Canadian mortgage glossary

The total stretch of time it would take to pay your mortgage down to zero at your current payment — usually 25 years, sometimes 30, occasionally 20 or less if you're pushing hard. It is not the same thing as your term, and confusing the two is probably the single most common mix-up I correct in a first conversation. Longer amortization means a smaller payment and considerably more interest paid over the life of the loan; shorter means the opposite.

Term vs. amortization, explained

An independent opinion of what your property is worth, ordered by the lender so they know what they're actually lending against. It's not a home inspection and it says nothing about whether the furnace is on its last winter. Most of the time it comes back at or near the purchase price and you never think about it again — but on a refinance, a rural property, or a private sale, a low appraisal can change your whole file overnight.

The interest rate with the mandatory lender fees folded back in, expressed as a single annual number so you can compare offers that are structured differently. On a plain bank mortgage with no fees, the APR sits right on top of the rate. Where it earns its keep is with private and alternative lenders, where a low-looking rate plus a lender fee plus a broker fee can quietly add up to something very different from what the headline number suggested.

A mortgage the buyer takes over from the seller, keeping the existing rate, balance, and remaining term instead of arranging new financing. It sounds like a gift when the seller's rate is well below current market — and occasionally it is — but the lender still has to approve the buyer, and the buyer has to come up with the entire gap between the assumed balance and the purchase price in cash. That gap is usually what kills the idea.

Instead of breaking your mortgage and paying a penalty, your lender blends your existing rate with today's rate and restarts a fresh term at the weighted result. It's a way to access new money or lock in a longer horizon without a penalty cheque changing hands. The catch is that the penalty doesn't vanish — it gets buried inside the blended rate, and most lenders won't show you that math unless you ask for it directly.

Short-term money that covers the gap when you buy your next home before the sale of your current one actually closes. It's secured against the home you're selling, it runs for days or weeks rather than years, and it exists purely so you don't have to move twice or write a firm offer you can't fund. You need a firm, unconditional sale on the outgoing property for a lender to consider it.

How bridge financing works

A mortgage you've committed to for the full term, where paying it off early triggers a penalty. This is what the overwhelming majority of Canadians have, because the rate is meaningfully lower than the open equivalent. You still get annual prepayment privileges — closed doesn't mean locked in a vault, it just means there's a cost to walking away early.

Open vs. closed, compared

Everything you have to pay on closing day that isn't the down payment — legal fees, land transfer tax, title insurance, adjustments for prepaid property tax, and a handful of smaller items. Budget roughly 1.5% to 4% of the purchase price depending on your province, and understand that these come out of your pocket, not out of the mortgage. This is the number that catches most first-time buyers off guard, because nobody mentions it until the lawyer's statement arrives.

Estimate your closing costs

The federal Crown corporation that insures mortgages where the buyer put down less than 20%, alongside two private insurers who do essentially the same job. CMHC insures the lender against your default — not you — which surprises almost everyone who pays the premium. It's the reason a 5%-down purchase is possible at competitive bank rates at all.

What default insurance actually costs

A way of registering your mortgage on title for more than you currently owe, so the lender can lend you more later without a new registration. Convenient in theory. In practice it makes switching to a different lender at renewal more expensive and more paperwork-heavy, because the charge usually has to be discharged and re-registered rather than simply transferred.

Collateral vs. standard charge

A lender saying yes, subject to a list of things you still have to prove — income documents, down payment source, appraisal, sometimes an updated credit pull. It is real and it is meaningful, but it is not funding. Every condition on that list has to be signed off before the money moves, and files fall apart at this stage more often than people expect.

Financing for a home that doesn't exist yet, released in stages as the build hits agreed milestones — foundation, lock-up, completion — with an inspection before each draw. You carry interest on what's been advanced so far rather than the full amount. It's a different animal from a regular purchase mortgage and it needs a lender who genuinely does them, not one who technically offers them.

