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Mortgage Definitions & Glossary for Canadians
Understanding Common Mortgage Terms
Mortgage terminology can make an already complicated decision feel even harder.
Use this Canadian mortgage glossary to understand common terms related to mortgage qualification, rates, home buying, refinancing, home equity, penalties and mortgage payments.
When a term connects to a topic you want to explore in more detail, follow the related Haystax Mortgage guide for a deeper explanation.
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Adjustable Rate Mortgage (ARM)
A mortgage where the interest rate can change during the term, usually in response to changes in the lender's prime rate. Depending on the mortgage, payments may change or the amount applied to principal and interest may change. Remove the current specific prime discount, introductory rate, 20% privilege and 90% financing claims.
Agreement of Purchase and Sale
A legally binding contract between a buyer and seller setting out the terms and conditions of a real estate transaction. Buyers should obtain appropriate real estate and legal advice before signing.
Amortization Period
The total period over which a mortgage is scheduled to be repaid. A longer amortization generally lowers regular payments but increases total interest costs.
Appraisal
An estimate of a property's market value prepared for purposes such as mortgage financing, refinancing or a real estate transaction.
Assets
Things you own that have financial value, such as savings, investments, real estate and other property. Lenders may consider assets when assessing a mortgage application.
Assumption Agreement
An agreement that may allow a buyer to assume responsibility for an existing mortgage, subject to lender approval and the terms of the mortgage.
Blended Payments
The regular mortgage payment that combines both principal and interest. The current definition is duplicated from Assumption Agreement and should definitely be replaced.
Bridge Financing
Short-term financing that may help cover the timing gap when a new home closes before the sale of an existing home. Eligibility, rates and fees vary by lender.
CMHC
Canada Mortgage and Housing Corporation, a federal Crown corporation involved in Canada's housing system and one provider of mortgage loan insurance. Avoid implying CMHC is the only insurer.
Closed Mortgage
A mortgage that generally limits how much principal can be prepaid during the term without a penalty. Prepayment privileges vary by contract.
Closing Date
The date the real estate transaction is completed, ownership transfers and the buyer generally becomes entitled to possession according to the contract.
Collateral
Property or another asset pledged as security for a loan. A mortgage is secured by real property.
Conventional Mortgage
A mortgage with a loan-to-value ratio of 80% or less and therefore generally not requiring mortgage default insurance.
Convertible Mortgage
A mortgage that allows the borrower to convert from one mortgage term or type to another under conditions set by the lender. Remove the current six-month/product-specific claims.
Credit Scoring
A method lenders and credit bureaus use to assess credit risk based on information such as payment history, balances, credit utilization and account history.
Demand Loan
A loan that may become repayable when demanded by the lender, subject to the terms of the agreement.
Deposit
Money a buyer provides with or after an accepted offer according to the purchase contract. It is generally held in trust and becomes part of the funds applied to the purchase on closing.
Equity
The difference between a property's current value and the debts secured against it.
Equity Mortgages
Financing primarily supported by the amount of equity in a property. Qualification, pricing and lender requirements vary and may differ from traditional mortgage underwriting. Remove the current blanket 80%, second-mortgage and income-verification claims.
First Mortgage
The mortgage registered in first priority against a property, generally giving that lender first claim on proceeds if the property is sold under enforcement.
Fixed-Rate Mortgage
A mortgage where the interest rate remains fixed for the selected term.
Fixed-Term Mortgage
A mortgage with an interest rate and contractual term that remain in place for a specified period. Remove the recommendation that longer fixed terms are automatically better in low-rate environments.
Gross Debt Service (GDS)
The percentage of gross household income used for housing costs such as mortgage payments, property taxes, heating and generally 50% of condo fees. FCAC currently uses 39% as a general affordability guideline, although lender criteria can vary.
High-Ratio Mortgage
A mortgage where the borrower has less than 20% equity or down payment and mortgage default insurance is generally required, subject to applicable rules. Remove the second-mortgage workaround language.
