Mortgage glossary

Every term the industry throws at you, defined in plain language. Terms with a "Full guide" link go deeper on our Learn pages.

A

A lender: A mainstream prime lender: the banks, credit unions, and monolines that offer their best rates to borrowers with solid credit, documented income, and ratios inside the guidelines. Most Canadian mortgages are A deals; B lenders and private lenders pick up the files that fall outside them. Full guide
Amortization: The total number of years it would take to pay off your mortgage completely at the current payment. Most Canadian mortgages amortize over 25 years; up to 30 is possible on some loans. A longer amortization lowers the payment but costs more interest overall. Full guide
Appraisal: A professional estimate of what a property is worth, ordered by the lender before it approves your mortgage. The lender lends against the appraised value or the purchase price, whichever is lower. Typical cost is a few hundred dollars.
Assumability: A feature that lets a buyer take over the seller's existing mortgage, keeping its rate and remaining term. Valuable when rates have risen since the seller locked in. The buyer must still qualify with the lender. Full guide

B

B lender: A lender that approves borrowers the big banks decline: bruised credit, self-employed income that is hard to document, or high debt ratios. Rates are higher and a lender or broker fee often applies. Many borrowers use a B lender for a year or two, then move back to a mainstream (A) lender. Full guide
Basis point: One hundredth of a percentage point. A rate that drops from 5.00% to 4.75% fell 25 basis points. Rate advertising lives on basis points; your total cost of borrowing depends on much more.
Blend and extend: Renegotiating mid-term with your current lender: your old rate and a current rate get blended into one, and the term restarts. It avoids a prepayment penalty up front, but the penalty is usually built into the blended rate. Compare it against paying the penalty and switching.
Bona fide sale clause: A restriction some low-rate and alternative mortgages carry: you cannot break the mortgage early unless you genuinely sell the home. It removes your ability to refinance or switch lenders mid-term, so treat it as a real cost of the lower rate.
Bridge financing: A short-term loan that covers the gap when you buy your new home before the sale of your old one closes. Interest rates are higher than mortgage rates but you only pay for days or weeks.

C

Cash-back mortgage: A mortgage that pays you a lump sum at closing in exchange for a higher rate. If you break it early, lenders typically claw back some or all of the cash. Useful for closing costs; expensive as free money goes.
Charge (standard vs collateral): How your mortgage is registered on title. A standard charge registers the actual mortgage amount and transfers easily to another lender at renewal. A collateral charge often registers more than you borrowed, makes future borrowing easier with the same lender, but usually requires paying legal fees to switch lenders. Full guide
Closed mortgage: A mortgage you cannot fully pay off before the term ends without a prepayment penalty. Almost all Canadian mortgages are closed because closed rates are much lower than open rates. Full guide
Closing costs: The cash you need on closing day beyond the down payment: land transfer tax, legal fees, title insurance, adjustments, and moving costs. Budget roughly 1.5% to 4% of the purchase price depending on your province and city.
CMHC (Canada Mortgage and Housing Corporation): The federal crown corporation that insures high-ratio mortgages (less than 20% down). The insurance protects the lender, not you, and its premium is added to your mortgage. Sagen and Canada Guaranty are the two private insurers that do the same job. Full guide
Co-signer: Someone who signs the mortgage with you and is fully responsible for the payments, usually added so the application qualifies on combined income. Their credit is on the line exactly like yours.
Collateral charge: A mortgage registration style that can secure more than the original loan (sometimes up to 125% of the home's value), letting you re-borrow later without new registration. The trade-off: switching lenders at renewal usually means paying legal fees instead of a free transfer. Full guide
Commitment letter: The lender's formal written approval of your mortgage, listing the rate, term, conditions, and deadlines. Read every condition; the deal is not done until each one is satisfied.
Conventional mortgage: A mortgage with a down payment of 20% or more, so no default insurance is required. Also called a low-ratio or uninsured mortgage. Full guide
Convertible mortgage: A short-term or variable mortgage that lets you lock into a longer fixed term later without a penalty. The conversion rate is the lender's rate at that time, not today's.
Credit score: A number (roughly 300 to 900) that summarizes how you have handled credit. Most prime lenders want 680 or higher for the best pricing; alternative lenders work far below that at higher rates. Checking your own score does not lower it. Full guide
Credit union: A member-owned financial cooperative. Provincially regulated, which means some flexibility the federally regulated banks do not have, and often strong renewal pricing. You join as a member (usually a small share purchase) to borrow. Full guide