Construction financing

A legally binding arrangement filed through a Licensed Insolvency Trustee to repay creditors a negotiated portion of what you owe, used as an alternative to bankruptcy. It hits your credit hard and it stays on your report for years after it's completed. It does not permanently disqualify you from a mortgage — I've placed plenty of files for people who've been through one — but timing and rebuilt credit matter enormously.

Mortgages after a proposal

A mortgage where you've put down 20% or more, so no default insurance is required. You skip the insurance premium, which is real money, but you generally pay a slightly higher interest rate than an insured borrower with 5% down. That trade-off surprises people, and it's worth actually running the numbers on rather than assuming more down is automatically cheaper.

Someone who goes on the mortgage and the title with you, is fully liable for the payments, and whose income and credit get counted alongside yours. Usually a parent helping a first-time buyer clear the qualifying hurdle. It is a serious commitment — the debt shows on their credit report and affects their own borrowing capacity — and everyone involved should understand the exit plan before signing.

A three-digit summary of how you've handled borrowed money, generally running from 300 to 900 in Canada. Most prime lenders want to see 680 or better, though there's real lending available below that. What moves it most isn't mysterious: pay on time, every time, and keep your balances well under your limits — utilization above roughly 30% drags the number down faster than almost anything else.

What score you actually need

The two percentages that decide how much you can borrow. GDS measures housing costs against your gross income; TDS adds every other debt payment you carry. Lenders typically want GDS at or under about 39% and TDS at or under about 44%, with some flexibility for strong files. If you're being told no, these two numbers are almost always the reason.

Breaking the terms of your mortgage — nearly always by missing payments, though letting property insurance lapse or failing to pay property tax counts too. One missed payment isn't a catastrophe, and it isn't foreclosure. What matters enormously is what you do next: lenders have far more flexibility at week two than at month six, and calling them first is the whole ballgame.

What default looks like in Nova Scotia

The money you hand over shortly after your offer is accepted, held in the listing brokerage's trust account to show the seller you're serious. It isn't an extra cost — it counts toward your down payment at closing — but it is genuinely at risk if you walk away after your conditions are removed. Typically a few thousand dollars up to around 5% of the price, depending on the market.

Your own money going into the purchase. The federal minimum is 5% on the first $500,000, 10% on the portion between $500,000 and $1.5 million, and 20% above that. Where it comes from matters as much as how much it is — lenders want a 90-day paper trail, and gifted funds need a signed gift letter from an immediate family member.

Comparing down payment sizes

What your home is worth minus what you still owe on it. It grows two ways at once: every payment chips away at the principal, and the market does whatever the market does. It's the raw material for a refinance, a HELOC, or a second mortgage — but it only becomes usable money when a lender agrees to lend against it, and most cap you at 80% of the property's value.

A registered account for first-time buyers that combines the best of both worlds — contributions are tax-deductible like an RRSP, and withdrawals for a qualifying home purchase come out completely tax-free like a TFSA. You can put in $8,000 a year up to a $40,000 lifetime cap. If you're more than a year out from buying and you qualify, opening one is close to a no-brainer.

FHSA and Home Buyers' Plan

Your interest rate is locked for the entire term, so the payment on your first month is the payment on your last. You're paying a small premium for that certainty, and if rates fall you don't get to follow them down without breaking the mortgage. For most people the real question isn't which one wins on paper — it's how much a moving payment would actually bother you.

Fixed vs. variable

The legal process a lender uses to take and sell a property after a borrower has defaulted. How it works depends heavily on your province — Nova Scotia requires a court-supervised process through the Supreme Court, which is slower and gives borrowers more room to catch up than the non-judicial power of sale used in Ontario. It's the last stop, not the first, and there are usually several off-ramps before it.

Foreclosure in Nova Scotia

The share of your gross monthly income that goes to housing: mortgage payment, property tax, heat, and half of any condo fee. Most lenders draw the line around 39%. It's the first ratio a lender calculates and the reason two people with identical incomes can qualify for very different amounts once property tax and condo fees enter the picture.

