Glossary
Canadian mortgage glossary
103 mortgage, lending, and home-buying terms defined in plain English, with the official source for each rule. Use it to decode your mortgage documents, your lender’s offer, and our own calculators.
A
10 terms
- Accelerated Payments — Accelerated payments are a mortgage schedule that raises the annual total above the standard monthly equivalent, so the loan is repaid faster.
- Adjustable-Rate Variable Mortgage — An adjustable-rate variable mortgage ties the interest rate to a lender's prime rate, so the periodic payment rises or falls as prime moves.
- Adjustment — A pro-rated credit or debit between buyer and seller at closing for prepaid or outstanding items such as property tax.
- Agreement of Purchase and Sale — The written contract between buyer and seller that sets the price, deposit, closing dates, and conditions of a real estate transaction.
- Amortization Period — The amortization period is the total length of time scheduled to pay off a mortgage in full, assuming every payment is made as agreed.
- Amortization Schedule — An amortization schedule is a table showing how each mortgage payment splits between interest and principal over the life of the loan.
- Annual Percentage Rate (APR) — The Annual Percentage Rate (APR) expresses the yearly cost of borrowing including certain fees, not just the interest rate, for easier comparison.
- Appraisal Fee — An appraisal fee is the cost of a professional, independent valuation of the property a lender is financing, ordered to confirm the home's market value.
- Arrears — Arrears means mortgage payments that are past due — amounts the borrower should have paid by the scheduled due date but has not yet paid.
- Assumable Mortgage — An assumable mortgage is an existing mortgage that a buyer takes over from the seller, keeping the remaining balance, rate and term, subject to the lender's approval.
B
2 terms
- Blend and Extend — Combining your existing mortgage rate with a current market rate to extend your term early, usually before maturity and often with a penalty.
- Bridge Financing — Short-term financing that covers the gap when you buy a new home before your current one sells, repaid from the sale proceeds.
C
11 terms
- Canada Guaranty — Canada Guaranty is a private company approved to provide mortgage default insurance in Canada, backing high-ratio mortgages alongside CMHC and Sagen.
- Canada Mortgage and Housing Corporation (CMHC) — CMHC is the federal Crown corporation that insures Canadian mortgages against borrower default and publishes national housing data and research.
- Closed Mortgage — A closed mortgage limits how much you can prepay and charges a penalty if you break the contract before the term ends.
- Closing Costs — Closing costs are the one-time fees, taxes, and charges paid on top of a home's purchase price, separate from the down payment.
- Co-Signer — A co-signer is a person who takes equal legal responsibility for a mortgage and is listed on title alongside the other owners.
- Collateral Mortgage — A mortgage registered as a collateral charge that can secure other borrowing and may make switching lenders more complicated.
- Completion Date — The date on which a real estate sale legally closes, the mortgage funds are advanced, and ownership of the property transfers to the buyer.
- Conditional Offer — A conditional offer is an offer to buy a home that only becomes binding once stated conditions, such as financing or inspection, are met or waived.
- Conventional Mortgage — A conventional mortgage is a home loan at 80% or less of the property's value, so mortgage default insurance is not required.
- Convertible Mortgage — A convertible mortgage lets you switch from a variable rate to a fixed rate partway through the term, usually without paying a prepayment penalty.
- Credit Score — A credit score is a number, typically from 300 to 900 in Canada, that summarizes your credit history for lenders considering your application.
D
9 terms
- Debt Consolidation — Debt consolidation means combining several debts, such as credit cards and loans, into one loan or payment, often to lower the total interest cost.
- Debt Service Coverage — Debt service coverage is a lender's measure of whether a property's income is enough to cover its mortgage payments, used mainly in rental and commercial lending.
- Debt Service Ratio — A measure comparing your housing and other debt payments with your income, used by Canadian lenders when deciding whether you qualify for a mortgage.
- Debt-to-Income Ratio — Your total debt compared with your total income — a broader measure than the debt service ratios Canadian lenders use at approval.
- Default — Default means failing to meet your mortgage terms, most commonly by missing a scheduled payment, which can trigger lender enforcement.
- Demand Facility — A demand facility is a loan the lender can require you to repay in full at any time; most Canadian HELOCs are structured this way.
- Discharge Fee — A discharge fee is a lender charge for removing a paid-off mortgage from the property's title and confirming the loan is cleared.
- Discounted Rate — The discounted rate is the actual mortgage interest rate a lender offers a borrower after negotiation or promotion, sitting below that lender's published posted rate.
- Down Payment — A down payment is the portion of a home's purchase price a buyer pays upfront, reducing the amount borrowed through a mortgage.
E
2 terms
F
5 terms
- Firm Offer — An offer to buy a home with no conditions attached, which the buyer cannot withdraw once the seller accepts it.