D

Debt service ratios (GDS and TDS): The two affordability tests lenders run. GDS: housing costs as a share of gross income (guideline max about 39%). TDS: housing plus all other debts (about 44%). Blow past them and the loan shrinks or the answer is no. Full guide
Default: Failing to meet the mortgage contract, most commonly missing payments. Default can lead to power of sale or foreclosure, so talk to the lender early if trouble is coming; they generally prefer a repayment plan over a forced sale.
Default insurance: Insurance that repays the lender if you stop paying. Mandatory with less than 20% down, financed into the mortgage as a premium that scales with your down payment (typically 4% at 5% down, slightly more with a 30-year amortization or a borrowed down payment). It is not life or disability insurance and pays you nothing. Full guide
Deposit: Money you put down with the offer to show you are serious; it forms part of your down payment at closing. Not the same as the down payment itself.
Discharge fee: An administrative fee (often $200 to $400, set provincially in some cases) for removing the lender's charge from title when you pay off, refinance, or switch. Separate from any prepayment penalty.
Down payment: Your own money toward the purchase. Minimums: 5% on the first $500,000, 10% on the portion above that up to $1.5 million; 20% minimum at $1.5 million and above (no default insurance available there). Below 20% you pay for default insurance. Full guide

E

Equity: The part of the home you actually own: current market value minus everything owed against it. Equity grows as you pay down principal and as the value rises; refinances, HELOCs, and reverse mortgages all borrow against it.

F

First-time home buyer programs: A rotating set of government supports: land transfer tax rebates in some provinces and Toronto, the Home Buyers' Plan (RRSP withdrawal), the FHSA (tax-free savings for a first home), and a federal tax credit. Rules and amounts change; check current program pages before counting on a number.
Fixed rate: Your rate and payment stay the same for the whole term. You pay a premium for certainty, and the penalty to break a fixed mortgage early (the IRD) can be large at some lenders. Full guide
Foreclosure / power of sale: The legal processes a lender uses to recover a defaulted mortgage: foreclosure (the lender takes ownership, used in BC, Alberta, and others) or power of sale (the lender sells the home, standard in Ontario). Either is the worst-case ending; act long before it starts.

G

Gross debt service (GDS): Housing costs (mortgage payment, property tax, heat, half of condo fees) divided by gross income. The guideline ceiling is about 39% for prime lending. Full guide
Guarantor: Someone who guarantees your mortgage without going on title. If you stop paying, they must. Lenders use guarantors to strengthen thin applications; the guarantor takes real legal risk.

H

HELOC (home equity line of credit): A revolving credit line secured by your home, usually up to 65% of its value (80% when combined with a mortgage). Interest-only minimum payments at a variable rate, borrow and repay as you like, no fixed term. Discipline required. Full guide
High-ratio mortgage: A mortgage with less than 20% down, which makes default insurance mandatory. Insured mortgages often get the lowest rates on the market because the lender's risk is covered. Full guide
Home inspection: A professional check of the home's condition before you buy: roof, foundation, wiring, plumbing. A few hundred dollars that can save you from five-figure surprises. Not the same as an appraisal.

I

Insurable / insured / uninsured: The three pricing buckets lenders use. Insured: buyer pays the default-insurance premium (under 20% down). Insurable: 20%+ down but the loan still qualifies for back-end insurance the lender buys. Uninsured: does not qualify (rentals, $1.5M+ purchases, refinances, and 30-year amortizations except for first-time buyers and new builds), so rates run higher. Full guide
Interest adjustment date: A small interest charge covering the gap between your closing date and the start of your regular payment cycle. Shows up on your closing statement; not a fee, just prorated interest.
IRD (interest rate differential): The formula behind most fixed-mortgage break penalties: roughly the rate difference times the balance times the time left. The catch is which rates go into it. Posted-rate lenders (the big banks) compute it in a way that can produce penalties four times larger than fair-penalty lenders charge for the same mortgage. Full guide

