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Navigating the world of mortgages can feel overwhelming, especially with so many industry-specific terms and conditions. Whether you’re buying your first home, refinancing, or renewing your mortgage, understanding the language lenders and real estate professionals use is essential.
This glossary breaks down key mortgage terms in simple, easy-to-understand language, giving you the confidence to make informed financial decisions. At The Mortgage Doctors, we’re here to demystify the mortgage process and help you feel empowered every step of the way.
A
A legally binding contract between a buyer and seller outlining the terms and conditions of a property sale. It’s recommended to have a licensed real estate professional draft your offer to ensure proper protection.
An A Lender is a financial institution, like a major Canadian bank or credit union, that offers mortgages to borrowers who meet standard lending criteria. These lenders typically require strong credit scores, stable income, and low debt levels. A Lenders usually provide the most competitive interest rates and conventional mortgage products, as they focus on lower-risk borrowers who meet government-regulated mortgage guidelines.
The total length of time required to fully pay off a mortgage loan through regular payments, typically expressed in years.
An independent evaluation used to determine a property’s current market value.
Any items of value you own, such as cash, real estate, or investments. Assets are used to calculate your net worth and are often reviewed during loan applications.
A legal document that notifies a buyer of their responsibility for an existing mortgage. If your mortgage is being assumed by another party, request a release from the lender to be removed from future liability.
B
A mortgage lender outside of Canada’s Big Six Banks, including credit unions and non-bank institutions, that often provides more flexible lending criteria for borrowers who may not qualify with traditional lenders.
A refinancing option where you merge your current mortgage rate with a new lower rate and extend the mortgage term, helping you avoid breaking your mortgage early and facing penalties.
Mortgage payments that combine both principal and interest portions. While the payment amount stays the same, over time more goes towards the principal and less towards interest.
A competitive home buying scenario where offers are made without disclosure of competing bids, potentially leading to offers well above asking price.
A clause in some mortgages that limits you from breaking your mortgage or switching lenders unless you sell your home, often found in ultra-low-rate mortgage offers.
A short-term loan, secured by your current property, used to cover the gap between buying a new home and selling your existing one. Typically comes with a higher interest rate.
Also known as a pre-emptive offer, this is an aggressive bid submitted before the scheduled offer date in hopes of securing a property early, often at a price above asking.
C
A federal agency that insures high-ratio mortgages, helping buyers with less than 20% down to still secure a home loan. The borrower typically pays the insurance premium.
An offer to purchase a property that comes with no conditions, often used to make the offer more attractive to sellers.
A mortgage with terms that restrict early repayment or renegotiation without incurring penalties.
Expenses due at the completion of a real estate transaction, such as legal fees, land transfer taxes, and property adjustments.
The day ownership officially transfers from seller to buyer and the sale is finalized.
An asset pledged to a lender as security for a loan, which the lender can claim if the borrower defaults.
A mortgage registration allowing lenders to secure additional funds beyond the initial mortgage balance, commonly used when adding a line of credit.
Specific requirements, like securing financing or completing a home inspection, that must be met before a property sale becomes firm.
A mortgage where the borrower provides a down payment of 20% or more, eliminating the need for default insurance.
An individual who shares financial responsibility for the mortgage, typically to help the main borrower qualify for the loan.
A points-based system used by credit agencies to assess a borrower’s creditworthiness, factoring in payment history, debts, and more.
D
A general decline in prices over time, which can negatively affect economic growth and increase debt burdens.
A loan that must be repaid in full when the lender requests repayment.
An upfront sum paid by a buyer when making an offer on a property, held in trust until closing or returned if conditions aren’t met.
The upfront cash contribution toward a property’s purchase price, affecting your mortgage type and whether mortgage insurance is needed.
E
The actual interest rate you pay on your mortgage once compounding frequency is factored in, usually slightly higher than your contract rate.
The portion of your property’s value that you truly own, calculated as the market value minus any outstanding mortgage.
A mortgage primarily based on the property’s value and marketability, rather than income or credit qualifications.
An amortization period longer than the traditional 25 years, often up to 30 years, used to lower monthly mortgage payments.
