A
Amortization
The total length of time it takes to pay off your mortgage in full. In Canada, common amortization periods are 25 or 30 years. A longer amortization means lower monthly payments but more interest paid over time. See our Mortgage Calculator to see how amortization affects your payments.
Appraisal
A professional assessment of a property's market value conducted by a licensed appraiser. Lenders require appraisals to ensure the property is worth at least as much as the mortgage amount. Appraisal fees typically range from $300-$500.
Accelerated Bi-Weekly Payments
A payment schedule where you pay half your monthly payment every two weeks. Because there are 26 bi-weekly periods per year, you end up making the equivalent of 13 monthly payments instead of 12, reducing your amortization by years. See our Payment Frequency Guide.
Assumable Mortgage
A mortgage that can be transferred from the seller to the buyer when a property is sold. The buyer takes over the existing mortgage terms, which can be advantageous if the current rate is lower than market rates.
B
Blended Rate
A rate that combines your existing mortgage rate with current market rates when you refinance or renew early. This avoids paying a full penalty while giving you a new rate that's somewhere between your old rate and current rates.
Bridge Financing
A short-term loan that helps homeowners bridge the gap between buying a new home and selling their current one. Typically lasts 90-180 days with interest rates of prime + 2-4%. See our Bridge Financing page.
B-Lender
Also called alternative lenders, B-lenders offer mortgages to borrowers who don't meet traditional bank criteria. They have more flexible qualification requirements but typically charge higher interest rates (0.5-2% more than A-lenders).
Broker
A licensed mortgage professional who works with multiple lenders to find the best mortgage for your situation. Brokers are typically paid by the lender, not the borrower, and can access rates and products not available directly to consumers.
C
CMHC (Canada Mortgage and Housing Corporation)
A federal Crown corporation that provides mortgage default insurance for high-ratio mortgages (less than 20% down payment). CMHC insurance protects the lender if you default, allowing them to offer mortgages with smaller down payments. See our CMHC Calculator.
Closed Mortgage
A mortgage that restricts prepayment options. If you pay off a closed mortgage early (before the term ends), you'll face a prepayment penalty. Closed mortgages typically offer lower interest rates than open mortgages.
Closing Costs
The expenses beyond the purchase price that you pay when buying a home. These include legal fees, land transfer tax, title insurance, home inspection, and adjustments for prepaid taxes or utilities. Typically 1.5-4% of the purchase price. See our Closing Costs Calculator.
Collateral Mortgage
A type of mortgage that registers a charge on your property for more than your actual mortgage amount (often up to 125% of the property value). This allows you to borrow more later without refinancing, but can make switching lenders more complicated.
Conventional Mortgage
A mortgage where the down payment is 20% or more of the property's value. Because of the larger down payment, conventional mortgages don't require mortgage default insurance (CMHC), saving you thousands in premiums.
Convertible Mortgage
A mortgage that allows you to convert from a variable rate to a fixed rate during your term without penalty. This provides flexibility if you want the initial savings of variable but the security of being able to lock in.
D
Down Payment
The initial amount you pay upfront when purchasing a home. In Canada, the minimum is 5% for homes under $500,000, with scaled minimums for higher-priced homes. A larger down payment reduces your mortgage amount and may eliminate the need for default insurance.
Debt Service Ratios
Financial ratios lenders use to determine how much you can afford to borrow. See GDS (Gross Debt Service) and TDS (Total Debt Service) for specific definitions. Use our Affordability Calculator to check your ratios.
Discharge
The legal process of removing a mortgage from the title of your property. This happens when you pay off your mortgage completely or switch to a new lender. Discharge fees typically range from $200-$350.
E
Equity
The difference between your home's market value and what you owe on your mortgage. Equity builds as you pay down your mortgage and as your property appreciates. You can access equity through refinancing or a HELOC.
Escrow
An account held by a neutral third party (usually a lawyer) that holds funds during a real estate transaction until all conditions are met. Common in real estate purchases to protect both buyer and seller.
