Complete List of All Common Mortgage Terminologies in Canada

Mortgages can be confusing. We have covered the most common mortgage terminologies here to help you with your mortgage shopping.

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Accelerated Payment

It is a mortgage repayment plan in which the borrower makes more payments than needed. The extra money is applied directly to the principal. You can choose to accelerate your mortgage payment by going with an accelerated weekly or an accelerated bi-weekly payment frequency.

With an accelerated weekly payment option, your monthly payment amount is divided by four and then paid over 52 payments. Each payment will be a little higher than the regular weekly mortgage payment.

With accelerated bi-weekly payment, your monthly payment is divided by two and then paid over 26 pay periods. Each payment will be a little higher than the regular bi-weekly mortgage payment.

Acceleration Clause

It is a clause in a mortgage contract that gives the lender the full power to demand the immediate repayment of the mortgage loan balance upon the borrower’s default. Or by exercising the right vested in the Due on Sale Clause

Accrued Interest

It is the amount of interest owed on a mortgage loan, the period that has elapsed since the last interest date. Depending on the mortgage loan type, the interest accrues daily or weekly. The calculation of the accrued interest is based on the loan balance and the mortgage rate.

Action for Possession

The last remedy available to a lender when a mortgage is in default. It allows the lender to take possession of the mortgaged property.

Adjustable-Rate Mortgage (ARM)

A mortgage in which the interest rate is adjusted periodically based on an index, which is often the lender’s prime rate. An adjustable-rate mortgage is also known as a variable-rate mortgage or renegotiable rate mortgage. If the interest rate decreases, your payment amount decreases. Suppose the interest rate rises, your payment amount increases.

Adjustment Date

The date that the interest rate changes on an adjustable-rate mortgage (ARM).

Adjustment Period

It is the time between changes in interest rates on an adjustable-rate mortgage.

Affordability Analysis

An analysis of a buyer’s liabilities, creditworthiness, and assets in consideration to the loan amount you want to borrow, the property type, and the property location.

Learn More: Mortgage Affordability Calculator

Agreement of Purchase and Sale (“offer”)

A written legal agreement between seller and buyer in which the buyer agrees to buy a specific real property and the seller agrees to sell upon terms and conditions outlined in the contract at a set price.
The offer may be firm (no conditions attached) or conditional (certain situations – like confirming your mortgage loan approval or completing an inspection of the house for any defect).

Alternative Mortgage

These are mortgage solutions designed for individuals who cannot secure a mortgage with a traditional lender because of a poor credit profile or income. Traditional lenders follow strict underwriting criteria for income, credit score, credit history, and qualification ratios.

Learn More: What is an Alternative Mortgage Loan?

Amortization

Amortization is the process of spreading out a mortgage into a series of fixed payments. Part of each payment goes towards interest costs, and the other part goes towards paying down the loan.

Learn More: Mastering Mortgage Amortization

Amortization Period

The amortization period is the total number of years it takes to ultimately pay off your mortgage loan, the length of time it would take to pay off your mortgage loan assuming equal regular payments. A new mortgage is usually 25 years, but it can be up to 30 years in certain situations. If all periodic payments are made on time, and the terms (payment and interest rate) remain the same, the mortgage balance should be zero at the end of the amortized period.

Amortization Schedule

It is a table showing each periodic mortgage payment breakdown into the interest and principal loan portions. The table also shows the loan balance at the end of each payment period.

Annual Percentage Rate (APR)

It is the annualized interest of the full cost of a loan. This cost is not just limited to interest expense. It also includes lawyer fees, lender fees, brokerage fees, and more. Because all lenders apply the same rules in calculating the annual percentage rate, it provides consumers with a good basis for comparing different loans’ costs. APR is higher than the interest rate since it includes all the other loan costs.

Appraisal

It is the process of determining the market value of a property, usually for lending purposes. It is an independent assessment of a property by a qualified individual (a licensed appraiser). This assessed value may or may not be the same as the sale price of the property.

Learn More: Home Appraisal In Canada: Everything You Need To Know

Appraisal Report

An independent, unbiased report that uses various analysis techniques and market research to determine the realistic value of a property upon inspection of the property and comparable houses that have been sold in recent times.

Learn More: Home Appraisal In Canada: Everything You Need To Know

Assessment (Assessed Value)

A value placed upon property (land and buildings) for taxation purposes.

Assignment

The transfer of a mortgage from one person to another.

Assumption Fee

The fee is paid to a lender (usually by the purchaser of real property) when assuming the seller’s mortgage.

Learn More: What Is An Assumable Mortgage: All You Need to Know

Assumption of Mortgage

It is a clause in a mortgage contract that allows the owner to transfer the property and the mortgage obligation to a new owner. If a mortgage is assumable, the owner of the property will be able to transfer the property, together with the mortgage on it, to the new buyer.

Generally, the lender will still have to review the purchaser’s income and credit to ensure they are able to make the required monthly payments of the mortgage loan. Also, the lenders may charge a fee for the assumption.