Home Equity Line of Credit (HELOC)
A revolving line of credit secured by home equity. A standalone HELOC may generally allow borrowing up to 65% of the home's value, subject to qualification and other secured financing.
Interest Adjustment Date (IAD)
The date from which regular mortgage interest calculations and scheduled payments are aligned after closing. Any interim interest treatment depends on the mortgage and closing arrangement. Remove the advice that closing near month-end is “always better.”
Interest-Only Mortgage
A mortgage or loan structure where scheduled payments may cover interest without reducing principal for a defined period. Terms and availability vary by lender.
Mortgage
A loan secured against real property. The borrower agrees to repay the debt according to the mortgage terms, and the lender holds security against the property.
Mortgagee
The lender or creditor that holds the mortgage security.
Mortgagor
The borrower who grants the mortgage security over the property.
Multiple Term Mortgages
A mortgage structure that divides borrowing into multiple portions with different rates or terms. Availability and features vary by lender. Remove the “up to five parts” and stress commentary.
Open Mortgage
A mortgage that generally allows the borrower to repay some or all of the balance during the term without a prepayment penalty. Rates and terms vary, so remove the current 0.75%–1.00% premium claim.
P.I.T. (Principal, Interest, Tax)
Principal, interest and property taxes. Some lenders may collect property taxes with the mortgage payment while others allow borrowers to pay taxes separately.
Portable Mortgages
A mortgage that may allow qualifying borrowers to transfer some or all existing mortgage terms to a new property, subject to lender approval and timing requirements.
Pre-Approved Mortgage
A lender or mortgage professional's preliminary assessment of how much a borrower may qualify to borrow based on available financial information. It is not final mortgage approval and the property must still qualify. Remove the “free,” “best rate,” and 120-day guarantee claims.
Pre-Payment Penalty
A fee a lender may charge when a borrower exceeds permitted prepayments, breaks the mortgage early, transfers it before maturity or pays it out early. The calculation depends on the mortgage contract and lender.
Prime Rate
A benchmark lending rate set by individual financial institutions and commonly used to price variable-rate mortgages and lines of credit.
Principal
The amount of mortgage debt outstanding before future interest charges. Payments that reduce principal lower the remaining mortgage balance.
Rate Commitment
The period during which a lender may hold or guarantee a mortgage rate, subject to its terms and borrower qualification. The period varies by lender and transaction.
Refinance
Replacing or restructuring an existing mortgage with new financing, often to change terms, access equity, consolidate debt or meet another financing need.
Renewal
The point at the end of a mortgage term when the remaining balance must be renewed, repaid, transferred or otherwise refinanced. Remove the blanket “transfer at no cost” claim.
Second Mortgage
A mortgage registered behind a first mortgage in priority. It is generally secured by remaining home equity and may carry different rates, fees and qualification requirements.
Secured Line of Credit
A revolving line of credit secured against an asset such as a home. A HELOC is a common example. Remove the “rates as low as prime” claim and tax-deductibility suggestion.
Switch
Moving a mortgage from one lender to another, often at renewal. Costs, qualification and conditions vary, so remove “at no cost to you.”
Term
The period your mortgage contract and its agreed conditions remain in effect before renewal or repayment. Mortgage terms are shorter than the overall amortization period.
Total Debt Service (TDS)
The percentage of gross income required for housing costs plus other monthly debt obligations. FCAC currently uses 44% as a general guideline, although lender criteria can vary.
Variable-Rate Mortgage
A mortgage with an interest rate that changes based on movements in the lender's prime rate. Depending on the product, payments may change or the principal-interest allocation may change.
Vendor Take Back Mortgage
Financing provided by the property seller to the buyer and secured against the property, subject to the terms agreed between the parties and applicable legal requirements.
Need More Than a Definition?
Understanding the terminology is only the first step. Explore our Mortgage Resources for detailed guides on buying, renewing, refinancing, home equity, affordability and other common mortgage decisions.
Mortgage Agent Career Resources
Explore guides designed to help you understand the mortgage agent career, from entering the industry and selecting a brokerage to developing technical skills, building clients and planning long-term career growth.
