During a property purchase, certain terms come up with your lender, during visits, in the promise to purchase and at the notary’s office. This glossary follows the order in which you are likely to encounter them, with examples and distinctions that matter to your decisions. It supports house and condo buyers in Montreal, Brossard and across the South Shore. These are general explanations; ask the relevant professional how a particular clause applies to your situation.
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Key takeaways
- Pre-approval helps define your search; it does not guarantee final financing for a property.
- Purchase conditions have criteria, deadlines and notice requirements that must be followed.
- In a condo, distinguish operating expenses, the reserve fund and the self-insurance fund.
Three amounts to distinguish in your budget
Illustrative example: with a $600,000 price and a $120,000 down payment, the loan before any financed fees is $480,000. The down payment is not the total cost of buying: transaction costs and a reserve must also be budgeted.
- Purchase price : the amount agreed for the property.
- Loan principal : the financed amount, which may include an applicable mortgage default insurance premium.
- Mortgage payment : the periodic loan payment; the housing budget must also account for other expenses.
1. Prepare your budget and financing
Mortgage pre-approval: an initial lender review to estimate your borrowing capacity. The chosen property and the lender’s remaining conditions still need approval. A pre-approved $500,000 budget does not mean you must spend that amount.
Down payment: the portion of the price paid from your own resources rather than the mortgage loan. The minimum depends on price, property type and lender and insurer rules. Closing costs are additional.
Mortgage default insurance: protection for the lender if the borrower defaults. It is generally required with a down payment below 20%, subject to eligibility. It does not replace home, life or disability insurance.
FHSA: the first home savings account, called CELIAPP in French. Eligible contributions may be deducted from income and qualifying withdrawals are tax-free. Account-opening, contribution and withdrawal conditions apply; not every withdrawal is tax-free.
HBP: the Home Buyers’ Plan, called RAP in French, allows eligible RRSP withdrawals to buy or build a home. Unlike a qualifying FHSA withdrawal, repayments are required. Check your CRA schedule because the repayment start date depends on the rules for your withdrawal.
GDS and TDS ratios: gross debt service compares qualifying housing costs with gross income; total debt service adds other credit obligations. These ratios help determine loan eligibility but do not capture all your personal expenses.
2. Understand your mortgage contract
Amortization: the planned period to repay the loan in full under the agreed terms. A longer amortization may reduce payments but generally increases total interest if other factors remain unchanged.
Term: the period your mortgage contract remains in effect before maturity. For example, a loan amortized over 25 years may have a five-year term. A balance normally remains to be renewed or repaid at that point.
Fixed and variable rates: a fixed rate stays unchanged during the term. A variable rate follows the contractual reference rate, often the lender’s prime rate. Depending on the product, payments may change or remain fixed with a different principal-interest split.
Mortgage prepayment penalty: a possible charge for exceeding prepayment privileges or ending the contract early. The calculation depends on the product and contract; it is not always just three months’ interest. Request a written estimate before selling or refinancing.
Equity: estimated property value minus debts secured against it. A simplified example: $600,000 in value minus $400,000 in debt gives $200,000 in equity before potential selling costs. That entire amount is not necessarily available to borrow.
Refinancing: a change to financing that may allow additional borrowing against the property, subject to approval. Include fees, potential penalties and new payments in the calculation. Increased value guarantees neither approval nor profitability.
3. Assess the property and prepare an offer
Comparative market analysis (CMA): a comparison with relevant properties, including recent sales, to estimate a value range. Size, condition, location and sale dates matter. A city-wide average alone is not enough.
Market value: an estimate of what a property could sell for under market conditions at a given date. It differs from the asking price and municipal tax assessment. None of these figures promises a resale gain.
Promise to purchase or offer to purchase: the buyer’s proposal to acquire a property at a stated price and on specified terms. Once accepted, it binds the parties according to its clauses; it is not simply a reservation.
Counter-proposal: a response proposing changes to an offer, such as price, inclusions or occupancy date. Check the acceptance deadline and the effect of the changes before signing.
Deposit: money paid under the promise to purchase and credited toward the price at closing. It may form part of the down payment, but the terms are not interchangeable. Release or refund depends on the contract and circumstances.
Financing and inspection conditions: clauses governing checks before proceeding with the purchase. Criteria, deadlines and required notices must be followed. An inspection report does not automatically give a right to cancel or demand a price reduction.
Inclusions and exclusions: items included in or expressly excluded from the sale, such as appliances or equipment. Identify them clearly and check whether the seller owns or rents them.
4. Read legal documents and prepare for closing
Deed of sale: the contract formalizing the sale before the notary. It specifies the rights transferred and applicable terms. The notary performs checks and registration formalities at the Land Register.
Occupancy or possession date: the agreed time to take physical possession and receive the keys. It may differ from signing. If the seller remains after the sale, clarify costs, responsibilities and insurance in writing.
