Canadian Mortgage Glossary
Plain-English definitions of the mortgage and real estate terms every Canadian buyer should know.
Amortization Period
The total length of time it takes to pay off your entire mortgage, typically 25 years in Canada (up to 30 for some insured first-time buyers). Longer amortizations mean lower payments but more interest overall.
Appraisal
A professional estimate of a property's market value, ordered by the lender to confirm the home is worth the amount being borrowed.
Blended Rate
A new interest rate that combines your existing mortgage rate with a current rate, used when you increase or refinance your mortgage without fully breaking it.
Bridge Financing
A short-term loan that covers the gap when your new home's closing date is before your current home's sale closes.
CMHC Insurance
Mortgage default insurance required when your down payment is less than 20%. It protects the lender, not you, and the premium (2.8%–4.0% of the mortgage) is added to your loan.
Closing Costs
One-time costs due on closing day beyond your down payment — land transfer tax, legal fees, title insurance, and adjustments — typically 1.5%–4% of the purchase price.
Closed Mortgage
A mortgage that cannot be fully paid off or refinanced before the end of its term without a prepayment penalty. It usually offers lower rates than an open mortgage.
Conventional Mortgage
A mortgage with a down payment of 20% or more, which does not require CMHC default insurance.
Down Payment
The portion of the home price you pay upfront. The Canadian minimum is 5% up to $500,000, 10% on the portion from $500K–$1.5M, and 20% above $1.5M.
Equity
The portion of your home you actually own — its current market value minus your remaining mortgage balance.
Fixed-Rate Mortgage
A mortgage where the interest rate stays the same for the entire term, giving predictable payments regardless of market changes.
FHSA
First Home Savings Account — a registered account letting first-time buyers contribute up to $8,000/year ($40,000 lifetime) with tax-deductible contributions and tax-free withdrawals for a home.
Gross Debt Service Ratio (GDS)
The percentage of your gross monthly income spent on housing costs (mortgage, property tax, heat, and half of condo fees). Lenders typically want this under 39%.
High-Ratio Mortgage
A mortgage with less than 20% down, which requires CMHC, Sagen, or Canada Guaranty default insurance.
Home Buyers' Plan (HBP)
A program letting first-time buyers withdraw up to $60,000 from their RRSP tax-free for a down payment, repaid over 15 years.
Interest Rate Differential (IRD)
A penalty for breaking a fixed-rate mortgage early, based on the difference between your rate and the lender's current rate for the remaining term.
Land Transfer Tax
A one-time provincial (and sometimes municipal) tax paid on closing, calculated as a percentage of the purchase price. Alberta and Saskatchewan are exempt.
Mortgage Term
The length of your current mortgage contract (commonly 5 years), after which you renew. Distinct from the amortization period.
Open Mortgage
A mortgage you can pay off in full or refinance at any time without penalty, usually at a higher interest rate than a closed mortgage.
Porting
Transferring your existing mortgage and its rate to a new property, letting you avoid a prepayment penalty when you move.
Pre-Approval
A lender's conditional commitment to lend you a specific amount at a held rate (usually for 90–120 days), based on your income, credit, and debts.
Prepayment Privilege
Contract terms allowing you to pay extra — typically 10–20% of the original principal per year plus a payment increase — without penalty.
Prime Rate
The benchmark lending rate set by each bank (based on the Bank of Canada policy rate) that variable mortgage rates are priced against, e.g. 'Prime − 0.70%'.
Refinancing
Breaking your current mortgage to start a new one — usually to get a lower rate, consolidate debt, or access equity.
Stress Test
A federal qualifying rule requiring you to prove you can afford payments at the higher of your contract rate plus 2% or 5.25%.
Title Insurance
A one-time policy protecting you and your lender against title defects, fraud, and survey issues affecting ownership.
Total Debt Service Ratio (TDS)
The percentage of your gross monthly income spent on all debts including housing. Lenders typically want this under 44%.
Variable-Rate Mortgage
A mortgage whose interest rate moves with the lender's prime rate. Payments may stay fixed (with the principal/interest split changing) or fluctuate.
Put These Terms Into Practice
Use our calculators to see how amortization, rates, and the stress test affect your mortgage.