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Mortgage Glossary Canada: A-Z of Mortgage Terms (2026)

Updated

This glossary covers every mortgage term you will encounter in Canada, from initial research through closing day and beyond. Terms are organized alphabetically with links to detailed guides where available.

A

Accelerated Bi-Weekly Payment — A payment frequency where you pay half your monthly payment every two weeks. Because there are 26 bi-weekly periods in a year (vs 24 semi-monthly), you effectively make one extra monthly payment per year, paying off your mortgage faster.

Adjustable Rate Mortgage (ARM) — A variable-rate mortgage where the payment amount changes when the prime rate changes. Unlike a standard variable-rate mortgage (where the payment stays the same and the interest/principal split adjusts), an ARM payment rises or falls with rate movements. See fixed vs variable rates.

Amortization — The total period over which a mortgage is repaid through regular payments. Standard in Canada is 25 years; 30-year amortization is available for conventional mortgages and qualifying insured mortgages. See term vs amortization.

Amortization Schedule — A table showing each payment broken into principal and interest over the life of the mortgage. Early payments are mostly interest; later payments are mostly principal. See amortization schedule guide.

Appraisal — A professional assessment of a property’s market value, ordered by the lender to confirm the home is worth the purchase price. See home appraisal guide.

APR (Annual Percentage Rate) — The total annual cost of borrowing expressed as a percentage, including the interest rate plus fees (insurance premiums, certain closing costs). APR is always higher than the posted interest rate. See APR vs interest rate.

Assumable Mortgage — A mortgage that a buyer can take over from the seller, keeping the existing rate and terms. Advantageous when the seller’s rate is below current market rates. See assumable mortgage guide.

B

B-Lender — A lender that serves borrowers who don’t meet A-lender (big bank) qualification criteria. B-lenders charge higher rates but have more flexible approval standards for bad credit, self-employment, or non-standard income. See B-lender guide.

Basis Point (bps) — One-hundredth of a percentage point (0.01%). A rate change from 4.50% to 4.75% is a 25 basis point increase. See basis points explained.

Blend-and-Extend — A renewal strategy where your lender blends your current rate with a new rate and extends your term, avoiding a penalty for breaking the mortgage early. See blend-and-extend guide.

Blended Mortgage — A mortgage where two rates are combined (blended) into a single rate. Different from blend-and-extend. See blended mortgage guide.

Bridge Financing — A short-term loan that covers the gap when you buy a new home before selling your existing one, so you can access your equity for the down payment before the sale closes. See bridge loan guide.

Broker — See Mortgage Broker.

C

Canada Guaranty — One of three mortgage default insurers in Canada (alongside CMHC and Sagen). Provides insurance for high-ratio mortgages.

Cash-Back Mortgage — A mortgage where the lender gives you a lump sum of cash (typically 1–5% of the mortgage) at closing in exchange for a higher interest rate. See cash-back mortgage guide.

CMHC (Canada Mortgage and Housing Corporation) — Canada’s national housing agency and the largest mortgage default insurer. CMHC insures high-ratio mortgages, administers the CSSLP, and publishes housing data. See CMHC insurance explained.

Closed Mortgage — A mortgage that restricts prepayment to the prepayment privileges defined in the contract. Paying it off entirely before the term ends triggers a penalty. Most Canadian mortgages are closed. See open vs closed.

Closing Costs — All costs beyond the purchase price incurred when buying a home: land transfer tax, legal fees, title insurance, property tax adjustments, and more. Budget 1.5–4% of the purchase price. See closing costs guide.

Closing Day — The date the sale is finalized: ownership transfers, funds are exchanged, and the mortgage is registered. See offer to closing process.

Collateral Mortgage — A mortgage registered for a higher amount than the actual loan (often up to 125% of the property value). This allows the borrower to access additional funds later without re-registering the mortgage. Harder to switch lenders at renewal. See collateral vs conventional.

Conventional Mortgage — A mortgage where the down payment is 20% or more, meaning mortgage default insurance is not required. Also called an uninsured mortgage. See conventional mortgage guide.

Co-Signer — A person who signs the mortgage alongside the borrower and is equally responsible for repayment. Used when the primary borrower doesn’t qualify alone. See co-signing guide.

Credit Score — A numerical rating (300–900 in Canada) reflecting your creditworthiness. Equifax and TransUnion are the two Canadian credit bureaus. Most A-lenders require 680+ for the best rates. See credit score guide and credit score needed for a mortgage.

D

Debt Service Ratio — See GDS and TDS. These ratios determine how much of your income can go toward housing and debt payments. See GDS/TDS explained.

Default — Failing to meet the obligations of the mortgage contract (primarily, missing payments). Prolonged default can lead to power of sale or foreclosure.

Deposit — Money paid by the buyer when an offer is accepted, held in trust until closing. Different from the down payment.