- First Home Savings Account (FHSA) — A First Home Savings Account (FHSA) is a registered federal account that lets a first-time buyer save for a home with deductible contributions and tax-free qualifying withdrawals.
- First-Time Home Buyer Incentive — A federal shared-equity program that reduced the mortgage a first-time buyer needed by contributing part of the down payment in exchange for an equity share in the home.
- Fixed-Rate Mortgage — A fixed-rate mortgage keeps the same interest rate and the same scheduled payment for the entire mortgage term, so each payment is known in advance.
- Foreclosure — Foreclosure is the court-supervised process a lender uses to take possession of a home when a mortgage is not repaid.
G
3 terms
- Gross Debt Service Ratio (GDS) — The share of gross household income that goes to housing costs — mortgage principal and interest, property taxes, heating, and half of condo fees — commonly capped at 39%.
- GST/HST New Housing Rebate — A federal rebate that returns part of the GST or HST paid on certain new or substantially renovated homes used as a primary residence.
- Guarantor — A guarantor promises to cover your mortgage payments if you default, but is not listed on the property's title.
H
6 terms
- High-Ratio Mortgage — A high-ratio mortgage exceeds 80% of a property's value or purchase price, meaning the down payment is under 20%, and it must be insured against default.
- Home Buyers' Plan (HBP) — A federal program that lets a first-time home buyer withdraw money from an RRSP to put toward a down payment on a qualifying home in Canada.
- Home Equity — Home equity is the portion of your home you actually own: the property's current market value minus everything still owed against it.
- Home Equity Line of Credit (HELOC) — A revolving credit line secured by your home, usually capped at 65% loan-to-value and typically priced off the lender's prime rate.
- Home Equity Loan — A lump-sum loan secured by the equity in your home, repaid on a fixed schedule with set payments.
- Hybrid Mortgage — Also called a blended or part-and-part mortgage, a hybrid mortgage splits your mortgage balance between a fixed rate and a variable rate.
I
2 terms
- Income Verification — The process a lender uses to confirm the income stated on a mortgage application, using documents such as pay stubs, tax slips, and CRA notices.
- Interest Rate Differential (IRD) — A penalty formula some Canadian lenders use when a fixed-rate mortgage is paid off early, based on the interest the lender loses.
L
3 terms
- Land Transfer Tax — A provincial tax on transferring property title, paid by the buyer at closing and calculated as a percentage of the purchase price.
- Loan-to-Value Ratio (LTV) — The loan-to-value ratio (LTV) is the size of your mortgage expressed as a percentage of the property's appraised value or purchase price.
- Lump-Sum Payment — A lump-sum payment is a one-time extra payment applied directly to your mortgage principal, on top of your regular scheduled payment.
M
13 terms
- Mortgage Commitment — A mortgage commitment is a lender's formal written offer to advance funds on specified terms once the borrower satisfies the stated conditions.
- Mortgage Default Insurance — Insurance that protects the lender, not the borrower, when a high-ratio mortgage goes into default and the home sale does not repay the debt.
- Mortgage Interest — Mortgage interest is the cost a lender charges for borrowing mortgage money, expressed as an annual percentage rate applied to your outstanding balance.
- Mortgage Portability — Mortgage portability lets you move your existing mortgage to a new property without breaking the contract or paying a prepayment penalty.
- Mortgage Pre-Approval — A mortgage pre-approval is a lender's conditional commitment to lend a set amount at a held rate, subject to verifying your income, debts and the property.
- Mortgage Pre-Qualification — An early, non-binding estimate of how much a lender or broker thinks you might borrow, typically prepared without a credit check or verified documents.
- Mortgage Principal — The mortgage principal is the amount of money actually borrowed, separate from the interest charged on that balance over time.
- Mortgage Refinance — Replacing an existing mortgage with a new one, often to change the rate, term, or amortization, or to access home equity.
- Mortgage Renewal — The point at which a mortgage term ends and the borrower negotiates a new term, rate, and conditions with a lender.
- Mortgage Stress Test — The federal mortgage stress test is a qualification rule that makes lenders check whether you could afford your mortgage if rates were higher than your contract rate.
- Mortgage Switch — A mortgage switch moves your existing mortgage to a new lender at renewal while keeping the same balance, amortization, and payment structure.
- Mortgage Term — A mortgage term is the length of your current contract with a lender, during which your rate and conditions stay in force — always shorter than the amortization period.
- Mortgage Underwriting — The lender's review of your income, credit, down payment, and the property's value before it approves or declines your mortgage.
N
2 terms
- Negative Amortization — Negative amortization happens when a mortgage payment does not cover the interest owed, so unpaid interest is added to the balance and the debt grows.
- Net Worth — Net worth is the total value of what you own minus what you owe — a snapshot sometimes reviewed during a Canadian mortgage application.