A signed document from an immediate family member confirming that money they've given you toward your down payment is a true gift with no expectation of repayment. Lenders require it because a secret loan changes your debt ratios. They'll also want to see the funds actually land in your account — the letter alone isn't enough.

Someone who guarantees your mortgage payments without going on title as an owner. They're on the hook if you don't pay, but they don't own any part of the home. Fewer lenders accept guarantors than co-signers these days, and where both are options, most files end up structured as a co-signer instead.

A revolving line secured against your home that you can draw on, repay, and draw on again, usually at a variable rate tied to prime. Interest-only minimum payments make it flexible and make it dangerous in equal measure, because a balance that never gets paid down can sit there for a decade. Capped at 65% of your home's value on its own, or 80% combined with a mortgage.

How a HELOC works

A program that lets a first-time buyer withdraw up to $60,000 from their RRSP tax-free toward a home, with the money repaid to the RRSP over 15 years. It's a loan from your future self, essentially. It pairs well with an FHSA — you're allowed to use both on the same purchase, which a lot of buyers don't realize.

Using the HBP with an FHSA

A mortgage where you've put 20% or more down, but the file still meets every rule the insurers require — under a $1.5 million purchase price, 25-year maximum amortization, owner-occupied. The lender can insure it in the background at their own cost, and you get a better rate than a truly uninsured borrower. Most people have never heard of this category and it quietly saves them money.

Insured, insurable, uninsured

A mortgage with less than 20% down, where default insurance is mandatory and the premium gets added to your balance. You pay for it, the lender is protected by it. The upside people forget: because the lender carries almost no risk, insured mortgages typically get the sharpest rates on the board.

Insured, insurable, uninsured

The annual cost of borrowing, quoted as a percentage. Worth knowing that Canadian fixed mortgages compound semi-annually rather than monthly, which is why your effective cost is a hair different from a naive calculation. And the rate is only half the story — prepayment privileges, penalty formulas, and portability decide what a mortgage really costs you over five years.

The penalty formula lenders use when you break a fixed mortgage early, meant to compensate them for the interest they'd have earned. Every big bank calculates it differently, and some of those calculations produce eye-watering results — five-figure penalties are not unusual. If you're thinking about breaking a fixed mortgage, get the actual number from your lender in writing before you plan anything around it.

Estimate your IRD penalty

A provincial or municipal tax on the transfer of property, payable in cash on closing day. Rates vary a lot: Nova Scotia's deed transfer tax is set by each municipality, New Brunswick charges a flat percentage, and PEI exempts some first-time buyers entirely. Non-residents buying in Nova Scotia face a substantially higher rate on top.

NS, NB and PEI rates

A legal claim registered against your property by someone you owe money to — your mortgage lender, a contractor who wasn't paid, or the CRA. Liens have to be cleared before you can sell or refinance, and they surface during the title search whether you remembered them or not. An old builder's lien nobody discharged is a classic closing-week emergency.

Your mortgage balance divided by the property's value, as a percentage. Put 20% down and you're at 80% LTV. It's the number that drives almost everything downstream — whether you need default insurance, which lenders will look at your file, and what rate you're offered. Every product on the market has an LTV ceiling.

The day your current term ends and the balance becomes due — at which point you renew, switch lenders, or pay it off. Mark it in your calendar four to six months out, not four to six days out. That runway is when you have leverage; after it passes you're usually accepting whatever your lender put on the renewal letter.

The database real estate boards use to share listings, and the backbone of what you see on REALTOR.ca. Each listing carries an MLS number that lenders and appraisers use to identify the property. If a property is selling privately and never touched MLS, expect a lender to look at it a little harder.

A licensed intermediary who shops your file across many lenders instead of selling one institution's products. Brokers reach lenders you can't walk into — monoline lenders, credit unions, alternative and private lenders — and on straightforward files the lender pays the commission, not you. Where a broker earns their keep most is on the files a bank declines without explaining why.