L

Land transfer tax: A provincial tax due in cash at closing, scaled to the purchase price. Toronto charges its own municipal tax on top. First-time buyers get rebates in Ontario, BC, PEI, and Toronto. Use our calculator for the current brackets.
Lender fee: A fee some alternative and private lenders charge to fund the loan (often 1% to 2%), usually alongside a broker fee. Prime A lenders generally charge none. Always ask for the all-in cost, not just the rate.
Loan-to-value (LTV): The mortgage amount divided by the home's value. An $800,000 home with a $600,000 mortgage is 75% LTV. Lower LTV means more equity, less lender risk, and better options.
Lump-sum prepayment: An extra payment straight onto the principal, allowed up to your annual privilege (commonly 10% to 20% of the original amount) without penalty. Even small lump sums cut years of interest. Full guide

M

Maturity date: The last day of your current term, when the balance is due, renewed, or moved to another lender. Penalty-free switching happens at maturity; start shopping 120 days out. Full guide
MIC (mortgage investment corporation): A pool of investor money that lends on mortgages the mainstream will not touch: very low credit, unusual properties, short timelines. Interest rates and fees are among the highest of any lender type; borrowers typically treat it as a short-term tool with a planned exit. Full guide
Monoline lender: A lender that only does mortgages: no branches, no chequing accounts, usually broker-only. Monolines commonly use fair contract-rate penalties, which is why they often beat the big banks on the total cost of borrowing. Full guide
Mortgage broker: A licensed intermediary who shops your file to many lenders. Free to you on prime deals because the chosen lender pays the commission; that incentive is worth understanding before you rely on any single recommendation. Full guide
Mortgage life insurance: Optional lender-sold insurance that pays the lender your balance if you die. Post-claim underwriting (they verify eligibility after death, not before) makes it weaker than personal term life insurance for most people. Compare before signing at the branch.

O

Open mortgage: A mortgage you can pay off at any time with no penalty, in exchange for a much higher rate. Typically chosen only when a payout is close: a home sale about to close, an inheritance, a settlement. Full guide

P

Payment frequency: How often you pay: monthly, semi-monthly, bi-weekly, weekly, or the accelerated versions. Accelerated bi-weekly sneaks in one extra monthly payment per year and trims roughly three years off a 25-year amortization. Full guide
Porting: Taking your existing mortgage (rate and term) with you to a new home instead of breaking it and paying the penalty. Deadlines are tight (sometimes the same closing day) and the new property must qualify. Full guide
Posted rate: A bank's official sticker rate, well above what borrowers typically pay. Its main real-world use is inside big-bank IRD penalty math, where it inflates the penalty you pay to leave. Full guide
Pre-approval: A lender's conditional read on how much you can borrow, with a rate hold that typically lasts 90 to 130 days. Useful for shopping with confidence; not a guarantee, because the property itself must also pass. Full guide
Prepayment penalty: What it costs to break a closed mortgage early: usually three months' interest for variable, and the greater of three months' interest or the IRD for fixed. The IRD method varies wildly by lender and can mean a five-figure difference on the same mortgage. Full guide
Prepayment privileges: The penalty-free extra amounts your contract allows each year: lump sums (10% to 20% of the original principal is common) and payment increases. Bigger privileges mean more freedom to pay the mortgage down fast. Full guide
Prime rate: The benchmark rate lenders use for variable mortgages and HELOCs, set individually but moving with the Bank of Canada's policy rate. A variable at prime minus 0.9 reprices every time prime moves.
Principal: The amount you actually owe, separate from interest. Early payments are mostly interest; the split shifts toward principal as the amortization runs.
Private lender: An individual or small company lending secured by real estate, priced by the asset more than your credit. The most expensive and most flexible money in the market; most borrowers use it short-term, with an exit plan and independent legal advice. Full guide

