Mortgage Glossary
Canadian mortgage terms, explained in plain English.
Amortization Period
The total length of time it will take to pay off your mortgage in full — commonly 25 to 30 years in Canada — even though you renew your term long before then.
Term
The length of your current agreement with a lender (often 1 to 5 years). At the end of the term you renew, renegotiate, or switch lenders — the mortgage itself isn’t paid off yet.
Fixed-Rate Mortgage
A mortgage where the interest rate is locked in for the entire term, so your payment doesn’t change even if rates move.
Variable-Rate Mortgage
A mortgage where the interest rate moves with your lender’s prime rate, which follows the Bank of Canada’s policy rate.
Prime Rate
The benchmark interest rate lenders use to price variable mortgages and lines of credit. It moves when the Bank of Canada changes its policy rate.
Mortgage Stress Test
A federal requirement to prove you could still afford your payments at a higher “qualifying rate” than what you’re actually being charged — a buffer against future rate increases.
Mortgage Default Insurance (CMHC)
Insurance required when your down payment is under 20% of the purchase price. It protects the lender if you default — not you — and the premium is usually added to your loan.
Loan-to-Value (LTV)
Your mortgage amount expressed as a percentage of the home’s value. A smaller down payment means a higher LTV.
Down Payment
The portion of the purchase price you pay upfront, in cash, rather than borrowing. The rest becomes your mortgage.
Pre-Approval
A lender’s estimate of what you could likely qualify to borrow, based on your income, debts, and credit, before you start house-hunting.
Closing Costs
One-time costs due when a purchase finalizes — legal fees, land transfer tax, title insurance, and more — on top of your down payment.
Prepayment Privilege
The amount you’re allowed to pay toward your mortgage each year, above your regular payments, without triggering a penalty.
Prepayment Penalty
A fee charged for paying off or breaking your mortgage before the end of its term. Fixed-rate penalties are typically larger than variable-rate ones.
Renewal
The point when your term ends and you sign a new agreement — with your current lender or a different one. Nothing obligates you to stay put.
Refinancing
Replacing your existing mortgage with a new one, often to access home equity, consolidate debt, or change your rate or terms, usually before your term is up.
Home Equity
The portion of your home you actually own outright — its current value minus whatever you still owe on it.
Amortization Schedule
A payment-by-payment breakdown showing how much of each payment goes to interest versus principal over the life of the mortgage.
Private Lending / Private Mortgage
Financing from an individual or private company instead of a bank or credit union — typically short-term and higher-cost, used by borrowers who don’t fit a traditional lender’s criteria.
Land Transfer Tax
A provincial (and in some cities, municipal) tax paid when ownership of a property changes hands, calculated as a percentage of the purchase price.
Title Insurance
A one-time insurance policy that protects against certain problems with a property’s legal title, such as fraud, liens, or survey issues.