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Housing and mortgage glossary

These are the terms used elsewhere on the site, defined in ordinary language rather than in the wording of any particular contract. Legal meanings and thresholds differ by jurisdiction; where a definition matters to a decision, the governing document is the one that counts.

How the terms fit together

Most of the vocabulary belongs to one of three families. The first describes the market: stock, flow, turnover, comparables, months of supply, time on market. The second describes the transaction: offer, condition, appraisal, title, lien, easement, closing costs. The third describes the money: principal, interest, amortisation, term, loan-to-value, escrow, points.

Confusion usually comes from words that belong to two families at once. An appraisal is a market exercise used as a lending control; escrow means one thing during a sale and another every month afterwards; equity is both an accounting quantity and, in conversation, a synonym for the deposit.

The list

Definitions are alphabetical. Each one is written to stand alone, so a reader arriving from one of the explainers does not need to read the rest.

Amortisation

The scheduled repayment of a debt through level payments that cover interest first and reduce the balance by the remainder, reaching zero at the end of the term.

Appraisal or valuation

A professional opinion of a property's value, usually obtained by a lender to check that the security is adequate for the sum being lent.

Chain

A sequence of transactions where each depends on another completing, typically because sellers are also buying.

Closing costs

The charges payable when a sale completes, including lender fees, legal work, recording charges, insurance paid in advance and sums placed into escrow.

Comparable

A recently sold property similar enough to the subject property to be used, with adjustments, as evidence of value.

Contingency or condition

A term in a sale agreement allowing a party to withdraw if a stated event does not occur, such as satisfactory finance, inspection or title.

Covenant

A restriction recorded against a parcel limiting what may be built on it or done with it, binding on later owners.

Easement

A right for someone else to use part of a parcel for a defined purpose, such as access, drainage or utilities.

Equity

The difference between what a property is worth and what is owed against it.

Escrow

Money held by a third party on behalf of others, either pending completion of a sale or, monthly, to meet taxes and insurance as they fall due.

Fixed and adjustable rate

A fixed rate is held for a stated period; an adjustable rate moves with a reference rate after an initial period, usually within stated caps.

Lien

A recorded claim against a property securing a debt, which normally must be cleared before clear title can pass.

Loan-to-value

The loan expressed as a percentage of the property's value; it commonly determines both the rate offered and whether mortgage insurance is required.

Months of supply

Listings divided by the current rate of sales, used as a rough measure of whether a local market favours buyers or sellers.

Mortgage insurance

Insurance protecting the lender against loss on a high loan-to-value loan, paid for by the borrower.

Plat

The recorded map dividing land into parcels, showing boundaries, streets and easements.

Points

A fee paid at closing to reduce the interest rate, each point being one percent of the loan amount.

Principal

The amount borrowed, and thereafter the balance still owed, on which interest is charged.

Refinancing

Replacing an existing loan with a new one, usually to change the rate, the term, or to draw on equity.

Setback

The minimum distance a building must stand from a property line, fixed by regulation.

Stock and flow

The stock is all the dwellings in a place; the flow is the small share of them offered for sale at any moment. Prices are set by the flow.

Term

The period over which a loan is scheduled to be repaid.

Time on market

How long a property has been listed; it behaves as a signal in itself, because later viewers read elapsed time as evidence.

Title

The legal ownership of a property, together with everything recorded as affecting it.

Turnover

The proportion of the housing stock that changes hands in a year.

Underwriting

The lender's verification of a borrower's circumstances and of the property offered as security.

Zoning

Public regulation of what may be built on a parcel and what it may be used for.