Learn More: What Is An Assumable Mortgage: All You Need to Know

Bad Credit Mortgage

A bad credit mortgage is a loan granted to those who have a low credit score or no score at all. Since the risk is higher for the lender, they will charge more in interest and/or application fees than traditional loans.

Learn More: Bad Credit Mortgage: A Complete Guide

Balloon Mortgage

It is a mortgage loan that requires a lump sum payment at the end of the mortgage term. There is usually low or no monthly payment required during the mortgage term. Balloon mortgages are common in Private Lending, where a large portion of the interest payment needed is accumulated and due at the end as a one-time lump-sum payment together with the outstanding principal portion of the loan.

Balloon Payment

The final payment of a balloon mortgage. Balloon mortgages are common in Private Lending, where a large portion of the required interest payment is accumulated and due at the end as a one-time lump sum payment.

Beacon Score

It is the credit score published by Equifax

Biweekly Payment Mortgage

A Biweekly mortgage is a type of mortgage loan that requires the borrower to make a payment every two weeks rather than once a month. Making payments every two weeks will equate to 26 payments in a year, which is one-half more than what would have been paid if paid on a regular monthly basis.

Blanket Mortgage

A blanket mortgage is a single mortgage that covers two or more pieces of real estate.

Blended Payments

It is a form of payment that includes a principal component (the amount borrowed) and an interest component, paid on a regular basis (e.g. weekly, bi-weekly, monthly).

Learn More: Blended Mortgage In Canada; Plain And Simple

Blended Rate Mortgage

It is a type of mortgage loan that allows the blending of the mortgage rate on an existing mortgage and the mortgage rate for a new mortgage to form one consolidated mortgage rate. A blended rate is a feature offered by lenders to their existing clients for mortgage refinance. Blending mortgage rates help to lower a mortgage rate in a rising interest rate environment.

Learn More: Blended Mortgage In Canada; Plain And Simple

Bridge Financing

A temporary financing solution to help a borrower to finance the purchase of a new home, pending a closing sale of their existing property. This loan is primarily used when the closing dates of the newly purchased home and that of the sale of their current home are different.

Learn More: Bridging The House Buying Gap With Bridge Financing

Brokerage Fee

A brokerage fee, also called a broker fee, is the mortgage brokers often charge for their services.
A brokerage fee is common with alternative mortgage loans but not really with prime mortgage loans. Mortgage brokerages charge this fee to compensate for the minimal compensation alternative mortgage lenders offer.

Builder’s Loan

It is a short-term construction loan used to finance the building of a new property. Unlike a standard mortgage loan, construction loans are drawn down in phases as the project progresses. Interest is only accrued on the draw-down portion of the loan.

Buy Down

It is a mortgage financing technique used by borrowers to get a lower interest rate by making an upfront lump-sum payment as a consideration for a reduced mortgage rate.

B-Lenders

Mortgage lenders that will accept non-traditional income sources, low credit scores, poor credit histories, and higher debt-service ratios are generally classified as B-Lenders. Mortgage loans from this set of lenders are designed for borrowers who do not fit a traditional income and credit.

Learn More: B-Lenders For Mortgage: Everything You Need To Know

Canada Guaranty

Canada Guaranty is a private mortgage default insurance provider in Canada. The mortgage default insurance protects lenders against loss if the borrower defaults on the mortgage.

Canada Mortgage and Housing Corporation (CMHC)

A Crown Corporation was created to administer the National Housing Act (NHA). It is the only public sector mortgage default insurer in Canada. Mortgage default insurance protects lenders against loss if the borrower defaults on the mortgage. CMHC also works with community organizations, the private sector, non-profit agencies, and all levels of government to help create innovative solutions to today’s housing challenges.

Learn More: Mortgage Default Insurance (CMHC Insurance)

Capacity (5 Cs of Credit)

Capacity measures the borrower’s ability to repay a loan. It compares the borrower’s income to their recurring debts.

Capital (5 Cs of Credit)

Borrowers who can put a large down payment for a new home or have a large equity stake in the property at the time of refinancing, for example, typically find it easier to qualify for a mortgage. It is because the large contribution by the borrower decreases the default risk.

Capped Rate Variable Mortgage

It is a form of a mortgage with a built-in feature to limit the rise and fall of its interest rate. The interest rate in a capped mortgage has an upper boundary which limits how high the right can rise, and a lower boundary, limiting how low the interest rate can fall. The rate in this mortgage will only swing within these upper and lower boundaries even if the market rate is outside the boundary limits.
The capped rate limits the borrower’s risk exposure to rising interest rates while allowing lenders to earn a higher return when rates are low.

Caps (payment)

It is a safeguard built into an adjustable-rate mortgage to limit the amount of change to the monthly payments. This safeguard is designed to help the borrower.

Cash Back

A mortgage feature that provides the borrower with a lump sum cash when the mortgage loan closes. The cashback amount is calculated as a percentage of the mortgage principal. The money is generally used to cover closing costs.

Cash-Out Refinance

A cash-out mortgage refinance is a type of mortgage refinancing that allows homeowners to use the built-in equity of their house to borrow more money than the size of their existing mortgage loan.