Broker vs. bank

Insurance that pays the lender if you default, mandatory whenever your down payment is under 20%. The premium runs roughly 2.8% to 4% of the mortgage amount depending on your LTV, and it's usually added to the balance rather than paid up front. It protects the lender entirely — this is the most misunderstood product in Canadian mortgages.

Premium rates and math

Optional coverage sold by lenders that pays off your mortgage balance if you die. The payout shrinks as your balance does, the lender is the beneficiary, and medical underwriting often happens at claim time rather than when you sign up. A plain term life policy of the same size is usually cheaper, portable between lenders, and pays your family instead. Worth a conversation with an insurance advisor rather than a signature at the branch.

How long your current contract with this lender runs — most commonly five years, though anything from one to ten is available. At the end of the term the remaining balance doesn't disappear; you renew it. Term is the commitment window, amortization is the payoff horizon, and keeping those two straight solves most of the confusion people arrive with.

Term vs. amortization

Financing for someone who doesn't live in Canada for tax purposes — whether they're a Canadian citizen working abroad or a foreign national. Expect a minimum 35% down payment, a much heavier documentation load for foreign income and credit history, and a shorter list of willing lenders. Canada's ban on residential purchases by non-Canadians also applies to some buyers, with exemptions.

Non-resident and foreign buyer rules

A mortgage you can pay off in full at any time with no penalty, in exchange for a noticeably higher rate. It makes sense in a narrow set of situations — you're selling in a few months, you're expecting a lump sum, you're between properties. For anyone planning to hold the mortgage for years, the rate premium costs far more than a penalty ever would.

Open vs. closed

Moving your existing mortgage — same rate, same remaining term — over to a new property when you sell and buy. It's how you avoid a penalty when you move mid-term. The rules are fussier than people expect: tight timelines between the two closings, lender re-approval of you and the new property, and a blended rate if you need to borrow more.

A lender reviewing your actual documents — income, credit, down payment — and committing to a specific amount and a held rate, subject to the property. This is the one worth having before you shop, because it tells you a real number and protects your rate while you look. It still isn't final approval; the property has to pass too.

Pre-approval vs. pre-qualification

A quick estimate based on numbers you've stated, with nothing verified and no documents reviewed. It's useful for a rough sense of your range on a Sunday afternoon and not much else. Sellers and agents in a competitive market know the difference immediately, so don't lean on one when you're writing an offer.

Why the difference matters

What you owe for breaking a closed mortgage early. On a variable it's typically three months' interest, which is usually manageable. On a fixed it's the greater of three months' interest or the interest rate differential, and the IRD version can be brutal. Always get the exact figure from your lender before making a decision that depends on it.

Calculate your penalty

The extra payments your contract lets you make each year without penalty — commonly a lump sum of 10% to 20% of the original balance, plus the right to increase your regular payment by a similar percentage. These are genuinely valuable and wildly underused. Even modest annual prepayments in the early years knock years off your amortization, because that's when your balance is largest.

See what prepayments save you

The benchmark lending rate each bank sets, which moves in step with the Bank of Canada's policy rate. Variable mortgages and HELOCs are priced against it — you'll see quotes like 'prime minus 0.90%'. When the Bank of Canada moves, prime typically follows within days, and your variable payment or amortization moves with it.

The actual amount you borrowed, separate from the interest you pay to borrow it. Every payment splits between the two, and in the early years the split is depressingly interest-heavy. That balance shifts steadily over time, which is exactly why a lump sum applied in year two does far more work than the same amount in year fifteen.

A loan from an individual investor or a mortgage investment corporation rather than a bank, priced on the property's equity more than on your income or credit. Rates and fees are meaningfully higher and terms are short — typically a year. It's a bridge to somewhere, not a destination, and I won't recommend one unless there's a specific, dated plan for getting out of it.

When private lending fits

A program that rolls renovation costs into your purchase mortgage, so you can buy a place that needs work and fix it at mortgage rates instead of credit card rates. The lender holds the improvement funds until the work is finished and inspected, which means you or your contractor front the cost first. Quotes have to be in place before closing, not after.

