Resources
Mortgage Glossary
The Canadian mortgage terms you'll actually encounter, defined in plain language — no jargon defined with more jargon.
- Amortization
- The total length of time it would take to pay your mortgage off completely at your current payment. In Canada it's commonly 25 years, and up to 30 in some cases.
- Term
- The length of your current mortgage contract — often 5 years — after which the remaining balance must be renewed or repaid.
- Fixed rate
- An interest rate locked for the full term. Your payment and interest cost are predictable.
- Variable rate
- A rate tied to the lender's prime rate. It moves as prime moves, which can change your interest portion or your payment.
- Stress test
- The qualifying rule used by federally regulated lenders: you must qualify at the greater of your contract rate plus 2% or 5.25%.
- Pre-approval
- A lender's indication of the mortgage amount you may qualify for, based on the information reviewed. Not a final approval.
- Default mortgage insurance
- Required when your down payment is under 20%. It protects the lender, and the premium is normally added to your mortgage.
- GDS ratio
- Gross Debt Service — the share of your gross income going to housing costs: mortgage payment, property tax, heating and applicable condo fees.
- TDS ratio
- Total Debt Service — housing costs plus your other debt payments, as a share of gross income.
- Prepayment privilege
- How much extra you may pay each year without penalty, such as a lump sum or an increased payment.
- Prepayment penalty
- The charge for breaking your mortgage before the end of the term, calculated as interest for a set period or an interest rate differential.
- Interest rate differential (IRD)
- A penalty calculation based on the difference between your rate and a comparison rate, applied to the remaining term.
- Home equity
- Your home's current market value minus the balance you owe on it.
- HELOC
- Home Equity Line of Credit — a revolving credit facility secured against your home, usually at a variable rate.
- Refinance
- Replacing your existing mortgage with a new one, often to access equity, consolidate debt, or change your structure.
- Renewal
- Placing your remaining balance on a new term when your current term ends.
- Land transfer tax
- A tax paid on closing when property changes hands. Ontario charges it province-wide and Toronto adds a municipal tax.
- Closing costs
- Costs due at closing beyond your down payment — land transfer tax, legal fees, title insurance, adjustments and more.
- Appraisal
- A professional estimate of a property's market value, often required by the lender.
- Title insurance
- Coverage protecting against title defects, fraud and certain registration issues.
- Porting
- Moving an existing mortgage to a new property, subject to lender approval, to avoid breaking the term.
- Blended rate
- A single rate created by combining your existing mortgage rate with the rate on additional funds.
- Accelerated payment
- A bi-weekly or weekly schedule that results in the equivalent of one extra monthly payment per year, shortening your amortization.
- Conventional mortgage
- A mortgage with a down payment of 20% or more, so default insurance is not required.
Still unsure about a term?
Ask JARVIS for a plain-language explanation, any time.