Learn More: Cash-Out Refinance Best Explained

Character (5 Cs of Credit)

The assessment of your honesty and reliability to repay a debt as required. Your credit payment history and employment history are key measures used to determine your credit character.

Chattel Mortgage

A mortgage is given on movable properties like a manufactured home, a modular home, or a piece of construction equipment.

Closed Mortgage

A closed mortgage is one that cannot be repaid in full, refinanced, or renegotiated before the end of the term without incurring a prepayment charge. However, most closed mortgages will offer prepayment privileges that can include: paying up to 20% of your original principal balance each year, increasing your regular payment by up to 20%, or doubling up on payments.

Learn More: Open Term Mortgage Or Closed Term Mortgage, Which One Is Better For You?

Closing Costs

These are fees and charges in excess of the purchase price of the property due at the closing of a real estate transaction. Closing costs can include legal fees, land transfer taxes, origination fees, escrow fees, adjustments for prepaid property taxes, or condominium common expenses.

Learn More: Must-Know Mortgage Closing Costs for Canadian Homebuyers

Closing Costs Good Faith Estimate

Also known as the Good Faith Estimate is a document that outlines all the estimates of all the applicable costs needed to disbursed the mortgage loan. The costs may not be an exact amount, however, it is a way for lenders to inform buyers of what is needed from them at the time of closing of the loan.

Closing Date

The date on which a sale of a property becomes final. On the closing date, funds are transferred from the buyer to the seller, and the buyer takes possession of a property as the new owner.

Co-Applicant

One of two or more people applying together for a loan. All co-applicants share the liability for repaying a loan.

Collateral (5 Cs of Credit)

It is the property the lender accepts as security for a mortgage loan. Collateral can also take the form of guarantees provided by third parties i.e., guarantors.

Collateral Charge

A collateral charge is a way a mortgage lender can register its mortgage lien on your property.

A collateral charge allows the lender to register the mortgage lien up to 125% of the house value. With the example above, for a $450,000 house price, the bank will register $562,500 as of the mortgage loan even though you are only offered $350,000 on the day of closing.

Learn More: Collateral Charge: Everything You Need To Know

Collateral Mortgage

It’s a type of re-advanceable mortgage, meaning that you can borrow more money as you pay down your mortgage or as your property value increases without having to refinance your mortgage. To do so, the lender registers your home with a collateral charge similar to what they do for a home equity line of credit. The charge for a collateral mortgage is registered a higher amount than the mortgage loan amount borrowed.

Learn More: Collateral Mortgage: Everything You Need To Know

Conditional Offer

An offer to buy a property as long as conditions outlined in the offer are met within a specified timeframe. Both the buyer and seller need to agree to these conditions. The Purchase and Sale offer can be void and null if the outlined conditions are not met within the stated time frame. Buyers often place conditions in their Offers to Purchase to protect their interests.

Securing a satisfactory mortgage loan
home inspection
condominium document review (if the property is a condo)
satisfactory results of a water or soil test as a condition (for rural properties)

Construction Mortgage Loan

It is a short-term construction loan used to finance the building of a new property. Unlike a standard mortgage loan, construction loans are drawn down in phases as the construction project progresses. Interest is only accruing on the draw-down portion of the loan.

Consumer Reporting Agency (or Bureau)

An organization that handles the preparation of credit reports used by lenders to determine a potential borrower’s credit history. The agency gets data for these reports from a credit repository made of lenders.

Conventional Mortgage

A mortgage that does not exceed 80% of the purchase price or value of the home, whichever is lower. Mortgages that exceed this limit must be insured against default (by CMHC or Canada Guaranty), and are referred to as high-ratio mortgages. However, default insurance may be requested for conventional mortgages if the perceived additional risk in the mortgage application.

Learn More: Conventional Mortgage: Everything You Need To Know

Conversion Clause

A provision in a convertible rate mortgage that allows the loan to be converted to a fixed rate during the term. The conversion feature may cost extra.

Convertible Rate

A convertible mortgage is a variable-rate mortgage that gives the borrower the option to convert the mortgage to a fixed-rate mortgage after a specified period of time without incurring a penalty. Convertible mortgages are marketed as a way to take advantage of falling interest rates. There may be a fee to convert to a fixed rate.

Co-Signing A Mortgage

When you co-sign a mortgage, you promise to pay the loan if the primary borrower cannot make the payments.

The primary borrower may have a high debt load or weak, bad or insufficient credit history to get approved for a mortgage on their own. For example, a recent graduate who hasn’t had time to build enough credit. Or someone who has defaulted on loan repayments in the past.

Learn More: Co-Signing A Mortgage: Everything You Need To Know

Credit Check (hit)

A credit request is made by a lender to a credit reporting agency for a copy of a specific borrower’s credit report. The credit check is meant to assess how likely the borrower will repay the mortgage loan.

Learn More: How Does a Poor Credit Score Affect Your Life?

Credit Judgement

A Credit judgment is a court decision for a debt you owe. If someone or an institution sues you for an unpaid debt and you lose, the debt may show up in the public record section of your credit report as a judgment.

