Toronto Real Estate Terms and Definitions
An Agreement of Purchase and Sale is the contract between a buyer and seller for the purchase of a property.
Amenities are special features that are shared among residents of a condominium building. Common condo amenities include party rooms, pools, rooftop decks, and fitness centres.
Amortization is the set time period in which you have to pay off your mortgage.
An appraisal is the fair market value given to a particular property based on comparable sales, unique features of the property and the professional experience of the appraiser. Appraisals are typically required by the financial institution as part of the lending process when buying a home.
Appreciation is the increase in value a property earns based on market conditions and inflation.
An assignment is when the purchaser of a pre-construction condo chooses to sell their Agreement of Purchase and Sale with the builder to a new buyer before they officially take possession of the condo.
A bridge loan, or bridge financing, is the temporary loan provided to homeowners who need funds from their home equity to make a down payment on a new property before the sale of their current home closes. Most banks and lenders will loan upwards of $200,000 for up to 120 days to help bridge the gap between closing dates. In order to be eligible for a bridge loan you will need both your Sale Agreement and your Purchase Agreement from your properties.
A buyers agent is the real estate agent representing the buyer in a real estate transaction.
When the real estate market is considered a Buyers Market, it means that there is a lot of inventory for sale. With more options to choose from, buyers have the upper hand in negotiations.
Capital Gains are the profits earned from the sale of a property or an investment where the sale price exceeds the original purchase price.
The Capitalization Rate, or Cap Rate, is the ratio of your net operating income to the property’s asset value. [ Purchase Price ÷ Net Operating Income ]
When an investment or income property is earning you more than what you owe monthly to mortgage and operating expenses, it is considered a cash flow positive property.
Closing, in real estate, is when the sale of a property is complete. This means all paperwork has been signed and monies have been paid.
At closing you will need to pay all of your final expenses. Closing costs for a resale property are different than those of a pre-construction property but include things like lawyer fees and Land Transfer Tax. Ensure you set aside funds for your closing costs as they cannot be tied into your mortgage.
A commission is the payment a real estate agent earns from a real estate transaction. The commission is typically 5% of the property’s purchase price and is split between the buyer and seller agents.
Real estate agents will look for comparables, or comparable properties, that have recently sold in and around a particular property to determine its value based on the market at the time.
A condition within the Agreement of Purchase and Sale that must be met for the sale to proceed.
The condo board of directors is the group of people who oversee the operations of a condominium on behalf of the owners. Not to be confused with a property manager who takes care of the day-to-day operations, a condo board is responsible for any decisions regarding the condo rules, major maintenance, condo finances, and any associated by-laws.
Condo fees, or maintenance fees, are the monthly dues paid by owners to maintain the condo’s common areas, amenities, and sometimes utilities. A portion of condo fees will also go towards the building’s reserve fund which acts as an emergency savings account for unexpected repairs and maintenance. Condo fees will vary per building and are determined by the size of the owner’s unit and whether or not they have parking and lockers.
Curb appeal is the first impression your house has from outside. Good landscaping, a decluttered lawn, and a clean exterior will help with good curb appeal.
Failure to make your mortgage payments within the given time frame established by your mortgage lender means you’ve defaulted on your mortgage.
The deposit is the money given with your offer if you were in competition for a property. A typical deposit is 5% of the overall purchase price and goes towards your down payment.
Development charges are taxes imposed by the city of Toronto and passed on to purchasers of newly built property. These taxes are used to help the development of the city, such as park levies, education levies, water and sewer levies. These taxes are imposed on purchasers on the registration date and can be used as capital losses against their gains when the investor sells the property down the road.
The down payment is the portion of a property’s purchase price that must be paid for in cash and not financed through a mortgage. Anything under a 20% down payment requires mortgage insurance.
Equity is the profits earned on a property that has increased in value due to market conditions or inflation minus any outstanding debts owed on the property.
The fair market value of a property is the determined value of a property and what it would sell for on the market based on market conditions at the time.
With a fixed rate mortgage, your interest rate and monthly payments will remain the same throughout your chosen term.
Flipping is the term used to refer to investors who purchase properties with the intention of renovating it to increase the property’s value in order to earn a profit by reselling the property.
Gentrification is the condition in which an area or neighbourhood becomes more developed and established. Often referred to as the Starbucks Effect in real estate as the addition of a Starbucks is an indicator that an area is gentrifying and properties will appreciate in value.
A home inspection is a thorough inspection on a house that will help identify any hidden issues (structural and mechanical) within a house.
An income property is a property from which you are earning rental income from your tenants.
Interest is the pre-negotiated percentage (or interest rate) of your outstanding mortgage that is paid to your lender on an annual basis.
An investment property is a real estate property that doesn’t serve as your primary residence but rather is used as a means of generating equity and, in most cases, rental income from tenants.
The landlord is the owner of a leased property. Landlords may hire a property manager to oversee the day-to-day operations of the leased property.