How to Become a Mortgage Agent in Canada
Understand provincial licensing, choosing a brokerage, training and the steps involved in beginning your mortgage career.
What Does a Mortgage Agent Do?
Explore the day-to-day responsibilities, skills and professional expectations involved in working as a mortgage agent.
Mortgage Agent Career Guide
See how a mortgage career can progress from new agent through production, mentoring, leadership and potential business ownership.
How to Choose a Mortgage Brokerage
Learn what to compare before joining a brokerage, including compensation, training, technology, leadership, marketing and support.
Mortgage Agent Training & Onboarding
Understand what effective agent development should include, from onboarding and compliance to underwriting, lender knowledge and business growth.
How Mortgage Agents Get Clients
Learn how agents create a client pipeline through relationships, referrals, follow-up, CRM, brokerage opportunities and marketing.
Why Work With Haystax Mortgage?
More than one lender. More than one option.
A bank can generally offer you its own mortgage products. A mortgage brokerage can explore options from a broader range of lenders.
But access to lenders is only part of the value.
A Haystax Mortgage professional can help you understand:
how different mortgage structures compare
which lender requirements may fit your situation
the trade-offs between rate and flexibility
penalties and prepayment privileges
how your mortgage fits your longer-term financial plans
You're at HOME with Haystax!
Frequently Asked Questions
What is the first step when getting a mortgage?
The first step is understanding your current financial position. That usually means reviewing your income, debts, credit, down payment and approximate monthly budget before you start looking at properties.
A mortgage pre-approval can help establish a realistic price range and identify any issues that should be addressed before you make an offer.
How much mortgage can I afford?
The amount you may qualify for depends on your income, debts, down payment, credit, mortgage rate and expected housing costs.
But the maximum mortgage a lender will approve is not necessarily the amount you should borrow. Your mortgage payment should leave room for savings, emergencies and the rest of your financial life.
How much down payment do I need to buy a home?
The minimum down payment depends on the purchase price and type of mortgage. In many cases, buyers can purchase with less than 20% down, although mortgage default insurance may then be required.
You should also keep money available for closing costs rather than using every available dollar for the down payment.
Should I get pre-approved before looking for a home?
Yes. A mortgage pre-approval can help you understand your approximate buying range before you start making offers.
It can also uncover credit, income or documentation issues early, when there is still time to address them.
A pre-approval is not final mortgage approval, because the property and your financial circumstances still need to satisfy the lender's requirements.
Should I choose a fixed or variable mortgage?
Neither option is automatically better.
A fixed-rate mortgage generally provides greater interest-rate certainty, while a variable-rate mortgage exposes you to changes in the lender's prime rate.
The right choice depends on your budget, tolerance for changing rates, future plans and the features of the specific mortgage.
When should I start thinking about my mortgage renewal?
Ideally, several months before your mortgage reaches maturity.
Starting early gives you time to compare your current lender's offer with other options and decide whether you want to renew, switch lenders or refinance.
Waiting until the final few days can limit your choices.
Can I use the equity in my home?
Potentially. Homeowners with sufficient equity may be able to access it through refinancing or a home equity line of credit.
Home equity can be used for purposes such as renovations, debt consolidation, another property or major planned expenses.
Because the borrowing is secured against your home, the purpose and repayment plan matter.
Can I use my mortgage to consolidate debt?
Potentially. If you have enough available home equity and qualify for additional financing, higher-interest debts such as credit cards or unsecured loans may sometimes be consolidated through mortgage financing.
The goal should be to improve your overall financial position, not simply reduce the monthly payment while extending the debt over many more years.
Why use a mortgage broker instead of going directly to a bank?
A bank generally offers its own mortgage products.
A mortgage brokerage can explore options from a broader range of lenders, which may include banks, credit unions, monoline lenders and other mortgage providers.
The value is not simply finding a rate. A mortgage professional can also help compare lender requirements, penalties, flexibility and mortgage structures based on your situation.
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