Mortgage-related jargon

Glossary of Mortgage Terms

Let's Talk Mortgages

Adjustable Mortgage Interest Rate

With an adjustable rate, both the interest rate and the mortgage payment vary, based on market conditions.


The period of time required to completely pay off a mortgage debt, if all payments are made on time and the terms of the mortgage stay the same.


An estimate of the current market value of a home.


An appraiser is certified to assess the value of a home’s worth.


The increase in value of something because it is worth more now than when you bought it.

Approved Lender

A lending institution, which is authorized by the Government of Canada to make loans under the terms of the National Housing Act. Only Approved Lenders can offer CMHC-insured mortgages.

Assumption Agreement

A legal document that requires a person buying a home to take over responsibility for the mortgage of the home builder or previous owner.

Bridge Loan

A bridge loan is a temporary financing option designed to help homeowners “bridge” the gap between the time your existing home is sold and your new property is purchased. It enables you to use the equity in your current home to pay the down payment on your next home, while you wait for your existing home to sell.


Canada Mortgage and Housing Corporation. A Crown corporation that administers the National Housing Act for the federal government and encourages the improvement of housing and living conditions for all Canadians. CMHC also develops and sells mortgage loan insurance, along with Sagen and Canada Guaranty.

Cash Back Mortgage

With a cash back mortgage, you can get a certain amount of money back from your lender when your loan is finalized. You may receive money back upon the closing date, once the lender transfers the rest of the money to fund your mortgage.

Certificate of Status

Also called an Estoppel Certificate, it outlines a condominium corporation’s financial and legal state. Fees may vary and may be capped by law (does not apply in Quebec).

Closed Mortgage

A mortgage that cannot be prepaid or renegotiated before the end of the term without the lender’s permission and an interest penalty.

Closing Costs

The costs you will have to pay in addition to the purchase price of a home on the day you officially own the home. These costs include legal fees, transfer fees and disbursements. They usually range from 1.5% to 4% of the purchase price.

Closing Date

The date at which the sale of a property becomes final and the new owner takes possession of the home.

Compound Interest

Interest calculated on both the principal and the accrued interest.

Conditional Offer

An Offer to Purchase a home that includes one or more conditions that must be met before the sale is official (for example, getting a mortgage or home inspection).


You own the unit you live in (eg: highrise or lowrise, or a townhouse) and share ownership rights for the common areas of the building along with the development’s other owners.


A person responsible for overall construction of a home, including buying, scheduling, workmanship, and management of subcontractors and suppliers.

Conventional Mortgage

A mortgage loan for up to 80% of the value of a property. Mortgage loan insurance is usually not needed for this type of mortgage.

Convertible Mortgage

A convertible mortgage is an agreement made at the beginning of a term that allows homeowners to change the type of mortgage they hold during its term. If a homeowner wants to start with an open mortgage and then lock into a closed mortgage, a convertible mortgage is the right choice


If your original offer to the vendor is not accepted, the vendor may counteroffer. A counteroffer usually changes something from your original offer, such as the price or closing date.

Credit Bureau

A company that collects information from various sources and provides credit information on a person’s borrowing and bill paying habits to help lenders assess whether or not to lend money to the person.

Credit Report

The report a lender uses to determine your creditworthiness for getting a mortgage.

Curb Appeal

How attractive a home looks from the street. A home with good curb appeal will have attractive landscaping and a well-maintained exterior.


A legal document signed by both the vendor and purchaser to transfer ownership of a home.


Failing to abide by the terms of a mortgage loan agreement. If you default on (fail to make) your mortgage payments, your lender can take legal action to take possession of your home.


Failing to make a mortgage payment on time.


Money placed in trust by a home buyer when he or she makes an Offer to Purchase a home. The deposit is held by the real estate representative or lawyer/notary until the sale is complete.

Down Payment

The portion of the price of a home that is not financed by the mortgage loan, and which you must pay out of your own savings or other eligible sources before you can get a mortgage.


The difference between the price for which a home could be sold and the total debts registered against it. Equity usually increases as the mortgage is reduced through regular payments. Market values and improvements to the property may also affect equity.

Estoppel Certificate (or certificate of status)

A certificate that outlines a condominium corporation’s financial and legal status.

First Time Home Buyer’s Tax Credit

If you just bought your first home last year, or if you haven't lived in a home owned by you or your spouse in the last four years, then you might qualify for the First-Time Home Buyers' Tax Credit (HBTC) of $5,000, which adds $750 to your tax refund.

Fixed Mortgage Interest Rate

A locked-in rate that will not increase for the term of the mortgage. Your rate and payment remains the same for the term.


A legal process where a lender takes possession of your property if you default on a loan, and sells it to cover the debts you have failed to pay.

Gross Debt Service Ratio (GDS)

The percentage of gross income that will be used for payments of principal, interest, taxes and heat (P.I.T.H.) and 50% of any condominium maintenance fees or 100% of the annual site lease for leasehold tenure.

High-Ratio Mortgage

A mortgage loan for higher than 80% of the value of a property. This type of mortgage usually requires mortgage loan insurance.

Home Inspector

A home inspector will examine a home to tell you if anything is broken, unsafe or needs to be replaced. They may also be able to tell you if there have been any major problems in the past.

Insurance Broker

An insurance broker can help you choose and buy insurance, including property insurance and mortgage loan insurance.