Certificate of location: a land surveyor’s report and plan giving an opinion on the property’s current situation and condition relative to titles, the cadastre and applicable rules. It does not replace staking for the placement of a fence.
Servitude: a right or burden affecting one property for the benefit of another, such as a right of way. Its location and scope may restrict improvements. Read the deed rather than relying only on a plan notation.
Land Register: the public register where sales, hypothecs and servitudes are published. Consulting it helps verify rights affecting a property; it is not an inspection of the building’s physical condition.
Legal hypothec: security arising from law rather than a voluntary mortgage contract, including certain construction or tax claims. The notary must examine its consequences and required steps; discharge is not automatic.
Right of pre-emption: a priority right to acquire a property in specified circumstances, for example when exercised by a municipality. Its operation depends on the applicable law or agreement; check notice and timing requirements.
Transfer duties, often called the welcome tax: municipal duties associated with a transfer. The base is the highest of the consideration paid, stipulated consideration and statutory market value derived from the assessment roll and comparative factor. It is therefore not always the price paid.
Closing adjustments: allocation of certain amounts between seller and buyer according to the agreed date and terms, such as prepaid taxes. Include them in the money needed at closing.
5. Understand condo ownership and finances
Divided co-ownership: ownership of a private portion and a share of common portions. The declaration of co-ownership defines rights, uses and allocation of expenses. A balcony or parking space is not necessarily a private portion.
Undivided co-ownership: several people hold shares in the same property without division into divided co-ownership fractions. An agreement may govern occupancy and management. Financing is specialized; do not assume one down-payment rule fits every situation.
Syndicate of co-owners: the legal person comprising the owners of a divided co-ownership, responsible notably for preserving and administering the property. Its budget and decisions directly affect an owner’s expenses.
Reserve fund: money set aside for major repairs and replacement of common portions. Compare its balance with upcoming work, costs and planned contributions; the balance alone does not establish financial health.
Reserve fund study: an analysis of future major repair and replacement needs and the amounts to accumulate. It helps plan contributions; it does not replace a pre-purchase inspection.
Self-insurance fund: a separate reserve intended notably for the syndicate’s insurance deductibles and certain damages. It differs from the reserve fund, which addresses major work on common portions.
Special assessment: an additional contribution requested from co-owners for a specific need. It may fund planned work or a cash shortfall, not only an emergency. Before buying, check approved amounts, due dates and discussions of future projects.
Financial statements and minutes: the former describe the syndicate’s finances; the latter record meeting and board decisions. Read them together to compare discussed projects with available funds.
Maintenance log: a record of building components and maintenance work, including tracking and planning. It helps assess long-term management rather than relying on the appearance of the building during a visit.
6. Interpret inspection terminology
Seller’s declarations: a form recording information known to the seller about the property’s history and condition. It helps guide checks but does not replace inspection or recommended specialist assessments.
Apparent defect: a defect a prudent and diligent buyer can identify without an expert. A visible clue may warrant further investigation; do not ignore it simply because its cause is unknown.
Latent defect: a serious, non-apparent defect unknown to the buyer and existing at the time of sale that would have affected the purchase or price if known. The seller may or may not have known about it. Applicable warranties and remedies require legal assessment.
Specialist assessment: a closer examination of a component by a qualified specialist, such as an engineer for a structural concern. It helps establish causes, extent or potential remedies when a visual inspection is insufficient.
DIY work: work carried out by an individual or described as homemade. The label alone does not establish non-compliance. Check quality, permits and applicable requirements instead of inferring a defect from the description.
Efflorescence: whitish salt deposits left when water moves through material such as concrete and evaporates. It indicates moisture movement but does not by itself diagnose active leakage or structural failure.
Pyrite: a mineral that may occur in fill beneath a slab. Under certain conditions, reactions can cause swelling and damage. A crack alone does not confirm pyrite; specialist analysis may be needed.
7. Recognize building components
Septic tank: a tank within an independent wastewater treatment installation. It is not the whole system; the treatment and disposal components also matter. Review documentation, capacity and maintenance.
Drilled well: often called a puits artésien in Quebec, it draws groundwater. Depth does not guarantee safe drinking water. Water testing and yield checks answer different questions: quality and available quantity.
Sump pump: a pump removing water collected in a basin. Check operation, power supply and discharge arrangements. It helps manage water but does not guarantee protection from every flood.
Joist: a horizontal structural member supporting a floor or other assembly. Cuts, deformation or deterioration may require assessment; a broker’s visit does not replace that expertise.
Sealant or caulking: material sealing certain joints, notably around openings. Its condition is a maintenance consideration. Examine a damaged joint together with the surrounding assembly to assess water or air entry risks.
8. Use this glossary during your purchase
Before signing, identify terms or clauses you cannot explain in your own words. Then ask what they mean in practice: what amount should you budget, what check remains and when must you act?
I help connect this information to your search and promise to purchase and involve the right specialist when needed. The lender confirms financing, the inspector or specialist assesses the building and the notary addresses the sale’s legal issues.