49 terms
Canadian mortgage glossary
Plain definitions of the terms you'll see on an Alberta mortgage. Several of these words mean something different in the US, so an American definition can give you the wrong answer on a Canadian mortgage.
49 terms.
Terms beginning with A
Amortization
The total time it would take to pay your mortgage down to zero at your current payment, usually 25 or 30 years in Canada.
Annual percentage rate (APR)
The cost of a mortgage expressed as a yearly rate, including the mandatory fees that the interest rate on its own leaves out.
Appraisal
A lender-ordered opinion of a property's market value, used to confirm the loan-to-value ratio before funding.
Assumability
A feature that lets a qualified buyer take over your existing mortgage at your rate, instead of arranging their own.
Terms beginning with B
Blend and extend
A mid-term arrangement with your current lender that blends your existing rate with a new one over a longer term, so you avoid a prepayment penalty.
Bridge financing
Short-term borrowing that covers the gap when you take possession of a new home before the sale of your current one closes.
Terms beginning with C
Closing costs
The cash you need on possession day on top of the down payment, including legal fees, registration fees, adjustments, insurance and inspections.
Conventional mortgage
A mortgage with a down payment of 20% or more, which doesn't need default insurance.
Terms beginning with D
Discounted rate
The rate you pay after the lender's discount off its posted rate, and the rate a fair penalty calculation should use.
Down payment
The cash you put into the purchase: 5% up to $500,000, 10% on the portion to $1.5M, and 20% above that.
Terms beginning with E
Equity
The difference between what your home is worth and what you still owe on it.
Terms beginning with F
First Home Savings Account (FHSA)
A registered account for first-time buyers: $8,000 a year up to a $40,000 lifetime cap, deductible going in and tax-free coming out.
First-time home buyer
For most federal programs, someone who hasn't owned a home they lived in during the current year or the 4 preceding calendar years.
Fixed rate
An interest rate that stays the same for your whole term, compounded semi-annually as the Interest Act requires.
Terms beginning with G
Gift letter
A signed statement from an immediate family member confirming that down payment money is a gift with no repayment expected.
Gross debt service ratio (GDS)
Your housing costs as a share of your gross income (mortgage payment, property taxes, heat and half the condo fee). The insured guideline is 39%.
Terms beginning with H
Home equity line of credit (HELOC)
A revolving line of credit secured against your home, priced at prime plus a spread and capped at 65% of value on its own.
Terms beginning with I
Insurable mortgage
A mortgage with 20% or more down that the lender can still insure in the background, priced between insured and uninsured.
Interest-rate differential (IRD)
A prepayment penalty calculated from the gap between your rate and a comparison rate, applied over the months left in your term.
Terms beginning with L
Land Titles registration fee
Alberta's registration charge in place of a land transfer tax: $50 plus $5 per $5,000 of value, on both the transfer and the mortgage.
Land transfer tax
A provincial tax on property purchases in most of Canada. Alberta doesn't charge one.
Loan-to-value (LTV)
The mortgage as a percentage of the property's value, which decides your insurance, your pricing tier and how much you can borrow.
Terms beginning with M
Monoline lender
A lender that only does mortgages, reaches borrowers through mortgage brokers, and has no branches.
Mortgage broker
A licensed professional who arranges a mortgage between you and a panel of lenders, paid by the lender that funds it.
Mortgage default insurance
Insurance that protects the lender if you default, required with less than 20% down and paid for by you.
Terms beginning with N
No-frills mortgage
A lower-rate product with less flexibility, often including a bona-fide-sale clause that means the only early exit is selling the house.
Terms beginning with O
Open mortgage
A mortgage you can pay off in full at any time with no penalty, in exchange for a much higher rate.
Terms beginning with P
Policy interest rate
The Bank of Canada's target for the overnight rate, announced 8 times a year, which anchors prime.
Portability
A feature that lets you move your existing mortgage, rate and term to a new property instead of breaking it.
Possession date
The day the property legally becomes yours and the mortgage funds, usually at noon on the agreed date in Alberta.
Posted rate
A lender's advertised list rate, well above what borrowers pay, and the rate some penalties are calculated from.
Pre-approval
A lender's underwritten opinion of how much it will lend you, with a rate held for 90 to 120 days but no commitment to lend.
Prepayment penalty
The charge for paying off a closed mortgage early: 3 months of interest on a variable, or the greater of that and the IRD on a fixed.
Prepayment privilege
How much a closed mortgage lets you pay down each year without a penalty, typically 10% to 20% plus a payment increase.
Prime rate
Each lender's own reference rate for variable lending, set with reference to the Bank of Canada's policy rate.
Terms beginning with Q
Qualifying rate
The rate lenders test you at: the greater of your contract rate plus 2 percentage points, or 5.25%.
Terms beginning with R
Rate hold
A lender's commitment to honour today's rate for a set period, usually up to 120 days, at no cost and with no obligation.
Refinance
Replacing your mortgage with a larger one and taking the difference in cash, capped at 80% of the property's value.
Renewal
The end of a mortgage term, when you sign a new one with your current lender, switch to a new lender, or pay the mortgage off.
RRSP Home Buyers' Plan (HBP)
A program that lets a first-time buyer withdraw up to $60,000 from an RRSP tax-free for a home, repayable over 15 years.
Terms beginning with S
Statement of adjustments
Your lawyer's closing summary showing what you owe on possession day and what each line is for.
Straight switch
Moving your mortgage to a new lender at renewal without changing the balance or the amortization, and since November 2024, without a stress test if it's uninsured.
Stress test
The rule that lenders qualify you at about 2 percentage points above your contract rate, to confirm you could still carry the mortgage.
Terms beginning with T
Term
How long your current mortgage contract and rate last, usually 1 to 5 years, which is different from the amortization.
Title insurance
A one-time policy that protects you and your lender against title defects, survey problems and some kinds of fraud.
Total debt service ratio (TDS)
All your monthly debt payments as a share of gross income, including housing. The insured guideline is 44%.
Trigger rate
On a fixed-payment variable mortgage, the rate at which your payment stops covering the interest and the balance starts growing.
Terms beginning with U
Uninsured mortgage
A mortgage that can't be default-insured (a refinance, a rental, a home over $1.5M or a long amortization), so it's priced highest.
Terms beginning with V
Variable rate
A rate set as prime plus or minus a discount, which moves when prime moves while your discount stays locked for the term.
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