The cost of borrowing money. Interest is usually paid to the lender in regular payments along with repayment of the principal (loan amount).

Land surveyor

If the seller of the home does not have a Survey or Certificate of Location, or if their Survey is more than five years old, you will probably need to hire a surveyor (with the seller’s permission) before you can get a mortgage. Your real estate agent can help you coordinate the survey with the current owner of the home.


A lawyer (or notary in Quebec) will protect your legal interests and review any contracts.

Legal Fees & Disbursements

Charges paid on your behalf by a solicitor that are in addition to professional costs. Associated with the sale or purchase of a property, these include costs for searching, drawing and registering the mortgage documents.


Lenders will loan you money (a “mortgage”) to help you buy a home. Lenders include banks, trust companies, credit unions, caisses populaires, pension funds, insurance companies and finance companies.

Lump Sum Payment

An extra payment made to reduce the principal balance of your mortgage, with or without a penalty. Lump sum payments can help you pay off your mortgage sooner and save on interest costs.

MLS (Multiple Listing Service)

A service offered by Canada’s realtors with descriptions of most of the homes that are for sale across the country.

Maturity Date

The last day of the term of the mortgage. On this day, the mortgage loan must either be paid in full or renewed.


A mortgage is a security interest given in the property you are purchasing which secures repayment of the loan related to the property. That security interest is discharged on payment of the principal and interest owing on the loan in accordance with the mortgage document. In Quebec, “mortgages” are called “hypothecs”.

Mortgage Broker

A mortgage broker has access to multiple lenders and products. The job of the mortgage broker is to find you a lender with the terms and rates that will best suit you.

Mortgage Default Insurance/Mortgage Loan Insurance

Insurance that protects your lender against default. If your mortgage is for more than 80% of the lending value of the property, your lender will probably require mortgage loan insurance from CMHC, Sagen or Canada Guaranty.

Mortgage Life Insurance

Insurance which can protect your family by paying off your mortgage if you die.

Mortgage Payment

A regularly scheduled payment that is often blended to include both principal and interest.

Net Worth

Your financial worth, calculated by subtracting your total liabilities (everything you owe) from your total assets (everything you own).

New Home Warranty Program

A program in every province and the Yukon Territory which guarantees that any defects in a new home will be repaired, if the builder fails to repair them. There are currently no such programs in Nunavut or the Northwest Territories.


In Quebec a notary handles the legal matters related to homebuying. In most other provinces, a notary only administers oaths, certifies documents and attests to authenticity of signatures and could not, in his/her capacity as notary, advice on legal matters.

Offer to Purchase

A written offer that sets out the terms under which a buyer agrees to buy a home. If the offer is accepted by the seller, it becomes a legally binding contract.

Open Mortgage

A mortgage that can be prepaid, paid off or renegotiated at any time without an interest penalty. The interest rate on an open mortgage is usually higher than on a closed mortgage with an equivalent term.

Operating Costs

The monthly expenses that come with owning a home. These include property taxes, property insurance, utilities, and maintenance and repairs.

Porting a Mortgage

Porting your mortgage means taking your existing mortgage—along with its current rate and terms—from your current home to your new home. You can port your mortgage if you're purchasing a new property at the same time you're selling your existing one.


The amount that you borrow for a loan.

Property Insurance

Insurance that protects you in case your home or building is destroyed or damaged by fire or other hazards listed in the policy.

Property Taxes

Taxes charged by the municipality where a home is located based on the value of home.

Real Estate Agent/Realtor

A real estate agent can help you find a home, make an offer and negotiate the best price.


The process of revising and replacing the terms of an existing credit agreement, usually as it relates to a loan or mortgage.

Reserve Fund

An amount of money you set aside on a regular basis for emergencies or major repairs. It is usually a good idea to save around 5% of your monthly income for emergencies.

Reverse Mortgage

A reverse mortgage is a loan that allows you to get money from your home equity without having to sell your home. This is sometimes called “equity release”. You can borrow up to 55% of the current value of your home. The maximum amount you’re able to borrow will depends on your age, home’s appraised value, and lender.

Second Mortgage

These types of loans are called second mortgages because they follow your first mortgage—the one you obtained to purchase the home. And like your first mortgage, a second mortgage is secured by a lien on your property, meaning if you don't make payments or fail to repay the loan, you could face foreclosure.

Survey/Certificate of Location

A document that shows the legal boundaries and measurements of a property, specifies the location of any buildings, and states whether anyone else has the right to cross over your land for a specific purpose.


The length of time that the conditions of a mortgage, such as the interest rate you will pay, are carried out. Terms are usually between six months and ten years. At the end of the term, you can either pay off the mortgage or renew it, usually with new terms and conditions.


A freehold title is an interest in land that gives the holder full and exclusive ownership of the land and building for an indefinite period. A leasehold title is an interest in land that gives the holder the right to use and occupy the land and building for a defined period.

Title Insurance

Insurance against loss or damage arising from a matter affecting the title to real property (e.g.: by a defect in the title)

Total Debt Service Ratio (TDS)

The percentage of gross income that will be used for payments of principal, interest, taxes and heat (P.I.T.H.) and other debt obligations.

Variable Mortgage Interest Rate

A variable rate mortgage is one where the interest rates change with the market but the monthly payments are always the same.

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