Credit Report

Your credit report is a snapshot of your credit and financial history. The report includes the identification information, credit payment history, public record items, past credit inquiries, and a credit score.

Credit Score

A single three-digit number that summarises the information in your credit report. This score indicates the borrower’s likelihood to pay bills on time. Equifax’s credit score is known as the Beacon Score, while TransUnion’s score is known as FICO Risk Score.

Learn More: How Your Credit Score Affects Your Mortgage Qualification

Debt-Service Ratio

Lenders use debt service ratios to determine if they can make payments on a loan or mortgage.
It compares your monthly debt and housing expenses to your gross household income. It is calculated by dividing your monthly debt by your monthly income (before taxes).
If your percentage of debt compared to your income is too high, it may be difficult for you to manage the mortgage or other loan payments. This does not necessarily mean you won’t qualify for a loan, but it is something that a lender considers.

Learn More: Mortgage Debt Service Ratios: GDS and TDS Explained

Debt-to-Income Ratio

A loan assessment metric measures the percentage of your gross monthly income that goes to paying your monthly debt to your gross monthly income expressed as a percentage. The ratio serves as a risk indicator for additional debt. The higher the percentage, the riskier you are seen by the lender.

Debt Consolidation

Debt consolidation simply means paying off high-interest debts using a lower interest loan.

For example, suppose you have $20,000 credit card debt at 19% interest, $20,000 auto loan at 6% interest, and $10,000 personal loan at 12% interest. In that case, it may make sense to refinance your mortgage to pay off the $50,000 of high-interest debts, with a single low-interest payment of 2.5%.

Learn More: Understand Debt Consolidation In Canada

Double Up Payment Option

The opportunity to double the scheduled principal and interest payments. Your Double-Up payment is applied directly against the principal balance of your mortgage, which cuts down the life of your mortgage and saves interest costs.

Down Payment

A down payment is the amount of money you put towards the purchase of a home.

Purchase price of your home	The minimum amount of down payment
$500,000 or less	5% of the purchase price
$500,000 to $999,999	5% of the first $500,000 of the purchase price 10% for the portion of the purchase price above $500,000
$1 million or more	20% of the purchase price

Learn More: 15 Mortgage Down Payment Sources For Easier Home Buying

Electronic Funds Transfer (EFT)

Is the electronic transfer of money from one bank account to another, either within a single financial institution or across institutions, via computer-based systems, without the direct intervention of bank staff. Mortgage repayments can be made electronically directly to the lender.

Equity

The difference between the market value of a property and the total debts registered against it. Over time, as the home’s value increases and the amount of the loan decreases, the home’s equity generally increases.

Escrow

Escrow refers to a third-party service that’s usually mandatory in a home purchase. Third-party holds money and property “in escrow” until the two sides (buyer and seller) agree that all the conditions are met for a sale to close.

Existing Mortgage

A mortgage loan that is already in place before the new mortgage transaction (refinance, assumption, renew, or sale).

Expandability Mortgage Option

This feature allows the borrower to increase or expand the principal on a first mortgage at the lender’s agreed-upon interest rate. This can be a cost-effective way to finance a home renovation or free up some of the equity in your property.

Fair Market Value

Fair market value is the price that a willing buyer will pay for a real estate property to an unrelated but willing seller after adequate time and exposure to the market. For the Value of the home to be considered fair, both the buyer and the seller must enter into the transaction willingly.

Firm Offer

Is an offer to purchase a property for a specific price and the terms outlined by the seller without conditions attached.

First Mortgage

It is a mortgage in the first lien position on real estate. The first mortgage takes precedence over all other mortgages secured with the real estate. If the property is sold or if the borrower defaults, the first mortgage is paid before any other mortgage lien on the property.

First Time Home Buyer

In Canada, You are considered a first-time homebuyer if you, your spouse, or your common-law partner have not owned a house in the past four years. Also, you can still benefit from this plan if you are a person with a disability or helping a family member with a disability to buy or build a home.

Learn More: Buying Your First Home: A Complete Guide

Fixed-Rate Mortgage

It is a form of mortgage loan where the interest rate will not change throughout the mortgage loan term, even if the market rate goes up or down.

Also, neither will the amount of your principal and interest payments. A fixed-rate mortgage allows you to predict your monthly payments and know how much of your mortgage you will have paid at the end of your term.

Learn More: How Does Fixed-Rate Mortgage Works In Canada

Foreclosure

It is a legal process in which a lender attempts to recover the balance of a loan from a borrower who has defaulted on payments or other mortgage loan terms. Foreclosure allows the seller to force the sale of the asset used as the collateral of the loan to recover the outstanding loan balance.

Learn: How to Get a Mortgage After Foreclosure in Canada

Fully Amortized Mortgages

A mortgage that requires constant regular payments of both principal and interest components for the life of the mortgage. The loan is scheduled to be completely paid off at the end of the amortization period.

