A type of business where two or more individuals share ownership, pool resources and split responsibility for the company’s operations. Partnerships can be classified as general or limited.
Payday Loans	A short term, small loan that a borrower promises to repay on their next pay day. Payday loans are known to be an expensive and risky form of financing that makes it challenging for the borrower to repay and manage.
Payment Period	The period of time over which a borrower is obligated to make a payment. Payment periods could be weekly, bi-weekly or monthly, sometimes even longer.
Posted Rate	The posted rate is the lender’s benchmark advertised interest rate for mortgage products offered. These are not necessarily set in stone, but may be negotiated with the lender.
Prepayment	Prepayment is made when some or all of the loan amount is paid off before the end of the mortgage term. Most open mortgages can be paid off early without any prepayment penalty charges, but prepaying a closed mortgage typically comes with a prepayment charge. However, most closed mortgages allow an annual prepayment of anywhere between 10% to 20% without any penalty.
Prepayment Charge	When all or part of a closed mortgage is paid off before the end of the mortgage term, a prepayment charge may have to be paid to the lender.
Prime Rate	The prime rate advertised by a lender is typically based on the Bank of Canada’s interest rate that is set each night, which may change at any time.
Principal Balance	The total remaining balance of a loan, without considering interest and other fees.
Profit	The difference between the amount of money earned and the amount of money spent to earn the money.
Property Insurance	Property insurance must be paid on a home throughout the mortgage term. Lenders require a policy to be held on a property before they agree to extend a mortgage, and the lender must be named on the policy. This type of insurance covers the cost of any repair or replacement as a result of damage to the home from fire or other disasters.
Property Tax	Property taxes are paid by homeowners to their respective municipalities to cover the cost of things such as police, garbage collection, policing, schools, and fire protection. The property tax amount paid is based on the property’s value and the rate charged by the municipality.

TERM	DEFINITION
Qualifying Rate	A qualifying rate is the interest rate that a lender uses to assess a borrower’s eligibility for a mortgage and to calculate your debt-service ratio.
Renewal	When the term of a mortgage expires, another term may be negotiated with the lender. If the mortgage is not renewed, it must be paid off in full.
Repossession	If you owe money for a loan that has collateral and you default on the loan, the creditor can claim the collateral through the process of repossession. The repossessed collateral is sold and used to cover the owed amount of the loan. Assets that are commonly repossessed are cars, houses, equipment, and boats.
Retained Earnings	The amount of net income left over after a business has paid out dividends to their shareholders. Often, the retained earnings are used within the business for investment, growth or capital purchase purposes.
Reverse Mortgage	Homeowners over the age of 55 can use a reverse mortgage to borrow as much as 50% of the home’s value to be used to pay for other expenses. Payments are not made on a reverse mortgage, but interest can accrue on the loan amount until the property is sold or until the homeowner passes away.
Revolving Credit	A type of credit agreement that allows customers to borrow against a pre-approved credit line when making purchases. A credit card is the most popular form of revolving credit. The borrower is responsible for paying the borrowed amount plus interest each payment period. Revolving credit is also referred to as open-ended credit or charge account.
Right Of Offset	A legal right held by banks to seize deposited funds from a chequing or savings account to repay an owed amount that is in default.
Second Mortgage	A second mortgage may be taken out on a home that already has a mortgage on it. The funds accessed through a second mortgage from the home’s growing equity may be used to cover other expenses, such as home renovations, but they carry more risk than first mortgages.
Secured Loan	A loan that is secured by an asset known as collateral or security. In the event that the borrower defaults on the loan, the lender has the right to seize the asset securing the loan and sell it to repay the owed amount. This type of loan bears less risk for the lender, but more risk for the borrower.
Short-Term Debt	Debt that must be repaid in under twelve months.
Snowball Repayment Method	A debt repayment strategy designed to motivate individuals to tackle repaying multiple debts. The strategy involves repaying the lowest debt amount first, then the next lowest debt amount, then working up to pay the highest amounts one by one. The idea is that individuals will be motivated to continue paying down their debt because there are many successes in the early stages of this plan. The drawback of the repayment strategy is that it is not the most cost-effective strategy.
