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A
- Amortization
- The total length of time it takes to pay off your mortgage in full, typically 25 or 30 years in Canada. A longer amortization lowers your monthly payment but increases the total interest paid over the life of the loan.
- APR (Annual Percentage Rate)
- The true annual cost of borrowing, expressed as a percentage. In Canada, APR includes the interest rate plus applicable fees and costs, making it a more accurate comparison figure than the advertised rate alone.
- Appraisal
- An independent professional assessment of a property's market value, typically required by lenders before approving a mortgage. The appraised value determines how much a lender is willing to lend on the property.
- Assignment
- The transfer of a mortgage from one party to another. An assignment can occur when a property is sold and the buyer takes over the seller's existing mortgage, or when a lender sells the mortgage to another financial institution.
B
- Blend-and-Extend
- A mortgage renewal option where your lender blends your current rate with today's rate to create a new blended rate, then extends your term. This avoids a prepayment penalty while locking in a new term before your maturity date.
- Bridge Financing
- A short-term loan that helps homeowners cover the gap between closing on a new home and receiving funds from the sale of their old home. Bridge loans are typically 30–90 days and carry higher interest rates than conventional mortgages.
- Bank of Canada (BoC) Rate
- The overnight lending rate set by the Bank of Canada, which directly influences prime rate and, by extension, variable-rate mortgages and HELOCs across the country. The BoC reviews the rate eight times per year.
C
- CMHC (Canada Mortgage and Housing Corporation)
- The federal Crown corporation that provides mortgage default insurance on high-ratio mortgages (less than 20% down). CMHC insurance protects the lender if the borrower defaults; premiums are added to the mortgage principal and range from 0.60% to 4.00%.
- Closed Mortgage
- A mortgage that restricts prepayment beyond the agreed prepayment privilege. Breaking a closed mortgage early typically triggers a prepayment penalty — either 3 months' interest or the interest rate differential (IRD), whichever is greater.
- Collateral Charge Mortgage
- A type of mortgage registration where the lender registers the loan for more than the actual mortgage amount — often 100–125% of the property value. This allows you to borrow more in the future without refinancing, but makes it harder to switch lenders at renewal without paying legal fees.
- Commitment Letter
- A formal written offer from a lender confirming they will advance a mortgage under specified terms and conditions. A commitment letter is issued after full underwriting approval and typically has an expiry date of 90–120 days.
- Conventional Mortgage
- A mortgage where the down payment is 20% or more of the purchase price, resulting in a loan-to-value ratio of 80% or less. Conventional mortgages do not require CMHC default insurance.
- Co-Signer
- A person who signs the mortgage application alongside the primary borrower, agreeing to be equally responsible for repayment. Co-signers are typically used when a borrower doesn't qualify on their own due to income, credit, or employment issues.
D
- Default Insurance
- Mortgage default insurance protects the lender — not the borrower — if the borrower stops making payments. Required in Canada when the down payment is less than 20%. Provided by CMHC, Sagen, or Canada Guaranty.
- Discharge
- The legal process of removing a mortgage from title once it has been paid off in full. A discharge statement from the lender and registration at the land titles office are required; fees typically range from $200–$400.
- Down Payment
- The portion of the purchase price you pay upfront — not financed by the mortgage. In Canada, the minimum is 5% on homes under $500,000, scaling upward for homes priced between $500K–$999,999, and 20% on homes over $1 million.
E
- Equity
- The portion of your home you actually own — calculated as the current market value minus the outstanding mortgage balance. Equity grows over time as you pay down your mortgage and as the property appreciates in value.
- Effective Annual Rate
- The true annual interest rate after accounting for compounding. Because Canadian mortgages compound semi-annually, the effective annual rate is slightly higher than the nominal rate advertised by lenders.
F
- Fixed-Rate Mortgage
- A mortgage where the interest rate is locked in for the entire term — typically 1 to 5 years in Canada. Your payment stays the same regardless of changes to the Bank of Canada rate or prime rate, providing payment certainty.
- FHSA (First Home Savings Account)
- A registered account introduced by the federal government in 2023 allowing first-time buyers to save up to $40,000 tax-free for a home purchase. Contributions are tax-deductible and withdrawals for a qualifying home purchase are tax-free.