When buying a home or condo you are required to pay Land Transfer Tax to the province when your property closes. In Toronto you are required to pay both a provincial and municipal Land Transfer Tax. The rate is determined by the purchase price of the property. First-time homebuyers may. Be eligible for a Land Transfer Tax rebate. Click here to learn more about First Time Buyer Rebates.
A lease is a contract between a property owner (landlord) and tenant that outlines the tenant’s payments, conditions, and time period in which they will occupy the owner’s property.
Leverage is a strategy where you use borrowed money to increase the potential return of an investment. Leveraging the equity you have in your home into additional properties is a great way to get your money to start working for you. Learn more on our leverage strategy here.
A listing agent is the real estate agent representing the seller in a real estate transaction.
A listing is the term used to refer to a property that is listed for sale.
Maintenance fees, or condo fees, are the monthly dues paid by owners to maintain the condo’s common areas, amenities, and sometimes utilities. A portion of maintenance fees will also go towards the building’s reserve fund which acts as an emergency savings account for unexpected repairs and maintenance. Maintenance fees will vary per building and are determined by the size of the owner’s unit and whether or not they have parking and lockers.
A mortgage is a contract between you and a lender that outlines the payments, interest rate, and time period in which you have to pay back the funds lent to you in order to purchase a property.
Mortgage insurance is required on all mortgages where the down payment is less than 20%.
When a pre-construction condo property is nearing completion, occupancy is when residents or tenants can move into the building.
Your offer or “Agreement of Purchase and Sale” is a legally binding document which outlines not only the price you wish to pay but any conditions you want included in the offer (financing, status, etc), any inclusions with the property (fridge, washer/dryer, etc), and your ideal closing date.
Sellers can choose to list their property with an offer date. This is the only day in which interested buyers can make their offer. Knowing that their offer will be presented alongside other interested buyers, offer dates promote competitive offers to sellers.
A payment structure, or deposit structure, refers to the payment schedule affiliated with a pre-construction property.
During a pre-construction property sales launch there are different phases of pricing. When an agent has platinum access they have access to the first phase of pricing and inventory and therefore can offer their clients the lowest prices before the pre-construction property moves into the next phase of pricing.
Before you begin shopping for a home it’s important to get a mortgage pre-approval. Your lender will look at your financial situation (your income, debts or loans you have, and how much you have available for a down payment) to give you a realistic estimate as to what mortgage amount and interest rate you’ll likely qualify for.
An alternative to buying resale is pre-construction. A pre-construction property is one that is purchased three to four years before it is ready for occupancy. The payment structure is different than a resale purchase and is typically broken down into three payments of 5% over the first year, without any additional payments, including your mortgage until the building is ready for occupancy. For a more comprehensive look at Investing in Pre-Construction properties in Toronto, download our Pre-Construction Investment Guide here.
The prime rate is the interest rate that major banks and financial institutions use to set their interest rates for loans, mortgages and lines of credit. The prime rate is set by the Bank of Canada from whom major banks and lenders borrow their money to lend to borrowers. Changes to the prime rate will directly affect variable rate mortgages and some variable loans and lines of credit.
The principal is the non-interest balance of a mortgage.
A principal residence is the property in which an individual lives in for the majority of the year.
A property manager is someone who is hired by a property owner to manage the day to day operations and deal with tenants on the owner’s behalf.
Property taxes are monies owed to the government based on the assessed value of a property multiplied by the city tax rate for that year. You can see Toronto’s current property tax rate here.
A real estate agent is a licensed real estate sales person who works under a real estate broker.
A real estate broker is a real estate sales person with a broker’s license who can work independently, can employe real estate agents and can choose to run their own brokerage.
A REALTOR® is a real estate agent who is a member of the National Association of REALTORS®.
Renovations are physical improvements made to a home that can increase its appraised value.
A resale property is an alternative to a pre-construction property and refers to a property that has been previously owned and is currently for sale.
A return, or return on investment, is the measured success of an investment typically measured as a percentage. A real estate return is determined by the current market value of a property minus the purchase price of the property, divided by the purchase price. [ (Current Market Value – Purchase Price ) ÷ Purchase Price ]
When the real estate market is considered a Sellers Market, it means that there is a lack of inventory for sale. With fewer options to choose from, sellers have the upper hand in pricing and negotiations.
A short-term rental, sometimes referred to as an executive rental, is property that can be leased for a few days, weeks or months and is often furnished.
Staging is the temporary instalment of furniture and decor in a home or condo for sale to give buyers a proper vision of the property as it could be designed. Staging is a common practice is selling homes to elevate the listing for marketing and often adds value to the sellers sale price.
Not all that different from a home inspection, a status certificate will provide an in-depth overview of a condo building’s management policies, financial statements, the general health of the building as well as any particulars for the individual condo unit.
The legal document that states who has ownership of a particular property.
The vacancy rate is the percentage of available rental units of an entire rental inventory.
A valuation is a estimated property value based on comparable homes that have recently sold while also taking into consideration any unique features of a property.
Year-over-year (YOY) is the measured percentage change comparing two values of the same time period in successive years.