Discharge — The legal process of removing a mortgage from the title when the mortgage is fully paid off or transferred. Discharge fees typically range from $200–$400.

Down Payment — The portion of the purchase price paid in cash (not borrowed via the mortgage). Minimum in Canada is 5% for homes up to $500,000 and 20% for homes over $1,500,000. See down payment guide.

E

Equity — The difference between your home’s market value and your outstanding mortgage balance. A home worth $700,000 with a $400,000 mortgage has $300,000 in equity. See how much is my house worth.

F

FHSA (First Home Savings Account) — A registered account that lets you save up to $40,000 ($8,000/year) tax-free for a first home purchase. Contributions are tax-deductible (like an RRSP) and withdrawals for a qualifying home are tax-free (like a TFSA). See FHSA guide.

First-Time Home Buyer — In Canada, generally defined as someone who has not owned a home (or whose spouse has not owned a home) in the current year or the preceding four calendar years. Multiple first-time buyer programs use this definition.

Fixed-Rate Mortgage — A mortgage where the interest rate is locked for the entire term. Your payment amount stays the same regardless of rate changes. See fixed vs variable.

Foreclosure — A legal process where the lender takes ownership of the property when the borrower defaults. Used in Alberta and some other provinces. In Ontario, the equivalent process is called power of sale.

G

GDS (Gross Debt Service) Ratio — The percentage of your gross income that goes toward housing costs: mortgage payment + property taxes + heating + 50% of condo fees. Maximum is 39% for insured mortgages (some lenders use 35%). See GDS/TDS explained.

Guarantor — Similar to a co-signer — a person who guarantees mortgage repayment but does not necessarily appear on the property title.

H

HBP (Home Buyers’ Plan) — A program allowing first-time buyers to withdraw up to $60,000 from their RRSP for a down payment. The amount must be repaid over 15 years. See Home Buyers’ Plan guide.

HELOC (Home Equity Line of Credit) — A revolving line of credit secured by your home equity. Maximum LTV of 65% for the HELOC portion. Interest-only payments required. See HELOC guide and HELOC calculator.

High-Ratio Mortgage — A mortgage where the down payment is less than 20% of the purchase price (LTV greater than 80%). Mortgage default insurance is required. See high-ratio mortgage guide.

I

Insured Mortgage — A mortgage backed by mortgage default insurance. Required for high-ratio mortgages. Benefits the lender (not the borrower) by covering losses in case of default. Results in lower interest rates despite higher LTV. See insured vs uninsured.

Interest Adjustment Date (IAD) — The date from which your regular mortgage payments begin. There is a cost to cover the interest from your closing date to the IAD. See IAD explained.

Interest Rate Differential (IRD) — A method of calculating the penalty for breaking a fixed-rate mortgage. Based on the difference between your current rate and what the lender can charge for the remaining term. Often results in penalties of $10,000–$25,000+. See penalty calculation guide.

J

Joint Tenancy — A form of co-ownership where two or more people each own the entire property equally. When one owner dies, their share automatically passes to the surviving owner(s). See joint tenancy vs tenants in common.

L

Land Transfer Tax (LTT) — A provincial or municipal tax charged when property ownership changes hands. Rates vary by province. First-time buyers may qualify for rebates. See land transfer tax guide.

LTV (Loan-to-Value) Ratio — The mortgage amount divided by the property value, expressed as a percentage. A $400,000 mortgage on a $500,000 home is 80% LTV. Key thresholds in Canada: over 80% requires insurance; HELOCs capped at 65% LTV. See LTV calculator.

M

Maturity Date — The date your current mortgage term ends. You must renew, refinance, or pay off the balance at maturity.

MIC (Mortgage Investment Corporation) — A company that pools investor funds to lend as mortgages, typically at higher rates. MICs serve borrowers who don’t qualify with banks. See types of lenders.

Mortgage Broker — A licensed professional who arranges mortgages between borrowers and lenders. Brokers access multiple lenders and are paid by the lender (no cost to the borrower in most cases). See mortgage broker guide.

Mortgage Default Insurance — Insurance that protects the lender if the borrower defaults. Required in Canada when the down payment is less than 20%. Provided by CMHC, Sagen, or Canada Guaranty. The premium (0.60–4.00% of the mortgage) is added to the mortgage balance. See CMHC insurance guide.

N

Negative Amortization — A situation where the mortgage balance grows instead of shrinking because the payments don’t cover the full interest. This can happen with some variable-rate mortgages when rates rise significantly. See negative amortization guide.

Non-Recourse Mortgage — A mortgage where the lender can only claim the property (not the borrower’s other assets) in case of default. Alberta is the main non-recourse province in Canada. See recourse vs non-recourse.

O

Open Mortgage — A mortgage that can be paid off at any time without penalty. Open mortgages have higher interest rates than closed mortgages. See open vs closed.