- First Mortgage
- The primary mortgage registered against a property. In the event of default and sale, the first mortgage holder is paid before any other creditors. Most residential mortgages in Canada are first mortgages.
G
- GDS Ratio (Gross Debt Service)
- The percentage of your gross monthly income used to cover housing costs — mortgage principal and interest, property taxes, heating, and 50% of condo fees if applicable. Most lenders require a GDS of 39% or less under the stress test.
H
- HELOC (Home Equity Line of Credit)
- A revolving line of credit secured against the equity in your home, typically at prime rate. You can borrow, repay, and re-borrow up to your credit limit. In Canada, you can access up to 65% of your home's appraised value via a HELOC (up to 80% combined with your mortgage).
- High-Ratio Mortgage
- A mortgage where the loan-to-value ratio exceeds 80%, meaning the down payment is less than 20%. High-ratio mortgages require CMHC default insurance and have a maximum amortization of 25 years.
I
- Insured Mortgage
- A mortgage backed by mortgage default insurance from CMHC, Sagen, or Canada Guaranty. Required when the down payment is less than 20%. The insurance premium is added to the mortgage balance and amortized over the life of the loan.
- Interest Rate Differential (IRD)
- A prepayment penalty charged when you break a fixed-rate closed mortgage. The IRD is calculated as the difference between your original mortgage rate and the lender's current rate for the remaining term, multiplied by the outstanding balance. IRD penalties can be substantial — often much larger than 3 months' interest.
- Insurable Mortgage
- A conventional mortgage (20%+ down) that meets insurer guidelines — purchase price under $1 million, amortization 25 years or less — and can be insured by the lender at their cost. Insurable mortgages often qualify for lower rates than uninsurable ones.
L
- Land Transfer Tax (LTT)
- A provincial tax paid by the buyer when a property changes hands. Most provinces charge LTT; Ontario and BC have additional municipal taxes in major cities. First-time buyers may be eligible for a partial or full rebate depending on the province.
- LTV (Loan-to-Value)
- The ratio of your mortgage balance to the appraised or purchase value of your home, expressed as a percentage. A lower LTV means more equity and less risk for the lender — often resulting in better rates. LTV = (Mortgage amount ÷ Property value) × 100.
M
- Maturity Date
- The date your mortgage term ends. At maturity, your outstanding balance is due in full unless you renew or refinance. Most borrowers renew multiple times before their mortgage is fully paid off through amortization.
- Mortgage Broker
- A licensed professional who shops your mortgage application to multiple lenders — including banks, credit unions, and monoline lenders — to find the best rate and terms. Brokers are typically paid by the lender, not the borrower.
- Mortgage Term
- The length of your current mortgage contract — typically 1 to 5 years in Canada (though terms up to 10 years exist). At the end of the term you renew, refinance, or pay off the balance. The term is distinct from your amortization period.
- Monoline Lender
- A financial institution that specializes exclusively in mortgage lending — such as First National, MCAP, or CMLS — rather than offering a full range of banking products. Monolines often offer competitive rates and originate through the mortgage broker channel.
N
- Net Worth
- The total value of your assets (savings, investments, property, vehicles) minus your total liabilities (debts, mortgage, loans). Lenders may ask for a net worth statement as part of a self-employed or high-value mortgage application.
- NOA (Notice of Assessment)
- A document issued by the Canada Revenue Agency (CRA) after processing your annual tax return. NOAs confirm your reported income and are required by most lenders for self-employed borrowers to verify income over the past two years.
O
- Open Mortgage
- A mortgage that can be repaid in full at any time without penalty. Open mortgages offer maximum flexibility and are often chosen by borrowers expecting a large lump sum (sale of another property, inheritance) or planning to sell soon. They carry higher rates than closed mortgages.
P
- Portability
- The ability to transfer your existing mortgage — including its rate and terms — to a new property when you move, without triggering a prepayment penalty. Portability typically requires the new property to close within 30–90 days of selling the old one.
- Prepayment Privilege
- The right to make extra payments on your mortgage principal without penalty, within annual limits defined by your lender. Most Canadian lenders allow 10–25% of the original principal as a lump sum per year, plus increases to your regular payment.