O
3 terms
- Open Mortgage — An open mortgage lets you prepay or pay off the balance at any time without a penalty, usually at a higher interest rate than a closed mortgage.
- Open Term — An open term is a short window, usually near the end of a mortgage term, during which a borrower can prepay or pay off the balance without a prepayment penalty.
- Origination Fee — A lender's charge for arranging a mortgage, often calculated as a percentage of the loan amount and separate from third-party closing costs.
P
12 terms
- Payment Frequency — Payment frequency is how often you make mortgage payments — commonly monthly, semi-monthly, bi-weekly, or weekly — and it affects payment size and how fast the balance falls.
- Payment Shock — Payment shock is a sharp rise in a mortgage payment, usually at renewal or when a variable rate tracks a higher prime rate.
- Policy Interest Rate — The Bank of Canada's target for the overnight rate, which anchors short-term borrowing costs and influences Canadian mortgage pricing.
- Possession Date — The date set in a purchase agreement when the buyer receives the keys and may take physical occupancy of the home.
- Posted Rate — A posted rate is the headline mortgage rate a lender publishes publicly, and it is usually higher than the discounted rate most borrowers actually receive.
- Power of Sale — A lender's contractual right to sell a defaulted property to recover an unpaid mortgage, used in some provinces instead of court-ordered foreclosure.
- Prepayment Penalty — A prepayment penalty is the charge a lender applies when you break a mortgage early or prepay more than your contract's prepayment privileges allow.
- Prepayment Privilege — A prepayment privilege is the contract right to pay extra on your mortgage, up to a set cap, without triggering a penalty.
- Prime Rate — The prime rate is the interest rate Canadian banks charge their most creditworthy borrowers, and it is the benchmark used to price variable-rate mortgages and lines of credit.
- Property Tax — A property tax is a municipal levy on property ownership, based on assessed value and the local rate, often collected with your mortgage payment.
- Property Transfer Tax — Property Transfer Tax is British Columbia's name for its land transfer tax, charged to buyers when property title changes hands.
- Purchase Plus Improvements — A purchase plus improvements mortgage finances both the home purchase and planned renovations in a single mortgage, with the renovation funds held back until the work is done.
R
6 terms
- Rate Buydown — A rate buydown is an upfront payment to a lender that lowers a mortgage's interest rate, either permanently for the term or temporarily for an initial period.
- Rate Hold — A rate hold is a lender's commitment to reserve a quoted mortgage rate for a set period, often until a purchase closes.
- Rate Lock — A rate lock fixes your mortgage interest rate for a set period, protecting you if rates rise before your mortgage funds.
- Readvanceable Mortgage — A mortgage paired with a line of credit whose limit increases as you repay mortgage principal, keeping total available borrowing roughly steady.
- Rental Offset — Rental offset is the rental income from a suite or second unit that a lender counts toward a borrower's income when qualifying for a mortgage.
- Reverse Mortgage — A loan for homeowners typically 55 and older that converts home equity into cash without requiring regular monthly payments.
S
8 terms
- Sagen — Sagen is a private Canadian mortgage default insurance provider, formerly known as Genworth Canada, that insures high-ratio mortgages alongside CMHC and Canada Guaranty.
- Second Mortgage — A second mortgage is an additional loan registered behind an existing first mortgage, usually at a higher interest rate because it ranks second on title.
- Secured Line of Credit — A line of credit backed by an asset, such as a home, that typically charges a lower interest rate than an unsecured line of credit.
- Semi-Annual Compounding — Semi-annual compounding is the Canadian convention in which a mortgage rate quoted as an annual percentage is compounded twice a year rather than monthly or daily.
- Statement of Adjustments — A Statement of Adjustments is the closing document that lists the amounts each party to a property transaction owes or is owed, fixing the final cash balance.
- Static-Rate Variable Mortgage — A variable-rate mortgage whose payment stays fixed while the interest and principal split shifts as the lender's prime rate moves.
- Status Certificate Fee — A status certificate fee is the charge a condominium corporation levies for a document confirming its financial and legal standing.
- Strata Fee — A strata fee is a monthly payment owners make to a strata or condominium corporation to cover shared building costs and common expenses.
T
4 terms
- Three Months' Interest — Three months' interest is the prepayment charge most Canadian lenders apply when a borrower breaks a variable-rate mortgage before the term ends.
- Title Insurance — Title insurance protects a homeowner or lender against losses from defects in a property's legal title that a records search may not reveal.
- Total Debt Service — Total Debt Service is the share of gross monthly income that goes to housing costs plus all other debt payments.
- Total Debt Service Ratio (TDS) — The Total Debt Service Ratio (TDS) is the share of gross income that goes toward all debt payments, capped at 44% by most Canadian lenders.
V
1 term
W
1 term