How the program works

A lender guaranteeing a rate for a set window — usually 90 to 120 days — while you shop. If rates rise you keep the held rate; if they fall you generally get the lower one. There's no cost and no obligation, which makes not having one while you're actively looking a bit of an unforced error.

How rate holds work

Replacing your existing mortgage with a new, larger one and taking the difference in cash — for debt consolidation, renovations, or an investment. You can borrow up to 80% of your home's value. If you're mid-term it triggers a penalty, so the math has to clear that hurdle before it makes sense.

Refinancing options

Signing on for a new term when your current one matures. Your lender will mail you an offer, and that first offer is very often not their best rate — it's priced on the assumption you won't shop. Renewal is the single easiest place to save money on a mortgage, and the majority of Canadians sign the letter without making one phone call.

Renew, refinance, or switch

A product for homeowners 55 and older that converts equity into tax-free cash with no required monthly payments — the interest accumulates and the balance is settled when the home is sold or the owner passes away. Rates run above a conventional mortgage and the compounding is real. It fits a specific situation genuinely well and is a poor fit for most others.

Reverse mortgages

An additional loan secured against your home that sits behind your existing mortgage in priority. Because the second lender gets paid after the first in a default, they charge more. It's a way to access equity without breaking a great first mortgage — sometimes cheaper overall than refinancing when your penalty would be large.

Second mortgages explained

The federal rule requiring you to qualify at the higher of your contract rate plus 2% or 5.25%, even though you'll pay your actual rate. It applies to insured and uninsured mortgages at federally regulated lenders. It's the reason your approval amount is smaller than a simple affordability calculation suggests, and it catches almost every buyer off guard the first time.

How the stress test works

The specific property a mortgage application relates to — the one being purchased, refinanced, or used as security. You'll see the phrase all over lender documents and appraisal reports. It matters when someone owns several properties, because lenders assess the subject property's own value, condition, and rental income separately from everything else you own.

Moving your existing mortgage balance to a new lender at renewal, without borrowing more. Because you're not increasing the amount, the new lender usually covers the legal and appraisal costs to win your business. It's the cheapest way to get a better rate at maturity — unless you're on a collateral charge, which adds cost and friction.

Switching at renewal

Housing costs plus every other monthly debt payment — car loans, credit card minimums, student loans, support payments — measured against your gross income. Lenders generally cap it around 44%. Paying off a single car loan before applying can move this number enough to change what you qualify for, which is why it's worth reviewing months ahead rather than the week you apply.

A one-time policy protecting against title defects, fraud, survey problems, and liens a search didn't catch. Your lender will require their own policy; an owner's policy protecting your equity is optional and routinely skipped by people who assumed they already had it. Ask your lawyer in writing which one you're actually getting.

What title insurance covers

On a variable mortgage with a fixed payment, the point where rates have climbed so far that your payment no longer covers the interest owed. Past it, your balance starts growing instead of shrinking, and your lender will eventually require a higher payment or a lump sum. Plenty of Canadians met this term for the first time in 2022 and would rather not meet it again.

Variable rate mechanics

A mortgage that can't be insured at all — because the purchase price is $1.5 million or more, the amortization runs past 25 years, it's a rental property, or it's a refinance. The lender carries the full risk, so the rate is the highest of the three categories. Most refinances land here, which catches borrowers by surprise at renewal time.

The three categories compared

A rate that moves with your lender's prime rate, quoted as a discount off prime. Historically variable has won more often than not, but 'historically' is cold comfort when your payment jumps. Some variables hold the payment steady and shift the principal-interest split; others move the payment itself. Know which one you have.

Fixed vs. variable

The seller finances part of the purchase price themselves, holding a mortgage against the property you just bought from them. It shows up in commercial deals, family transfers, and rural properties where conventional financing is awkward. Your primary lender has to agree to it, and the tax consequences for the seller deserve an accountant's attention before anyone signs.

How a VTB works