Reference
Plain-language definitions for the terms you'll encounter during your mortgage process, without the jargon.
The total length of time over which a mortgage is repaid. Most mortgages in Canada amortize over 25 years, though 30-year options exist for insured mortgages under recent rule changes.
A professional assessment of a property's market value, ordered by the lender. The purchase price and appraised value must align for the lender to fund.
Short-term financing that covers the gap when you close on your new home before the sale of your existing one closes.
Canada Mortgage and Housing Corporation. The federal Crown corporation that provides default insurance on high-ratio mortgages (less than 20% down).
A type of mortgage registration that allows re-borrowing up to the registered amount without discharging and re-registering the mortgage. Common with HELOCs. Can be harder to transfer to another lender.
A mortgage where the down payment is 20% or more of the purchase price. No default insurance is required.
Insurance required when a down payment is less than 20%. Protects the lender if you default. Premiums are added to the mortgage balance and range from 2.8%–4% of the loan amount.
The upfront cash portion of a home purchase. The minimum in Canada is 5% for homes under $500,000, scaling up from there. 20% avoids default insurance.
A mortgage interest rate that does not change for the duration of the term. Payments are predictable. Breaking early typically involves a larger penalty than variable.
Home Equity Line of Credit. A revolving credit facility secured against your home. Borrow up to 65% LTV, pay interest only on what you use. Useful for renovations, investment, or emergency access.
A mortgage with a down payment of less than 20%. Requires default insurance through CMHC, Sagen, or Canada Guaranty.
Synonymous with high-ratio mortgage. The mortgage is insured against default. These typically receive the best rates because lenders carry no risk of loss.
A provincial tax paid on closing when purchasing property. BC charges a tiered rate starting at 1%. First-time buyers may qualify for a rebate on purchases up to $835,000.
The financial institution funding your mortgage: a bank, credit union, monoline lender, or private lender. Brokers work with many lenders simultaneously.
The mortgage amount expressed as a percentage of the property value. An 80% LTV means a 20% down payment. The lower the LTV, the lower the lender's risk.
The date your mortgage term ends and you must renew, refinance, or pay off the balance. Not the same as the end of your amortization.
A licensed professional who acts as an intermediary between borrowers and multiple lenders. Paid by the lender upon funding. There is no cost to the borrower in most cases.
An open mortgage can be repaid in full at any time without penalty. A closed mortgage has prepayment restrictions; breaking it early triggers a penalty.
A fee charged for breaking a mortgage before the end of its term. Fixed-rate penalties are typically the greater of 3 months' interest or the Interest Rate Differential (IRD). Variable penalties are usually 3 months' interest.
A mortgage that can be transferred from one property to another when you move, allowing you to keep your existing rate and avoid a penalty.
A lender's conditional commitment to lend up to a specified amount at a specified rate, based on your income, credit, and down payment. Rate holds are typically 90–120 days.
The benchmark interest rate set by major Canadian banks, which moves in relation to the Bank of Canada's policy rate. Variable-rate mortgages are typically priced as Prime minus a discount.
The outstanding balance of your mortgage, the amount you still owe, separate from interest.
Breaking your current mortgage and replacing it with a new one, often to access equity, change lenders, or restructure your rate and term.
At the end of a mortgage term, you renew for another term. You are free to switch lenders at renewal without penalty, and often should.
A type of mortgage registration for the exact amount of the mortgage. Easier to transfer to another lender at renewal than a collateral charge.
The length of time your interest rate and conditions are locked in. Common terms are 1, 2, 3, and 5 years. At the end of the term, you renew.
Legal ownership of a property. Title insurance protects against defects in title that could affect your ownership.
A mortgage rate that fluctuates with the lender's prime rate. Payments may stay fixed while the principal/interest split changes, or payments adjust with the rate.