Shop Across 25+ Lenders For Your Best Mortgage Deals

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Gross Debt Service (GDS) Ratio

The gross debt service (GDS) ratio is a debt service measure that mortgage lenders use to assess the proportion of your household debts (such as mortgage payments, taxes, heating costs, and 50% of condominium fees, if applicable) in proportion to your income. This ratio should be less than 35% if you are applying for a low down payment mortgage with a good credit score and less than 45% if you are applying for a bad credit mortgage or a self-employed mortgage.

Learn More: Mortgage Debt Service Ratios: GDS and TDS Explained

Gross Household Income

It is the culmination of total before-tax income for all applicants going on the mortgage. Depending on the lender, these incomes are child tax credit, salary, commission, wages, and alimony.

High Ratio Mortgage

In Canada, a high-ratio mortgage has a loan-to-value of above 80.00%. This occurs when the borrower’s down payment is less than 20% of the property value.

The minimum required down payment to buy an owner-occupied property in Canada is

5% for houses valued at $500,000.00 and less,
5% to 10% down for property between $500,000.00 to less than $1,000,000.00, and
20% for property of over $1,000,000.000 value. Home purchase with more than 20% down is referred to as “low-ratio.”

Learn More: High Ratio Mortgage: What You Need To Know

Holdback

Holdbacks are funds that are held back (deducted) from the advance of a mortgage. These funds can be held back for different reasons; pending achievement of a performance requirement, as protection against liens, to ensure contractors are paid in a construction mortgage or refinance mortgage for home renovation, to ensure property tax is paid to date, and more.

Home Equity Loan

A type of mortgage refinancing designed to help homeowners take advantage of the increased equity value in their homes. This loan can either be in the form of a Home Equity Line of Credit (HELOC) or a Home Equity Loan.

Learn More: Home Equity Loans in Canada Best Explained

Home Equity Line Of Credit (HELOC)

A home equity line of credit (HELOC) is a secured form of revolving credit. HELOC is a home equity product with a variable rate that works like a credit card.

It is a credit line you can withdraw and repay as needed up to the maximum credit limit. Also, the HELOC rate moves in the same direction as prime rates.

Learn More: Home Equity Line Of Credit (HELOC) In Canada Best Explained

Home Inspection

A home inspection is an examination of the condition of a home, often in connection with the sale of that home. Home inspections are usually conducted by a licensed home inspector, trained and certified to conduct such tasks.

Learn More: The Ultimate DIY Home Inspection Checklist For Canadian Homeowners

Homeowner's Insurance

It is a form of property insurance that covers a private residence. It generally covers destruction and damage to a residence’s interior and exterior, the loss or theft of possessions, and personal property.
The borrower must secure this insurance policy before the mortgage closing, or the mortgage loan goes into effect. The policy must list the lender as a loss payee in a fire or other event.

Insured Mortgage

An insured mortgage is a mortgage that includes mortgage default insurance. In Canada, mortgage default insurance is mandatory if you put less than 20% (between 5% and 19.99%) towards your home purchase.

Mortgage default insurance protects the lender in case you cannot make your mortgage payments due to default or foreclosure. The cost of your insurance is based on a percentage of your total mortgage amount. The bigger your down payment, the less you will pay for mortgage default insurance.

Learn More: Insured, Insurable and Uninsurable Mortgages Explained

Interest-Only Mortgage

It is a mortgage in which the borrower pays on the interest and principal remains the same during the life of the mortgage. The principal is repaid in full at the end of the mortgage term as a balloon payment.

Interest Payment

The interest payment is a monetary charge for the privilege of using a lender’s money. The interest payment is based on the size of the loan and the interest price (interest rate).

Interest Rate Differential

A charge you may pay on your closed mortgage if you pay off the mortgage principal before the maturity date or pay the mortgage principal down beyond the prepayment privilege amount. IRD takes the difference between your mortgage interest rate and compares it to the current interest rate charged by the lender of a similar mortgage term.

Interest Rate Differential Amount

The interest rate differential amount is the difference between the principal amount you owe at the time of prepayment and the principal amount you would owe using a similar mortgage rate. IRD takes the difference between your mortgage interest rate and compares it to the current interest rate charged by the lender of a similar mortgage term.

Joint Tenancy

Ownership of property by two or more people, defining each one’s ownership rights. In a joint tenancy, two or more people own property together, each with equal rights and responsibilities with an undivided interest subject to the right of survivorship.

Land Title

Official proof of land ownership is subject to certain exceptions and any liens or interests recorded on the certificate.

Learn More: Title Insurance: Everything You Need To Know

Land Titles System

A system is used for the registration of land. Under this system, the registrar or master of titles passes on the validity of the mortgage instrument and determines its legal effect. In Canada, the government of each province and territory guarantees the land titles of that province and territory.

Land Transfer Tax

Land Transfer tax (LLT) is a mandatory government tax (provincial or municipal) levied when property ownership is transferred to a buyer. The land transfer tax is generally levied when you purchase or gain an interest in a property registered at the Land Title Office.

Learn More: Land Transfer Tax In Canada

Lease

A lease is a contractual arrangement between a landlord (property owner) and tenant (property user) calling for the property used to pay the property owner for use of a real estate asset like a house, for a specified period of time.

