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Mortgage Dictionary "F"
Face Rate
The contractual interest rate stated in a mortgage document or other financial instrument. Also known as the nominal rate.
Face Value
The face value of the loan is the amount of money the borrower promises to repay (at the contract rate of interest).
Fair Market Value
Fair market value, also known as market value, is the highest price reasonably expected for an interest in land when sold by a willing seller to a willing buyer after adequate time and exposure to the market.
Fee
The right of ownership of a property. In real estate, this is an inheritable estate in land.
Fee Simple
The highest estate or absolute right in real property. In common practice, fee simple is thought of as absolute ownership.
Fellow of the Real Estate Institute (Appraisal Specialist)
Awarded by the Real Estate Institute, the FRI(A) signifies quality and experience in appraisals and valuation of properties up to triplexes.
Fiduciary
An individual or a trust institution charged with the duty of acting for the benefit of another party as to matters coming within the scope of the relationship between them. The relationship between a trustee and a beneficiary is an example of a fiduciary relationship. The implication in this type of relationship is that the fiduciary must act solely for the other person's benefit, because of the trust placed in him or her.
Final Order of Foreclosure
A judgement which extinguishes the borrower's (defendant=92s) equity of redemption and beneficial title goes over to the lender.
Financial Institutions Commission of British Columbia (FICOM)
An agency of the British Columbia provincial government that administers the Real Estate and Mortgage Brokers Department, the Credit Unions and Trust Companies Department, the Insurance Department and the Pensions Department.
Financial Services Commission of Ontario (FSCO)
FSCO regulates insurance, pensions, credit unions, caisses populaires, cooperatives, mortgage brokers and loan & trust companies in Ontario.
Finder's Fee
A fee or commission paid by a lender to a mortgage professional for referring a mortgage loan.
First Mortgage
A mortgage registered before all others on title.
Fiscal Year
A business operating year. Some companies do not use the calendar year for their bookkeeping but run over a 12 month cycle, beginning and ending at another point in the year.
Five Cs of Credit
The ability and willingness of a borrower to pay is determined by five criteria:
- Capacity - The ability of a borrower to repay a loan.
- Capital - The amount of money the borrower has invested into the property.
- Character - The overall feeling regarding a borrower's credibility to repay a loan; the borrower's length of employment is a key measurement.
- Collateral - Guaranteed support for a loan, generally consisting of funds or real estate, that ensures added security to the lender. Collateral can also take the form of guarantees provided by third parties, i.e. guarantors.
- Credit - The repayment history of the borrower
Fixed Assets
Fixed assets are typically long term in nature. The value of fixed assets to a company lies in their use in producing goods and services, rather than in their sale value. Fixed assets wear out over time or otherwise lose their usefulness.
Fixed Rate Mortgage
In a fixed rate mortgage the interest is determined and is set for the term of the mortgage. Fixed rate mortgages are most desirable when current interest rates are low.
Fixtures
Chattels that have been attached to the land or building so as to lose their character as chattels.
Forbearance
The waiving of a covenant in a mortgage document.
Foreclosure
A legal remedy available to a lender when there is default under any of the covenants in the mortgage. It deprives the borrowers of their equitable right to redeem.
Foreigners
In law, a foreigner refers to an individual who cannot read or speak the language of the contract. Foreigners are bound to agreements if they understand the nature of them. However, if an agreement is fraudulently interpreted by another party, then the contract is void.
Freehold Estate
An estate, or interest, in land or real property of uncertain duration, which is either of inheritance or for the life of the tenant. There are three (3) freehold estates, or interests: fee simple, fee tail and life estate.
Frustration
When unexpected events occur that render the contract impossible to be performed, the frustrated party is allowed to rescind the contract without penalty.
Full Review
The most comprehensive type of appraisal, it includes a review of both the internal and external features of the property as well as an assessment of neighbourhood factors.
Fully Amortized Mortgages
A mortgage that requires the constant regular payments, including both principal and interest components, for the life of the mortgage.
Fully Open Mortgage
An open mortgage that allowsprincipal payments to be made in any amount, at any time, in addition to regular mortgage payment, without penalty.
Functional Obsolescence (in Real Estate)
A loss of value over time due to some characteristic(s) of a building becoming less valuable as styles change. A building with no central air conditioning will suffer from functional obsolescence as air conditioning becomes the norm for new buildings.
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