F
Fixed-Rate Mortgage
A mortgage where the interest rate remains constant for the entire term. This provides payment predictability and protection against rate increases, but you won't benefit if rates drop. See our Fixed vs Variable Guide.
First-Time Home Buyer Incentive (FTHBI)
A federal program where the government provides a shared equity mortgage of 5-10% of the purchase price, reducing your monthly payments. You repay this amount when you sell, plus a share of any appreciation. See our First-Time Buyer Hub.
FHSA (First Home Savings Account)
A registered savings account that combines the benefits of an RRSP and TFSA. Contributions are tax-deductible (like an RRSP), and withdrawals for a first home purchase are tax-free (like a TFSA). Annual contribution limit is $8,000.
G
GDS (Gross Debt Service Ratio)
The percentage of your gross income needed to cover housing costs: mortgage payment (principal + interest), property taxes, heating, and 50% of condo fees. Most lenders require GDS to be 39% or less. Self-employed borrowers with 20%+ down may qualify up to 55%.
Guarantor
A person who agrees to be responsible for your mortgage payments if you default. Having a guarantor can help you qualify for a mortgage if your income or credit doesn't meet requirements on its own.
H
HELOC (Home Equity Line of Credit)
A revolving credit line secured against the equity in your home. You can borrow up to 65% of your home's value (80% combined with your mortgage). Rates are typically prime + 0.5-1%. Interest-only payments are possible. See our Second Mortgage & HELOC page.
High-Ratio Mortgage
A mortgage where the down payment is less than 20% of the property's value (LTV above 80%). High-ratio mortgages require mortgage default insurance from CMHC, Sagen, or Canada Guaranty.
Home Buyers' Plan (HBP)
A federal program allowing first-time buyers to withdraw up to $35,000 ($70,000 for couples) from their RRSPs tax-free to purchase a home. The amount must be repaid to your RRSP over 15 years.
I
IRD (Interest Rate Differential)
A penalty calculation for breaking a fixed-rate mortgage. It's based on the difference between your contract rate and the lender's current rate for your remaining term, multiplied by your balance and remaining months. Can result in penalties of thousands of dollars. Use our Penalty Calculator to estimate.
Insured Mortgage
A mortgage backed by mortgage default insurance, which protects the lender if you default. Required for high-ratio mortgages (less than 20% down) and sometimes chosen for conventional mortgages to access better rates.
L
Land Transfer Tax
A provincial tax paid when purchasing property, based on the property's purchase price. Rates and rebates vary by province. Toronto also charges an additional municipal land transfer tax. First-time buyers may qualify for rebates. See our Land Transfer Tax Calculator.
LTV (Loan-to-Value Ratio)
The ratio of your mortgage amount to the property's value, expressed as a percentage. For example, a $400,000 mortgage on a $500,000 home is 80% LTV. Higher LTV means more risk for lenders and may require mortgage insurance.
Lump Sum Payment
An extra payment made toward your mortgage principal beyond your regular payments. Most mortgages allow annual lump sum payments of 10-20% of the original balance without penalty. This can significantly reduce your amortization.
M
Maturity Date
The date when your mortgage term ends. At maturity, you must either renew with your current lender, switch to a new lender, or pay off the remaining balance. You'll receive a renewal offer 21+ days before maturity.
Monoline Lender
A financial institution that only offers mortgages (unlike banks that offer multiple products). Monolines often have competitive rates and lower penalties because they specialize in mortgages and have lower overhead costs.
Mortgage Default Insurance
Insurance that protects the lender (not you) if you default on your mortgage. Required for high-ratio mortgages in Canada. Providers include CMHC, Sagen (formerly Genworth), and Canada Guaranty. Premiums range from 0.6% to 4% of the mortgage amount.
O
Open Mortgage
A mortgage that can be paid off in full at any time without penalty. Open mortgages typically have higher interest rates (1-2% more) but offer maximum flexibility. Ideal if you expect to pay off your mortgage quickly or sell soon.
Owner-Occupied
A property where the owner lives as their primary residence. Owner-occupied properties typically qualify for the best mortgage rates and terms. Lenders have stricter requirements for investment properties.