R

Rate hold: A lender's promise to honour a quoted rate for a set window, usually 90 to 130 days with a pre-approval. If rates rise before closing you keep the lower one; if they fall, most lenders let you request the lower market rate. Full guide
Readvanceable mortgage: A mortgage packaged with a HELOC whose limit grows as you pay the mortgage down (examples: big-bank homeowner lines of credit). Powerful for re-borrowing equity; registered as a collateral charge, with the switching friction that brings. Full guide
Refinancing: Replacing your mortgage mid-term or at renewal to pull out equity (up to 80% of the home's value), consolidate debt, or change terms. Mid-term refinances trigger the prepayment penalty, so the math has to clear that hurdle first. Full guide
Renewal: Signing a new term when the old one matures. The first offer your lender mails is rarely its best. You can switch lenders at renewal with no penalty, and other lenders often cover the transfer costs. Full guide
Rental offset / add-back: The two ways lenders count rental income when you qualify. Offset (subtract rent from the housing cost before ratios) qualifies you for much more than add-back (add a share of rent to income). Which method a lender uses can change an investor's maximum loan by a wide margin.
Reverse mortgage: For homeowners 55 and older: borrow against home equity with no required monthly payments; interest compounds and the balance is repaid when you sell or the estate settles. Qualification is by age and equity, not income or credit.

S

Second mortgage: A separate loan registered behind your first mortgage, used to tap equity without breaking the first. Higher rates than firsts because the second lender only gets paid after the first in a default.
Semi-annual compounding: The Canadian legal standard for fixed mortgage interest: compounded twice a year, not monthly. A Canadian 5% works out slightly cheaper than a US-style 5%. Our calculators use it; many generic online calculators do not.
Stated income: Alternative-lender programs that accept reasonable declared income for self-employed borrowers instead of line 15000 on the tax return. Higher rates and usually a fee, but it is how many business owners qualify at all. Full guide
Stress test: The federal qualifying rule: you must qualify at the higher of your contract rate plus 2% or the 5.25% floor, even though you pay the contract rate. It cuts buying power by roughly 20%. Straight switches at renewal (same balance and amortization) no longer require re-passing the test, and provincially regulated credit unions have some flexibility on uninsured loans. Full guide
Switch / transfer: Moving a standard-charge mortgage to a new lender at renewal, usually free (the new lender covers appraisal and transfer fees) as long as the amount and amortization stay the same. Collateral charges cost legal fees to move. Full guide

T

Term: The length of your current contract with the lender (commonly 5 years, anywhere from 6 months to 10). At the end you renew, switch, or pay out. The term is not the amortization; you will have several terms over one mortgage.
Title: The legal record of who owns the property, held in the provincial land registry. Your lender registers its charge on title; your lawyer confirms it is clean before closing.
Title insurance: A one-time policy (a few hundred dollars) protecting against title fraud, survey problems, and registration errors. Almost every lender requires a policy protecting the lender; a separate owner's policy covers you directly and costs a little more.
Total debt service (TDS): All your monthly obligations (housing plus car loans, credit cards, support payments, other debts) divided by gross income. The guideline ceiling is about 44%. Full guide
Trigger point: The stage after the trigger rate where the balance is about to exceed the allowed share of the home's value. The lender then requires a payment increase, a lump sum, or a conversion to fixed. Full guide
Trigger rate: On a fixed-payment variable mortgage: the rate at which your unchanged payment no longer covers the interest. If rates rise past it, your amortization stretches or the lender requires action. Full guide

U

Underwriting: The lender's behind-the-scenes review of your income, credit, debts, and the property before final approval. Conditions on your commitment letter are the underwriter's checklist.

V

Variable rate (and adjustable rate): A rate that floats with prime. Adjustable: the payment changes when prime does. Fixed-payment variable: the payment stays put while the interest share shifts, which is where trigger rates come from. Breaking a variable usually costs only three months' interest. Full guide
Vendor take-back (VTB): The seller lends you part of the purchase price, registered as a mortgage. Rare in residential deals, more common when conventional financing falls short; get independent legal advice on the terms.

Educational information about Canadian mortgages, not financial or mortgage advice. Rules and figures change; confirm current details with the lender or a licensed mortgage professional before acting.

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