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Mortgage Glossary

Mortgage Glossary

Different words get thrown around frequently when it comes to mortgages. Below you will find the most important terms involving your mortgage.

Amortization: Length of time over which you will repay your debt

Closed mortgage: A mortgage with a prepayment limit of 15% of the original principal balance per year

Closing costs: Additional costs that go along with home purchase like legal fees, transfer fees and disbursements that are due on closing day

Closing day: The day that new owner takes over the title to the home they’ve purchased

CMHC: The Canada Mortgage and Housing Corporation is a crown corporation that manages the National Housing Act for the federal government, develops and sells mortgage insurance and helps improve housing and living conditions for Canadians

Conventional mortgage: A loan of up to 80% of the lending value of the property for sale

Credit history/Credit report: An official report generated by a trusted Canadian credit bureau that is used by lenders to determine your level of debt handling

Default: Inability to make a mortgage payment as laid out by your mortgage agreement

Down payment: A small portion of the home price that is not covered by the mortgage loan, put forth by the buyer using his/her own funds

Equity: The difference between the current market value of your property and the total debts registered against it (first and second mortgages)

Fixed rate mortgage: A mortgage that features a locked-in rate that cannot increase for the entire term of the mortgage

Insurance: An arrangement through which a guarantee of compensation for specified loss is made in return for a premium (payment for insurance)

Interest: The cost of borrowing money that is paid to the lender in regular installments along with the principal

Interest rate: The price a borrower pays to use the money they’ve been lent

Lender: An institution such as a bank, trust company or credit union that lends funds for a mortgage

Maturity date: The last day of the mortgage term where the mortgage must be renewed or paid in full

Mortgage: A loan based on the value of a property to be purchased

Mortgage approval: Written notification from the lender to the borrower that approves the specified amount of funds under agreed upon conditions

Mortgage broker: An accredited professional who specializes in matching borrowers with the lender that provides the exact mortgage package to suit the borrower’s needs

Mortgage loan insurance: A product set up to protect lenders against borrower default and allows you to purchase a home with a down payment of less than 20%

Mortgage payment: Payments made regularly to the lender that encompasses the mortgage’s interest and principal

Mortgage term: The length of time that the contracts, conditions and interest rate of a mortgage are applicable

Open mortgage: A flexible loan that allows borrowers to make extra payments towards the balance before the end of mortgage’s term

Prepayment privilege: The power to prepay a share of the mortgage’s principal before it’s due without consequences

Principal: The amount you borrow for a loan that does not include interest

Variable mortgage rate: An interest rate that fluctuates based on the conditions of the market without affecting the mortgage payments


Canada’s mortgage website

Your home is your most valuable asset. It is probably the single largest investment you will make in your lifetime. Your home is more than a place to rest your head and raise a family. Your home contains equity. It is a treasured resource and in some cases, can even be used as an ATM (aka cash back mortgages and HELOCs – don’t worry we’ll get there).

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