- Prime Rate
- The benchmark interest rate used by Canadian banks, typically set at 2.20% above the Bank of Canada overnight rate. Variable-rate mortgages and HELOCs are priced as prime ± a spread (e.g., Prime – 0.80%).
- Principal
- The original amount borrowed or the remaining balance on your mortgage, not including interest. Each regular mortgage payment reduces the principal and pays interest on the remaining balance; the split shifts over time through amortization.
- Private Mortgage
- A mortgage funded by a private individual or a mortgage investment corporation (MIC) rather than a regulated financial institution. Private mortgages carry higher rates and fees and are typically short-term solutions for borrowers who cannot qualify at an A or B lender.
- Property Appraisal
- See Appraisal. A formal written report by a certified property appraiser estimating the fair market value of a property based on comparable sales, location, size, condition, and other factors.
- Purchase Price
- The agreed-upon price at which a buyer purchases a property, as stated in the Agreement of Purchase and Sale. The purchase price is the starting point for calculating the required down payment, mortgage amount, and applicable taxes.
R
- Refinance
- The process of replacing your existing mortgage with a new one — often to access equity, lower your rate, consolidate debt, or change your mortgage structure. Refinancing before your term ends may trigger a prepayment penalty.
- Renewal
- The process of signing a new mortgage contract at the end of your current term. At renewal, you can stay with your lender or switch to a new one (often without penalty). This is the ideal time to renegotiate your rate and terms.
- RRSP Home Buyers' Plan (HBP)
- A federal program allowing first-time buyers to withdraw up to $35,000 from their RRSPs tax-free to use as a down payment. Withdrawals must be repaid to the RRSP over 15 years; missed repayments are added to taxable income.
S
- Second Mortgage
- A mortgage registered against a property that already has an existing mortgage. Second mortgages are subordinate to the first mortgage in repayment priority, making them riskier for lenders and therefore more expensive for borrowers.
- Semi-Annual Compounding
- The standard method for calculating interest on Canadian mortgages, required by law. Interest is compounded twice per year (not monthly as in the US), which results in a slightly lower effective rate and must be factored into payment calculations.
- Stress Test
- A federal mortgage qualification rule requiring borrowers to prove they can afford payments at the greater of the contract rate plus 2%, or 5.25% (the floor rate set by OSFI). Introduced under the B-20 guideline, the stress test applies to both insured and conventional mortgages at federally regulated lenders.
- Switch / Transfer
- Moving your mortgage from one lender to another at renewal, usually without legal fees or penalties. Switching is common when a new lender offers a lower rate. Some lenders cover the legal and appraisal fees associated with a straight switch.
T
- TDS Ratio (Total Debt Service)
- Similar to GDS, TDS measures total debt obligations — including housing costs plus all other monthly debt payments (car loans, credit cards, student loans) — as a percentage of gross income. Most lenders require a TDS of 44% or less.
- Title Insurance
- An insurance policy that protects against losses related to title defects, ownership disputes, survey errors, and fraud. In Canada, most lawyers recommend purchasing a title insurance policy at closing; it is a one-time premium typically costing $200–$400.
U
- Underwriting
- The process lenders use to evaluate the risk of a mortgage application, verifying income, employment, assets, credit history, and the property's value. Underwriting determines whether to approve an application and under what terms and conditions.
- Uninsurable Mortgage
- A conventional mortgage that does not meet default insurance guidelines — typically because the purchase price exceeds $1 million, the amortization exceeds 25 years, or it is a refinance or rental property. Uninsurable mortgages generally carry slightly higher rates.
V
- Variable Rate Mortgage
- A mortgage where the interest rate fluctuates with changes to the lender's prime rate, which is influenced by the Bank of Canada's overnight rate. Variable-rate mortgages can have either a fixed payment (with changing interest/principal split) or an adjustable payment that changes with rate moves.
- Vendor Take-Back (VTB)
- A financing arrangement where the seller of a property acts as the lender, providing some or all of the mortgage financing to the buyer. VTBs can help buyers who struggle to qualify through traditional lenders, but come with unique legal and financial considerations for both parties.