Lender Fee

Lender Fee, also known as origination fee is an upfront charge by a lender to process a new loan application. It acts as compensation for executing the loan. This fee is common with Alternative mortgage solutions, but not really with Prime mortgage solutions. These alternative lenders typically charge 1% of the total loan amount for the origination fee. For example, if you take out a $400,000 mortgage, the fee would be $4,000.

Lien

A claim on real or personal property for the payment of some undischarged debt or duty. Lien establishes the lender’s collateral hold on your property.

For example, when you buy a house with a mortgage loan, the lender registers a lien on the property with the land registry. The lien may not get automatically upon full payment of the mortgage loan. The lien has to be discharged, which is a legal process of releasing the collateral hold on your property.

Learn More: Title Insurance: Everything You Need To Know

Listing Agreement

A listing agreement is a contract under which a property owner (as principal) authorizes a real estate broker (as agent) to find a buyer for the property on the owner’s terms. In exchange for this service, the owner pays a commission. The listing agreement grants the real estate broker the authority to act as the owner’s agent in the sale of the property. This agreement generally includes but is not limited to, the length of the listing period, the desired sales price, and the amount of the commission.

Loan-to-value Ratio

Loan-to-value (LTV) ratio is a risk assessment measure used by lenders to determine how much risk they take for a specific mortgage loan request.

This ratio measures the relationship between the loan amount and the property’s market value securing the loan. The lower your LTV, the less risky a mortgage application appears to lenders.

Learn More: What Is A Loan To Value (LTV) Ratio And Why It Is Important In Mortgage

Lump-Sum Payment Option

In a mortgage, lump-sum payment is a choice to make a large sum towards your mortgage loan each year. You may charge a prepayment penalty if the amount paid in a lump sum is above your prepayment privilege.

Maturity

The end of the mortgage’s term.

Maturity Date

This is the last day of the term of your mortgage agreement. On this date, you will be required to renew your mortgage or pay the mortgage off, if you still have a balance owing. You can choose to renew the mortgage with the existing lender, or renew it with a new lender, refinance the mortgage to take advantage of the equity in the property for major cash expenditure or sell the property to get the money to pay off the lender.

Maximum Mortgage Amount

The maximum dollar that a lender is willing to offer you. This amount is based on the value of the property, your income, credit, and outstanding debt exposures.

Monoline Lender

In mortgage financing, Monoline lenders only offer mortgages or loans secured against real estate assets. They don’t offer any other lending products, such as credit cards or even chequing accounts, and usually don’t have retail locations. These types of mortgage lenders do not take deposits.

They can be publicly traded corporations like First National, Home Trust, or Equitable Bank; Privately held corporations like Haventree Bank, Bridgewater, and more; Mortgage Investment Corporations like Community Trust Company.

Mortgage

A mortgage is a type of loan used to buy a house or other forms of real estate property. A mortgage is a secured loan. A mortgage allows the lender to take possession of the property if you fail to repay the loan as outlined in the agreement.

Learn More: What Is A Mortgage Loan In Canada?

Mortgage Agent

A mortgage agent is a licensed mortgage professional who provides mortgage financing services like arranging mortgage financing for you, under a licensed mortgage brokerage.

Learn More: Why Use A Mortgage Broker Instead Of A Bank? (Pros & Cons)

Mortgage Arrears

An amount that is overdue. Your mortgage is overdue when one or more of your regular payments have not been made.

Mortgage Broker

A mortgage broker is a licensed mortgage professional who provides mortgage financing services like arranging mortgage financing for you, under a licensed mortgage brokerage. A Mortgage Broker may also be responsible for supervising several Mortgage Agents who work at their Mortgage Brokerage.

Mortgage Brokerage

A Mortgage Brokerage is a business that is licensed by a mortgage regulatory authority to carry out mortgage activities, such as arranging mortgages in the licensed province or territory. A Mortgage Brokerage usually employs several Mortgage Brokers and Agents who work with clients directly to find the best mortgage for their individual needs.

Mortgage lenders usually pay mortgage Brokerages through commission. However, some brokerages may charge borrowers added fees. It’s essential to go over the details with a Mortgage Broker/Agent in your first meeting.

Mortgage Commitment Letter

A mortgage commitment letter establishes the official approval of your mortgage loan. This letter contains the terms of the mortgage loan and the conditions you have to fulfill to get the loan funded.

This letter confirms the lender’s “conditional willingness” to finance your mortgage transaction.

Learn More: What Is A Mortgage Commitment Letter?

Mortgage Discharge

A legal document issued by mortgage lenders to release the borrower from all obligations and covenants contained in a mortgage agreement when the mortgage loan is paid in full and close.

The process releases the lender’s collateral hold on your property. You are legally released from all the mortgage obligations with a mortgage discharge.

Learn More: What Is A Mortgage Discharge: Everything You Need To Know

Mortgage Guarantor

A guarantor is one who promises to make the required mortgage payment or perform the required mortgage obligations contracted by another in the event the original borrower fails to pay or to perform the obligations as contracted. As a guarantor, you “guarantee” someone else’s mortgage by promising to repay the debt if they can’t afford to because you are involved in helping someone else get approved for a mortgage.