F
The primary loan secured against a property, taking precedence over all other claims.
A person purchasing their first property, or who qualifies under federal guidelines to access certain homebuyer programs and incentives.
A mortgage where the interest rate stays the same for the entire term, providing predictable payments.
G
A mortgage where the interest rate stays the same for the entire term, providing predictable payments.
A person who agrees to repay a mortgage if the borrower defaults but does not take legal ownership of the property.
H
A person who agrees to repay a mortgage if the borrower defaults but does not take legal ownership of the property.
A revolving credit line secured by your home’s equity, allowing flexible borrowing and repayment options.
I
A revolving credit line secured by your home’s equity, allowing flexible borrowing and repayment options.
A loan where only interest payments are made monthly, with the principal remaining unchanged.
How often unpaid interest is added to the mortgage principal. Most fixed-rate mortgages in Canada use semi-annual compounding.
A mortgage requiring default insurance because the down payment is below 20%, protecting lenders from borrower default.
L
The ratio of your mortgage balance compared to the value of your property, used to assess risk and determine insurance needs.
M
A secured loan provided by a lender, giving you funds to purchase property while using the property itself as collateral.
The lender or financial institution providing the mortgage loan.
The borrower taking out the mortgage loan.
The three stages of mortgage approval:
Insurance protecting the lender if a borrower defaults, required on mortgages with less than a 20% down payment.
The ranking of a mortgage on a property title. First position mortgages are paid out first in the event of a sale or foreclosure.
The interest percentage charged on your mortgage, either fixed for a term or variable based on market rates.
N
An offer made without typical buyer protections, such as financing or inspection conditions.
Occurs when your payment doesn’t fully cover interest costs, causing the unpaid amount to be added to your principal balance.
O
The federal regulator overseeing Canada’s financial sector, including banks and mortgage insurers, to maintain financial stability.
A mortgage that can be paid off early without penalties, often carrying a higher interest rate for this flexibility.
P
The schedule for making mortgage payments, ranging from monthly to accelerated weekly, which can reduce your amortization.
Principal, Interest, and Property Tax — common components included in mortgage payments.
A mortgage that can be moved to a new property, helping you avoid penalties when relocating.
A fee for paying off your mortgage early or making extra payments beyond the agreed amount.
The benchmark interest rate lenders charge their most creditworthy clients, influencing variable mortgage rates.
The original loan amount borrowed, excluding interest.
R
The period a lender guarantees your mortgage rate, typically lasting up to 120 days.
Replacing your existing mortgage with a new one, potentially to lower your rate, consolidate debt, or access equity.
Insurance coverage that protects insurers themselves, sharing risk among multiple parties.
The process of signing a new mortgage term with your lender once your current term ends.
A mortgage with fewer pre-payment options or higher costs for early termination, often offered with lower rates.
S
An additional loan secured by a second charge on your property, subordinate to your first mortgage.
A mortgage registered on your title for the specific loan amount, making it easier to switch lenders at renewal.
A government-mandated calculation ensuring you could afford your mortgage if rates were to rise significantly.
Transferring your mortgage to a different lender, often done at renewal to secure better rates.
T
The length of time your mortgage agreement is in effect before renewal or renegotiation is required.
A calculation comparing your total debt payments (housing and other loans) to your gross income, used to assess borrowing capacity.
The rate at which your variable-rate mortgage payment no longer covers the interest, requiring adjustments.
The point where your mortgage balance surpasses certain limits, such as exceeding the original loan amount due to rising interest costs.
U
Final loan approval confirming that all conditions are satisfied and the mortgage can proceed to funding.
V
A mortgage with an interest rate that fluctuates based on prime rate changes but with fixed payment amounts during the term.
A variable mortgage with fixed payments; as rates shift, the interest vs. principal portions of your payment will adjust.
A situation where the seller finances part of the sale by lending the buyer a portion of the purchase price.
Our experienced team of mortgage brokers can determine your maximum mortgage amount, what your payments are likely to be and options that are available to you. Our goal is to find out our client’s mortgage needs and long term financial goals and provide solutions to meet those needs. Call us at (905) 404-8001 or (866) 452-1100 (toll free) for more information.
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