Glossary

Adjustable Rate Mortgage (ARM): A mortgage where the interest rate and payments change periodically based on market conditions.
Amortization: The period of time it takes to pay off the entire mortgage balance through regular payments.
Annual Percentage Rate (APR): The total cost of borrowing, including interest and additional fees, expressed as a yearly percentage.
Appraisal: An estimate of the market value of a home, typically required by lenders to ensure the property justifies the loan amount.
Assumption: When a buyer takes over the existing mortgage of the seller, including its terms and interest rate.

B-Lender / Alternative Lender: Lenders that provide mortgages to borrowers who may not qualify with major banks due to credit or income verification challenges.
Blend and Extend: A mortgage feature that allows you to combine your current interest rate with a new rate for an extended term without a penalty.
Blended Payment: A mortgage payment that includes both principal and interest components.
Bridge Financing: A short-term loan used to cover the gap between buying a new home and selling an existing one.

Canada Guaranty Insurance: A private Canadian provider of mortgage default insurance for high-ratio borrowers.
Closing Costs: One-time fees paid at the end of the transaction, such as legal fees and land transfer taxes.
Closing Date: The day when the home purchase is finalized, ownership is transferred, and the mortgage funds are released.
CMHC Insurance: Mortgage default insurance provided by the Canada Mortgage and Housing Corporation, mandatory for down payments under 20%.
Closed Mortgage: A mortgage agreement that cannot be paid off or renegotiated before the term ends without paying a penalty.
Compounding Period: The frequency at which interest is calculated on a mortgage, usually semi-annually in Canada for fixed-rate loans.
Conventional Mortgage: A loan for up to 80% of the property value, where the down payment is at least 20%.
Co-Signer / Guarantor: An individual who signs the mortgage along with the primary borrower to help them qualify, sharing legal responsibility for the debt.
Credit Score: A three-digit number representing your creditworthiness, which lenders use to determine your eligibility.

Debt Consolidation: Combining multiple high-interest debts into a single, lower-interest mortgage payment to improve cash flow.
Debt Service Ratio: A measurement used by lenders to determine a borrower's ability to handle mortgage payments based on their income and debts.
Disbursements: Incidental costs paid by your lawyer on your behalf during the closing process, such as registration fees or courier charges.
Down Payment: The upfront amount of money paid toward the purchase of a home, typically ranging from 5% to 20% or more.

Equity: The difference between the current market value of a property and the outstanding balance of all liens on it.
Equity Take-Out: A way to access the value built up in your home by increasing your mortgage amount and withdrawing cash.

Fixed Rate Mortgage: A mortgage where the interest rate is locked in for the entire term of the agreement.

Gifted Down Payment: Funds provided by a close family member to help a buyer with their down payment, requiring a signed gift letter.
Gross Debt Service (GDS): The percentage of your monthly pre-tax income needed to cover housing costs like mortgage and taxes.

HELOC (Home Equity Line of Credit): A flexible borrowing tool secured against your home's equity that allows you to withdraw funds as needed.
High Ratio Mortgage: A mortgage for more than 80% of the property value, requiring mortgage default insurance (e.g., CMHC).

Insured Mortgage: A mortgage that is protected by default insurance because the buyer provided a down payment of less than 20%.
Interest Rate Adjustment: A change in the interest rate applied to your mortgage, common in variable-rate or adjustable-rate products.
Interim Financing: A short-term loan used to provide immediate funding before a long-term mortgage or permanent financing is established.

Land Transfer Tax: A provincial or municipal tax paid by the buyer upon the transfer of property ownership.
Loan-to-Value (LTV) Ratio: The percentage of the property's value that is being borrowed through the mortgage.

Maturity Date: The final day of your mortgage term, at which time the remaining balance is either fully repaid or renewed.
Mortgage Commitment: A lender's formal written offer to provide you with a mortgage, outlining all terms and conditions.
Mortgage Default Insurance: Required for down payments under 20%, this protects the lender if payments stop.
Mortgage Instructions: The specific details and requirements sent by a lender to your lawyer to facilitate the mortgage funding.
Mortgage Stress Test: A federal requirement to prove you can afford payments at a higher interest rate than your contract rate.

Open Mortgage: A mortgage that can be paid off at any time during the term without a penalty.

Portability: A feature that allows you to transfer your existing mortgage to a new property when you move.
Possession Date: The day you officially get the keys and take physical ownership of your new home.
Pre-Approval: A preliminary lender evaluation determining how much you can borrow, often locking in a rate for 120 days.
Pre-qualification: A basic estimate of how much you might be able to borrow based on self-reported income and debt information.
Pre-payment Penalty: A fee charged by the lender if a mortgage is paid off before the end of the term.
Pre-Payment Privilege: A mortgage feature allowing you to pay off a portion of your principal early without penalty.
Prime Rate: The base interest rate that lenders use to set rates for variable mortgages and lines of credit.
Principal: The actual amount of money borrowed for the mortgage, excluding interest.
Private Mortgage: A short-term mortgage funded by a private individual or company rather than a traditional financial institution.
Property Taxes: Annual taxes paid to the local municipality to fund community services like schools and infrastructure.

Rate Hold: A guarantee from a lender to lock in a specific interest rate for a set period while you shop for a home.
Refinancing: The process of breaking your current mortgage to start a new one to access equity or lower your rate.
Renewal: Signing a new agreement with your current lender when your existing mortgage term expires.

Sagen Insurance: A private provider of mortgage default insurance in Canada, formerly known as Genworth.
Statement of Adjustments: A document summarizing all costs, credits, and debits that must be settled between the buyer and seller on closing day.
Switch: Moving your current mortgage balance and amortization to a new lender at the end of your term.

Term: The length of time for which the mortgage agreement and interest rate are in effect.
Three-Month Interest Penalty: A common fee for breaking a variable-rate mortgage, equal to three months of interest.
Title Transfer: The legal process of changing the owner's name on a property's deed at the Land Titles Office.
Total Debt Service (TDS): The percentage of your monthly pre-tax income needed to cover all debts, including housing and credit cards.

Underwriting: The process by which a lender assesses your creditworthiness and the property to approve or decline a mortgage.

Variable Rate Mortgage: A mortgage where the interest rate can fluctuate over the term based on changes in the prime rate.