OSFI (Office of the Superintendent of Financial Institutions) — The federal regulator for Canadian banks. Sets the stress test rules (Guideline B-20) and capital requirements that affect mortgage rates and availability. See OSFI capital requirements impact.

P

Portability — The ability to transfer your existing mortgage (rate, terms, balance) to a new property when you move. Avoids the penalty for breaking the mortgage. See mortgage portability guide.

Power of Sale — The process in Ontario and some other provinces where a lender sells a property to recover the mortgage debt after borrower default. The lender does not take ownership (unlike foreclosure) — they sell on behalf of the borrower.

Pre-Approval — A conditional commitment from a lender confirming how much they will lend you, at a specific rate, held for 90–120 days. Requires income verification and a credit check. See pre-approval guide.

Prepayment Privilege — The right to make extra payments on your mortgage without penalty. Most closed mortgages allow 10–20% of the original principal per year. See prepayment privileges guide.

Prime Rate — The interest rate banks charge their most creditworthy customers. Variable mortgage rates are set relative to prime (e.g., prime minus 0.50%). See Canada prime rate explained.

Principal — The amount of the mortgage that represents the actual loan (not interest). Each regular payment includes both principal and interest. Over time, a larger portion of each payment goes toward principal.

Q

Qualifying Rate — The interest rate used to determine if you can afford a mortgage under the stress test. Currently the higher of your contract rate + 2% or 5.25%. See stress test explained.

R

Rate Hold — A guarantee from a lender that a specific rate will be held for you for a set period (typically 90–120 days) while you shop for a home. See rate lock explained.

Readvanceable Mortgage — A combined mortgage and HELOC product where the HELOC limit increases as the mortgage principal is paid down, keeping total borrowing capacity constant. See readvanceable mortgage guide.

Recourse Mortgage — A mortgage where the lender can pursue the borrower’s other assets if the property sale doesn’t cover the outstanding debt. Most Canadian provinces have recourse mortgages. See recourse vs non-recourse.

Refinancing — Replacing your existing mortgage with a new one — often for a larger amount, different rate, or different terms. Requires re-qualification. See refinancing guide.

Renewal — At the end of your mortgage term, you negotiate new terms for the next period. You can renew with the same lender or switch. See renewal guide.

Reverse Mortgage — A mortgage for homeowners aged 55+ that lets them borrow against home equity without making regular payments. The loan is repaid when the home is sold. See reverse mortgage guide.

S

Sagen — One of three mortgage default insurers in Canada (alongside CMHC and Canada Guaranty). Formerly Genworth Financial Canada.

Smith Manoeuvre — A strategy to make mortgage interest tax-deductible by using a readvanceable mortgage to invest. As you pay down your mortgage, you borrow back the principal and invest it, making the interest on the investment portion tax-deductible. See using home equity for investment.

Statement of Adjustments — A document prepared by the lawyer/notary at closing that accounts for all financial adjustments between buyer and seller (prepaid property taxes, utility credits, etc.). See statement of adjustments explained.

Stress Test — The federal requirement to qualify for a mortgage at a rate higher than the one you will actually pay. See stress test guide.

T

TDS (Total Debt Service) Ratio — The percentage of your gross income that goes toward all debt obligations: housing costs (GDS components) plus car payments, credit card minimums, student loans, lines of credit, and other debts. Maximum is 44% for insured mortgages. See GDS/TDS explained.

Tenants in Common — A form of co-ownership where each owner holds a specific share of the property (not necessarily equal). Shares can be sold or bequeathed independently. See joint tenancy vs tenants in common.

Term — The length of your current mortgage contract (rate agreement). Common terms in Canada: 1, 2, 3, 4, 5, 7, and 10 years. The 5-year fixed is the most popular. See term vs amortization.

Title Insurance — Insurance that protects against defects in a property’s title (liens, fraud, encroachments, zoning issues). Required by most lenders. See title insurance guide.

Trigger Rate — The prime rate at which a variable-rate mortgage payment no longer covers the interest, causing the mortgage to begin negatively amortizing. See trigger rate explained.

Trigger Point — The point at which the outstanding balance of a variable-rate mortgage reaches a predefined threshold (typically the original principal amount), causing the lender to require increased payments. See trigger point options.

U

Underwriting — The lender’s process of evaluating a mortgage application — reviewing income, credit, property value, and risk to decide whether to approve the loan and at what terms.

Uninsured Mortgage — A mortgage that is not backed by mortgage default insurance. Requires a down payment of at least 20%. See insured vs uninsured.

V

Variable-Rate Mortgage — A mortgage where the interest rate fluctuates with the prime rate. The standard Canadian variable mortgage keeps the payment amount the same while adjusting the split between principal and interest. See fixed vs variable.

Vendor Take-Back (VTB) Mortgage — A mortgage where the seller provides financing to the buyer, acting as the lender for part or all of the purchase price. See VTB guide.