Mortgage Glossary
Understand the language of mortgages with this comprehensive glossary of common terms.
Amortization
The total length of time (usually 25 or 30 years) it takes to pay off your mortgage in full, assuming regular payments at the agreed interest rate.
Appraisal
A professional assessment of a property's market value, usually required by the lender to confirm the property is worth the purchase price.
Blended Rate
A new interest rate calculated by combining your existing mortgage rate with a new rate, often used when increasing your mortgage mid-term.
Bridge Financing
A short-term loan that bridges the gap between the purchase of a new home and the sale of an existing one.
Closed Mortgage
A mortgage that cannot be prepaid, renegotiated, or refinanced before the end of the term without a prepayment penalty.
CMHC Insurance
Mortgage default insurance provided by Canada Mortgage and Housing Corporation, required when the down payment is less than 20% of the purchase price.
Conventional Mortgage
A mortgage where the down payment is 20% or more of the property's value, meaning mortgage insurance is not required.
Debt Service Ratios (GDS/TDS)
Gross Debt Service (GDS) and Total Debt Service (TDS) ratios measure the percentage of income needed to cover housing costs and all debts. Lenders use these to assess affordability.
Equity
The difference between your property's market value and the outstanding balance of all mortgages and liens against it.
Fixed Rate Mortgage
A mortgage where the interest rate remains the same for the entire term, providing predictable payments.
FSRA
The Financial Services Regulatory Authority of Ontario, which regulates mortgage brokers and agents in the province.
HELOC
Home Equity Line of Credit. A revolving line of credit secured against your home equity, allowing you to borrow and repay as needed.
High-Ratio Mortgage
A mortgage where the down payment is less than 20% of the purchase price, requiring mortgage default insurance.
Interest Rate
The cost of borrowing money, expressed as a percentage. Can be fixed (stays the same) or variable (fluctuates with prime rate).
Loan-to-Value (LTV)
The ratio of the mortgage amount to the appraised value of the property, expressed as a percentage. A $400K mortgage on a $500K home is 80% LTV.
Maturity Date
The date your current mortgage term ends and must be renewed, refinanced, or paid in full.
Mortgage Broker/Agent
A licensed professional who acts as an intermediary between borrowers and lenders, shopping multiple lenders to find the best mortgage terms.
Open Mortgage
A mortgage that can be prepaid in part or in full at any time without a prepayment penalty. Usually has a higher interest rate.
Porting
Transferring your existing mortgage (rate and terms) from your current property to a new one, avoiding prepayment penalties.
Power of Sale
A legal process in Ontario where a lender can sell a property to recover the outstanding mortgage debt when a borrower defaults.
Pre-Approval
A conditional commitment from a lender for a specific mortgage amount at a set rate, usually valid for 90-120 days.
Prepayment Penalty
A fee charged by the lender if you pay off your mortgage early, pay more than your allowed prepayment privilege, or break your mortgage before the term ends.
Prime Rate
The baseline interest rate set by major banks, which variable-rate mortgages are based on (e.g., prime minus 0.50%).
Private Mortgage
A mortgage funded by a private individual or company rather than a traditional financial institution. Typically used for short-term or non-traditional borrowing situations.
Refinance
Replacing your existing mortgage with a new one, often to access equity, secure a better rate, or change your mortgage terms.
Stress Test
A qualifying mechanism required by regulators where borrowers must prove they can afford payments at a rate higher than their actual mortgage rate (typically the contract rate + 2% or the benchmark rate, whichever is higher).
Term
The length of time your mortgage contract is in effect (e.g., 5 years). At the end of the term, you renew, refinance, or pay off the balance.
Variable Rate Mortgage
A mortgage where the interest rate fluctuates based on changes to the lender's prime rate, meaning your payments or the interest portion can change.
Regulatory Disclosure: Michael Noble Green, Mortgage Agent Level 1 (Licence #M21002443), operating under 8Twelve Mortgage Corp. (Brokerage Licence #13390). Regulated by FSRA under the MBLAA. Definitions provided are for educational purposes only and may not reflect all nuances of individual mortgage products. All mortgage products subject to lender approval, O.A.C.