Understanding mortgage terminology doesn't have to be complicated. Browse our glossary of commonly used mortgage terms explained in clear, simple language to help you make informed financial decisions.
The legal contract a purchaser and a seller enter into. We recommend having your offer prepared by a professional realtor who has the knowledge and experience to protect your interests with the most appropriate clauses and conditions.
The number of years it takes to repay the entire amount of the financing based on a set of fixed payments.
The process of determining the market value of a property.
What you own or can call upon. Often used in determining net worth or in securing financing.
A legal document signed by a buyer that transfers responsibility for the obligations of an existing mortgage. If someone assumes your mortgage, ensure you receive a formal release from the lender confirming you are no longer liable for the debt.
Equal mortgage payments that include both principal and interest. Over time, the principal portion increases while the interest portion decreases.
A federal Crown corporation that administers the National Housing Act and provides mortgage default insurance for high-ratio mortgages.
A mortgage that cannot usually be prepaid or renegotiated before the end of its term without paying penalties.
The date when ownership of the property officially transfers to the purchaser and the sale becomes final.
An asset pledged as security for a loan, such as investments, savings, or a vehicle.
A mortgage that is up to 80% of the property's purchase price or appraised value and generally does not require mortgage default insurance.
A system used by lenders to evaluate a borrower's creditworthiness by assigning points to various financial factors.
A loan where the lender can require the outstanding balance to be repaid upon request.
A sum of money placed in trust when making an offer to purchase. Once accepted, the deposit is held until closing and forms part of the purchase transaction.
The difference between the market value of a property and any outstanding mortgages registered against it. This difference belongs to the property owner.
A debt registered against a property that has first priority or first claim against that property.
A mortgage with an interest rate that remains fixed for the entire mortgage term, providing consistent monthly payments.
A calculation used by lenders to determine a borrower's ability to repay a mortgage. It considers mortgage payments, property taxes, heating costs, and a portion of condominium fees compared to gross household income.
A person with sufficient income and an established credit history who agrees to repay the loan if the borrower is unable to do so.
A mortgage that exceeds 80% of the property's purchase price or appraised value. This type of mortgage requires mortgage default insurance.
A revolving line of credit secured against your home, allowing you to borrow against your available home equity.
The date when the mortgage term officially begins. It is typically the first day of the month following the property's closing date.
A mortgage where only the monthly interest is paid. The principal balance remains unchanged throughout the interest-only period.
A loan secured against real estate. Once the loan has been fully repaid, the lender provides a discharge of the mortgage.
The lender or financial institution that provides the mortgage financing.
The individual or borrower who receives the mortgage loan and is responsible for repaying it.
A mortgage that can be repaid in full or in part at any time during the term without penalty. In exchange for this flexibility, open mortgages generally have a higher interest rate than closed mortgages.
Principal, Interest, and Property Tax. These are the primary costs included in many mortgage payments.
An existing mortgage that can be transferred to a new property. Porting a mortgage may help avoid prepayment penalties and allow you to keep your current interest rate.
A fee charged by a lender when a borrower repays all or part of a mortgage earlier than permitted under the mortgage agreement. The penalty is commonly the greater of three months' interest or the Interest Rate Differential (IRD).
The lowest interest rate that a financial institution offers to its most creditworthy customers. Variable mortgage rates are often based on the prime rate.
The original amount of money borrowed, excluding any interest charges.
The length of time that a lender guarantees an approved mortgage interest rate. Depending on the lender, this period can range from 30 to 120 days.
Replacing an existing mortgage with a new one under different terms. Homeowners commonly refinance to obtain a lower interest rate, consolidate debt, access home equity, reduce monthly payments, or change from a variable-rate mortgage to a fixed-rate mortgage.
When your mortgage term ends, you can renew your mortgage with your current lender or transfer it to another lender. Renewal is also an opportunity to review your mortgage options and negotiate a better interest rate.
A mortgage registered against a property that is secured by a second charge. It is subordinate to the first mortgage in repayment priority.
The process of transferring an existing mortgage from one lender to another, often at the end of a mortgage term without additional cost to the borrower.
The period covered by your mortgage agreement. Mortgage terms commonly range from six months to ten years, with the interest rate remaining fixed or variable during that period.
A lender calculation used to determine mortgage affordability by comparing your housing costs and all other monthly debt obligations against your gross household income.
A mortgage with an interest rate that changes based on movements in the lender's prime lending rate.
A mortgage provided directly by the seller to the buyer as part of the property's financing arrangement.
Explore some of the most commonly used mortgage terms to better understand the home financing process.
Learn how your mortgage is repaid over time.
Understand mortgage default insurance in Canada.
Know how fixed interest rates work.
Discover how variable mortgage rates change.
Access your home's equity or improve your mortgage.
Learn what happens when your mortgage term ends.
We work with Canada's leading banks, monoline lenders, credit unions, and alternative lenders to find the mortgage solution that's right for you.
Understanding mortgage terminology is the first step. Whether you're buying your first home, refinancing, or renewing your mortgage, I'm here to guide you every step of the way with expert advice tailored to your goals.
