35+ mortgage terms explained in plain English. Bookmark this page for quick reference during your home buying journey.
The total length of time it takes to pay off your mortgage in full. Common amortization periods in Canada are 25 or 30 years.
A professional assessment of a property's market value, typically required by lenders before approving a mortgage.
When you refinance or renew early, a blended rate combines your existing rate with the new rate to create a single rate.
Short-term financing that helps you cover the gap when your new home closes before your current home sells.
A mortgage with restrictions on prepayments. Breaking a closed mortgage early usually results in significant penalties.
Mortgage default insurance required when your down payment is less than 20%. Protects the lender if you default on your loan.
A mortgage where the down payment is 20% or more of the purchase price, not requiring CMHC insurance.
The percentage of your gross income used to pay housing costs (GDS) and all debts (TDS). Lenders use this to determine affordability.
The portion of the purchase price you pay upfront. Minimum is 5% for homes under $500K in Canada.
The difference between your home's market value and the amount you owe on your mortgage. Your ownership stake.
A mortgage where the interest rate stays the same for the entire term, providing predictable payments.
The percentage of your gross income needed for housing costs (mortgage, taxes, heating, condo fees). Should be under 39%.
A mortgage where your down payment is less than 20%, requiring mortgage default insurance (CMHC, Sagen, or Canada Guaranty).
A revolving line of credit secured against your home equity. You can borrow, repay, and borrow again up to your limit.
The cost of borrowing money, expressed as a percentage. Can be fixed or variable over your mortgage term.
A provincial tax paid when you purchase property in Ontario. First-time buyers may qualify for rebates up to $4,000.
An extra payment made on your mortgage in addition to regular payments, helping you pay down principal faster.
The date when your mortgage term ends and you need to renew, refinance, or pay off the remaining balance.
A licensed professional who works with multiple lenders to find you the best mortgage product and rate.
A mortgage that allows you to pay off the entire balance at any time without penalty. Usually has higher rates.
A mortgage that can be transferred to a new property if you move, keeping your existing rate and terms.
A conditional commitment from a lender for a specific mortgage amount, usually valid for 90-120 days.
A fee charged if you pay off your mortgage early or make payments exceeding your prepayment privileges.
The amount you're allowed to pay extra on your mortgage each year without penalty, typically 15-20% of the original amount.
The benchmark interest rate set by banks, which variable rate mortgages are typically based on (e.g., Prime - 0.5%).
The original amount borrowed, not including interest. Your payments reduce principal over time.
Replacing your existing mortgage with a new one, often to access equity, consolidate debt, or get better terms.
When your mortgage term ends, you renew with your current lender or switch to a new one for another term.
A loan for homeowners 55+ that lets you access home equity without monthly payments. Repaid when you sell or pass away.
An additional mortgage on a property that already has a first mortgage. Higher rates but doesn't disturb first mortgage.
A federal requirement to qualify at a rate higher than your actual rate (currently contract rate + 2% or 5.25%, whichever is higher).
The percentage of your gross income needed for all debts including housing costs. Should be under 44%.
The length of time your mortgage contract is in effect (usually 1-5 years). Not the same as amortization.
Insurance that protects against problems with property ownership, like unknown liens or survey issues.
A mortgage where the interest rate fluctuates with the prime rate. Payments may stay fixed or change with rates.
These are the terms first-time buyers ask about most frequently.
A federal requirement to qualify at a rate higher than your actual rate (currently contract rate + 2% or 5.25%, whichever is higher).
Mortgage default insurance required when your down payment is less than 20%. Protects the lender if you default on your loan.
The portion of the purchase price you pay upfront. Minimum is 5% for homes under $500K in Canada.
A conditional commitment from a lender for a specific mortgage amount, usually valid for 90-120 days.
A mortgage where the interest rate stays the same for the entire term, providing predictable payments.
A mortgage where the interest rate fluctuates with the prime rate. Payments may stay fixed or change with rates.
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