P
Porting
Transferring your existing mortgage to a new property when you move. Porting allows you to keep your current rate and terms, avoiding prepayment penalties. Most lenders allow porting within 30-120 days of selling your current home.
Pre-Approval
A conditional commitment from a lender for a specific mortgage amount based on your financial information. Pre-approval typically includes a rate hold for 90-120 days, protecting you from rate increases while you shop. Different from pre-qualification, which is less formal.
Prepayment Penalty
A fee charged when you pay off your mortgage early or exceed your prepayment privileges. For fixed-rate mortgages, this is typically the greater of 3 months' interest or the IRD. Variable-rate mortgages usually only charge 3 months' interest.
Prepayment Privileges
The amount you're allowed to prepay on your mortgage each year without penalty. Typically 10-20% of the original mortgage amount as a lump sum, and/or the ability to increase regular payments by 10-20%.
Prime Rate
The interest rate that banks charge their most creditworthy customers. Variable-rate mortgages are typically priced as prime minus or plus a percentage (e.g., prime - 0.5%). Prime rate is influenced by the Bank of Canada's overnight rate.
Principal
The amount of money you borrowed for your mortgage, excluding interest. Each mortgage payment includes a portion that goes toward principal (building equity) and a portion for interest (the cost of borrowing).
Private Lender
Non-institutional lenders (individuals or companies) that provide mortgages outside traditional banking channels. Private lenders charge higher rates (7-15%+) but offer more flexible qualification for borrowers who don't meet bank criteria.
R
Rate Hold
A guarantee from a lender that they will honor a specific interest rate for a set period (typically 90-120 days). This protects you from rate increases while you're shopping for a home or finalizing your purchase.
Refinance
Replacing your existing mortgage with a new one, typically to access equity, consolidate debt, or secure a better rate. Refinancing may involve prepayment penalties. See our Refinance Calculator.
Renewal
The process of extending your mortgage for another term when your current term ends. At renewal, you can negotiate a new rate, change your term length, or switch lenders without penalty. See our Renewal Guide.
Reverse Mortgage
A loan for homeowners 55+ that allows you to access up to 55% of your home's equity without monthly payments. The loan is repaid when you sell, move, or pass away. See our Reverse Mortgage page.
S
Second Mortgage
An additional mortgage taken out on a property that already has a first mortgage. Second mortgages are subordinate to the first mortgage (paid second in case of default) and typically carry higher interest rates. See our Second Mortgage page.
Stress Test
A federal requirement that borrowers must qualify at the higher of their actual mortgage rate plus 2%, or the Bank of Canada's 5-year benchmark rate (currently around 5.25%). This ensures you can handle rate increases. The stress test applies to all federally regulated lenders.
Switch
Moving your mortgage from one lender to another at renewal. A straightforward switch (same balance, no changes) typically has minimal or no cost, as the new lender often covers legal fees. Also called a "transfer."
T
TDS (Total Debt Service Ratio)
The percentage of your gross income needed to cover all debt payments: housing costs (GDS) plus credit cards, car loans, lines of credit, and other debts. Most lenders require TDS to be 44% or less. Self-employed with 20%+ down may qualify up to 55%.
Term
The length of time your mortgage agreement (rate, terms, conditions) is in effect. Common terms in Canada are 1-5 years, with 5 years being most popular. At the end of each term, you renew or pay off the mortgage. Not to be confused with amortization.
Title Insurance
Insurance that protects you and your lender against problems with the property's title, such as fraud, liens, or survey errors. It's a one-time premium paid at closing, typically $200-$400. Most lenders require it.
V
Variable-Rate Mortgage
A mortgage where the interest rate fluctuates based on the prime rate. When prime goes up, so does your rate (and often your payment). Variable rates are typically lower than fixed rates initially but carry more risk. See our Fixed vs Variable Guide.
Vendor Take-Back (VTB) Mortgage
A mortgage where the property seller provides financing to the buyer, essentially "lending" part of the purchase price. VTBs can be used as a down payment or second mortgage. Common in commercial real estate and private sales.
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No terms starting with Z in our glossary yet.
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