Mortgage Default Insurance

Mortgage default insurance (also known as mortgage insurance) is an insurance policy to protect lenders if a borrower defaults on their mortgage obligations. This insurance does not protect the borrower. In Canada, borrowers are required by law to buy mortgage default insurance when buying a home with less than a 20% down payment.

Learn More: Mortgage Default Insurance (CMHC Insurance)

Mortgage Interest Rate

It is the price of a mortgage loan. This rate is applied to the mortgage loan borrowed to determine the monthly payment amount. A mortgage interest rate is based on factors like the loan-to-value ratio, mortgage type, mortgage term, income type of the borrower, and the borrower’s creditworthiness.

Learn More: What is a Mortgage Rate? A Complete Mortgage Rate Breakdown

Mortgage Life Insurance

Mortgage life insurance is a form of insurance designed to pay off or pay down your mortgage loan if you die, get a terminal illness, or suffer an accident

Mortgage Term

A mortgage term is the length of your mortgage contract with a lender. In Canada, mortgage terms for fixed-rate mortgages are usually between six months to 10 years, and mortgage terms for variable-rate mortgages are usually 6-months, 3-years, and 5-years.
You can renew or refinance your mortgage at the end of your mortgage term without incurring a penalty.

Mortgagee

A mortgagee is the mortgage lender. This is term is often used in a mortgage contract

Mortgagor

A mortgagor is a borrower of the mortgage loan. This is term is often used in a mortgage contract

No Cost Switching of Payment Option

This option allows the borrower to change the payment frequency (monthly/semi-monthly/bi-weekly/weekly).

Offer to Purchase

A written contract outlining the terms under which a buyer agrees to buy a property. The offer may be conditional on the buyer arranging mortgage financing or selling a current home, or firmed (accepted) with no condition.

Open Mortgage

A mortgage can be prepaid at any time during the term without paying a prepayment charge.

Learn More: Open Term Mortgage Or Closed Term Mortgage, Which One Is Better For You

Payment Frequency

How often do you choose to make your mortgage payments – weekly, bi-weekly, semi-monthly, monthly, accelerated weekly, and accelerated bi-weekly.

Payment Increase Option

It is an option to increase your regular payment by a certain percentage once per year without an administrative fee. The extra payment amount goes directly toward paying down your principal loan. You can continue executing the option every year for the remainder of the term, at the approved rate.

You may submit an application to your lender for consideration if you wish to increase the approved payment increase percentage above the initial approved level.

Portable Mortgage

A mortgage with an option that allows a buyer to transfer a current mortgage to a new property (typically subject to credit approval and a property appraisal).

Learn More: Mortgage Porting: Everything You Need To Know

Porting

Moving your existing mortgage from your current home to your new home. When you port your mortgage, your mortgage balance, interest rate, and term do not change. Porting allows you to avoid early prepayment charges.

Learn More: Mortgage Porting: Everything You Need To Know

Power of Sale

Power of sale is a mortgage clause that permits the lender to foreclose on and sell a property if the borrower defaults on the mortgage.

Prepayment Charge

A fee you pay the lender when you pay all or part of a closed mortgage early.

Prepayment Clause

A provision in a mortgage agreement giving the borrower the privilege to pay all or part of the mortgage loan in advance of the maturity date without penalty.

Prepayment Penalty

A prepayment penalty is a fee that your mortgage lender may charge if you:

Pay down your mortgage more than the allowable amount,
break your mortgage contract, or
transfer your mortgage to another lender before the end of your term.

Prepayment Privilege

A prepayment privilege gives you the ability to pay additional amounts toward your mortgage on top of your regular payments, without having to pay a prepayment penalty.

With a prepayment privilege, you can;

increase your regular payments by a certain percentage
make lump-sum payments up to a certain amount or percentage of the original mortgage amount

Principal

The amount of money borrowed for a mortgage.

Private Mortgage

A private mortgage is a short-term alternative mortgage financing solution for borrowers who are unable to qualify with mainstream mortgage lenders like banks, credit unions, and other monoline mortgage lenders, probably due to their credit score or income.

Learn More: Private Mortgage: Everything You Need To Know

Property Appraised Value

An estimate of the market value of a property based by a licensed appraiser upon completion of a thorough inspection of the property and review of comparable sold properties. The property appraised value is based on an appraiser’s knowledge, experience, and analysis of the property.

Learn More: Home Appraisal In Canada: Everything You Need To Know

Property Legal Description

The written geographical description of a property is described in the land register. The property legal description will contain parameters like lot numbers, land features, parallels and meridians, and total acreage.

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Qualifying Ratios

Also known as the income-to-debt ratio or debt-service ratio, is a calculation used by lenders to determine if a borrower qualifies for a mortgage loan. These ratios assess the borrower’s capacity and capability to make the required mortgage payment without stressing their financing situation.