Sole Proprietor	An individual who is the only owner of a business known as a sole proprietorship. That individual is entitled to all of the profits after all liabilities and taxes have been paid.
Statement of Adjustments	The statement of adjustments outlines the purchase price, deposit, and any financial adjustments that are required for taxes, utilities, or condo fees that have been prepaid by the seller and payable by the buyer to compensate the seller for fees already covered on the home.
Statute of Limitations	A law that dictates the maximum amount of time all parties in relation to a particular case have to take legal action. After that period of time passes, legal action cannot be taken, unless under special circumstances. Each crime, whether civil or criminal, has a different set statute of limitations.
Survey	A survey is a plan of the property’s lot that shows the lot size and where the property boundaries and building structures lie. It will also show where any easements, right-of-ways, or overhanging structures from adjacent properties that could impact the value of the home.
Tax Refund	An amount owed to or received by a taxpayer from the government resulting from taxation. A tax refund typically occurs when an individual has paid more income tax throughout the year than what was owed, has large tax credits or did not earn enough income to be required to pay tax by law.
Tax Return	A legal form which is completed by a taxpayer to determine tax payable to the government or tax receivable from the government. Tax returns require information about the taxpayer, such as annual income, annual expenses, personal information and financial information, to determine the tax asset or liability.
Term	The mortgage term is the period of time that you are committed to your mortgage with your lender, including the interest rate. When the term expires, the mortgage either needs to be paid off in full, refinanced, or renewed, either with the same lender or a new one. The average term is 5 years, though it can range anywhere from 1 to 10 years.
Title	Title is the ownership provided to a homeowner when a property is purchased. A clear title is required by lenders before a mortgage is extended. If there are any issues with the property’s title, they must be resolved before the transaction closes.
Title Insurance	Title insurance is meant to protect lenders and buyers from issues on the title that are discovered after the transaction closes. Title issues can include title fraud, encroachments, municipal work orders, or zoning violations. If title insurance is purchased, it will be added to the closing costs.
Title Loan	A title loan uses the vehicle title as a form of collateral to secure a loan. Borrowers must own their vehicles free and clear and no longer owe any amount on a car loan. A lender will place a lien on the car title in exchange for funds. If the borrower defaults on the loan, the lender can take possession of the vehicle and sell it to cover any losses.
Total Debt Service Ratio	The total debt service ratio refers to the percentage of gross annual income needed to cover all debts in addition to the mortgage payments (including principal, interest, taxes, utilities, and more).
Trade-in Allowance	A trade-in allowance is the amount that a car dealer will reduce the cost of a new car purchase by after the consumer’s old vehicle has been traded in. It is somewhat like being given credit from the sale of an existing vehicle that is then applied to the purchase of a new vehicle.
Trade-in Value	A trade-in value is the amount that dealerships offer consumers for their vehicle and is typically applied toward the purchase price of another vehicle. Dealerships will assess the value of the vehicle and will base the amount that can be applied to a new car purchase. The consumer will then trade in the old vehicle and the assessed value amount will be deducted from the price of another vehicle. Trade-in value is often different than what the vehicle may be worth when sold in the open market.

TERM	DEFINITION
Unsecured Loan	A loan that is not secured by an asset known as collateral or security. In the event that the borrower defaults on the loan, the lender will not have the opportunity to seize the collateral or security to repay the owed amount. This type of loan bears more risk for the lender, but less risk for the borrower.
Variable-Rate Mortgage	With a variable-rate mortgage, the interest rate will fluctuate based on a financial index. Monthly payments could remain the same, but the amount paid toward interest versus principal could change. If rates increase, more money is paid toward interest, but if rates decrease, more money goes toward the principal.
Vehicle Identification Number (VIN)	Every vehicle will have its own unique vehicle identification number, which is used to identify a specific vehicle. No two vehicles will have the same VIN, making them easily identifiable with this unique 17-character code.