Refinancing

In mortgage financing, refinancing is the act of replacing your existing mortgage with a new mortgage under different terms. Homeowners usually choose to refinance their mortgage loans to access additional funds for debt consolidation and pay for major expenses. Mortgage refinance also helps to take advantage of lower interest rates.

Learn More: Refinancing Your Mortgage

Renewal

When you sign on a new mortgage term at the end of your existing term, without change to your mortgage balance. If you still want to own the property, you will have to renew or refinance your mortgage at the end of your existing term.

Mortgage renewal provides you with an opportunity to renegotiate the length of the new mortgage contract, mortgage rate, and even prepayment privileges.

Learn More: Mortgage Renewal: Everything You Need To Know

Readvanceable Mortgage

A readvanceable mortgage is a two-in-one type of mortgage – a standard mortgage and a line of credit combined and offered as one mortgage product.

This mortgage’s line of credit portion is structured to mimic standard or standalone Home Equity Line Of Credit (HELOC) characteristics. You can re-borrow from the HELOC as you pay it down. But you are not allowed to re-borrow from the standard mortgage portion of the loan.

A readvanceable mortgage is a great way to secure consistent access to your home’s equity in cash.

Learn More: Readvanceable Mortgage: Everything You Need To Know

Renewal Agreement

An agreement that outlines your mortgage renewal terms.

Learn More: Mortgage Renewal: Everything You Need To Know

Reverse Mortgage

A reverse mortgage is a loan that allows you to get money from your home equity without having to sell your home. The loans are typically promoted to older homeowners and do not require monthly mortgage payments. The loan balance is due at the end of the loan period or upon the homeowner’s death and is usually settled by the heirs who sell the property to meet the outstanding obligation.

Sagen (formerly known as Genworth Canada)

Sagen is a private sector supplier of mortgage default insurance in Canada, making homeownership more accessible to first-time homebuyers. This insurance protects the mortgage lender against loss if a borrower defaults.

Learn More: Mortgage Default Insurance

Second Mortgage

It is a mortgage loan made in addition to the homeowner’s primary mortgage. This loan takes the second lien position of the property. Second mortgage lenders have a second priority of the proceeds if the property has to be foreclosed.

Learn More: Second Mortgage: Everything You Need To Know

Skip-a-Payment Option

It is a mortgage payment option that allows the borrower to skip one or more mortgage payments without any penalty or without the mortgage going into default.

Third Mortgage

It is a mortgage loan made in addition to the homeowner’s primary and second mortgage. This loan takes the third lien position of the property. Third mortgage lenders have a third priority of the proceeds if the property has to be foreclosed.

Title Fraud

It is the act of stealing your identity and forging documents by a fraudster to either refinance your home or sell your home. The fraudster walks away with the proceeds[on completion of the fraud transaction.

Title Insurance Policy

Title insurance is an insurance policy to protect both the homeowner and the mortgage lender from financial loss sustained from problems related to the title of your home.

The policy can also provide coverage against losses caused by insured defects like rights of way, encroachments (from neighbouring properties), unpaid liens, etc., to the property’s title.

Lenders may require you to get title insurance before closing the mortgage loan.

This insurance and related title searches ensure that the property is free and clear. Because the property will be used as collateral for the mortgage loan, the lender needs to be certain that the title is free and clear of any lien that could jeopardize the mortgage loan.

Learn More: Title Insurance: Everything You Need To Know

Title Search

It is an examination of public records to determine and confirm a property’s legal ownership as well as find out what claims or liens are on the property. A clean title is required for any real estate transaction to be completed.

Learn More: Title Insurance: Everything You Need To Know

Total Debt Service (TDS) Ratio

It is a financial measure used by mortgage lenders to assess borrowers’ ability to support the required mortgage payment and their existing debts at their current income level.
This value is expressed as a percentage of the annual gross income to total debts, which includes all other recurring debts of the borrowers, in addition to mortgage and property costs (mortgage payment, property tax, heat, and condo fee). The lower the ratio, the better.

Variable Rate Mortgage

A variable-rate mortgage is a mortgage loan with interest that may change during the term of the mortgage contract. Interest rates of variable-rate mortgages are influenced by economic factors like inflation, the housing market, employment, and more. Changes in any of these factors can lead to changes in the rate of these mortgage loans.

Learn More: Variable Rate Mortgage; Everything You Need To Know

Vendor Take-Back Mortgage (or Seller Take-Back Mortgage)

Also called Seller Take-Back Mortgage is a form of mortgage that allows the seller of a real estate property to extend a loan to the buyer for some portion or all of the sales price using their equity in the property. The seller retains equity in the home and continues to own a percentage equal to the loan amount until the vendor take-back mortgage is paid in full.

Vendor’s Lien

Also known as a seller’s lien, is a notice registered on title by the property seller, protecting the seller from the unpaid balance of the purchase price. The seller can repossess the property under certain conditions.

Wage Garnishment

Wage garnishment is a legal procedure in which a court orders that your employer withholds a specific portion of your paycheck to pay a debt. It is a legal process instructing a third party to deduct payments directly from a debtor’s wage or bank account.

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