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  • Abstract of title

    Registry System: A condensed history of the title to a parcel of land. The abstract consists of a synopsis of every recorded instrument affecting the title to that land arranged in chronological order of recording.

  • Accelerated Bi-weekly mortgage payments

    Mortgage payments which are made every 2 weeks for a total of 26 payments per year. Not to be confused with semi-monthly mortgage payments. Read Article for more information.

  • Amortization period

    The actual number of years it will take to pay back your mortgage loan. In Canada the amortization does not generally exceed 25 years.

  • Appraised Value

    An estimate of the value of the property, conducted for the purpose of mortgage lending by a certified appraiser. This appraisal is not to be confused with a building inspection.

  • Arms Length

    A transaction between unrelated entities where a willing seller (the seller is not compelled to sell) transacts with a willing buyer (the buyer is not compelled to buy).

  • Assumability

    Allows the buyer to take over the seller’s mortgage on the property.

  • Closed Mortgage

    A mortgage that locks you into a specific payment schedule. A penalty usually applies if you repay the loan in full before the end of a closed term.

  • Compound Period

    The number of times per year in which the interest rate is compounded. In Canada, mortgages are generally compounded semi-annual, which is twice per year.

  • Condominium Fee

    A common payment among owners which is allocated to pay expenses associated with the development.

  • Conventional Mortgage

    A mortgage loan issued for up to 80% of the property’s appraised value or purchase price, whichever is less.

  • Down Payment

    The buyer’s cash payment toward the property. The difference between the purchase price and the amount of the mortgage loan.

  • Effective Interest Rate

    This is the actual interest rate paid on a loan or mortgage. In Canada, mortgages typically have a higher effective interest rate because of the fact that interest rates are compounded semi-annually or twice per year.

  • Equity

    The difference between the price for which a property could be sold less the total debt registered against the property.

  • First Mortgage

    The first mortgage in the mortgage agreement that is considered to be in first place and will have first claim on assets in the event of default.

  • Fixed Rate Mortgage

    A mortgage in which the rate of interest has been fixed for a specific period of time. This specific period of time is generally known as the term. 

  • GDS Ratio (Gross Debt Service Ratio)

    The percentage of gross annual income required to cover payments associated with housing. Payments include mortgage principal, interest, property taxes and sometimes include secondary financing, heating, condominium fees or pad rent.

  • High Ratio Mortgage

    A mortgage that exceeds 75% of the home’s appraised value or purchase price, whichever is lower. These mortgages must be insured for payment.

  • Interest Rate

    The value charged by the lender for the use of the lender’s money. Expressed as a percentage.

  • Land Transfer Tax, Deed Tax, Property Purchase Tax

    A fee paid to the municipal and/or provincial government for the transferring of property from seller to buyer.

  • Loan to Value Ratio

    The ratio of the loan to the appraised value or purchase price of the property, whichever is lower.

  • Maturity Age

    The end of the term, at which time you can pay off the mortgage or renew it.

  • Mortgage Insurance

    Applies to high-ratio mortgages. It protects the lender against loss if the borrower is unable to repay the mortgage.

  • Mortgage Life Insurance

    Pays off the mortgage if the borrower dies.

  • Mortgagee

    The party who advances the funds for a mortgage loan. The lender.

  • Mortgagor

    One who gives a mortgage as security for a loan. The borrower.

  • Nominal Interest Rate

    An interest rate which does not necessarily correspond to the effective interest rate. In Canada, these two rates do not correspond.

  • Open Mortgage

    Allows partial or full payment of the principal at any time, without penalty.

  • OSB (Outstanding Balance)

    The amount of principal which is still outstanding at the end of the term.

  • Portability

    A mortgage option that enables borrowers to take their current mortgage with them to another property, without penalty.

  • Pre-Approved Mortgage

    Qualifies you for a mortgage before you start shopping. You know exactly how much you can spend and are free to make a “firm” offer when you find the right home.

  • Prepayment Privileges

    Voluntary payments in addition to regular mortgage payments.

  • Principal

    The amount borrowed or still owing on a mortgage loan. Interest is paid on the principal amount.

  • Refinancing

    Paying off the existing mortgage and arranging a new one or re-negotiating the terms and conditions of an existing mortgage.

  • Renewal

    Re-negotiation of a mortgage loan at the end of a term for a new term.

  • Second Mortgage

    Additional financing. Usually has a shorter term and higher interest rate than the first mortgage.

  • Semi-Monthly Mortgage Payments

    Mortgage payments which are made on the 1st and 15th of the month, or twice per month, 24 payments per year. Not to be confused with bi-weekly mortgage payments (26 payments per year). 

  • TDS Ratio (Total Debt Service Ratio)

    The percentage of gross annual income required to cover payments associated with housing and all other debts and obligations, such as car loans and credit cards.

  • Term

    The length of time the interest rate is fixed. It also indicates when the principal balance becomes due and payable to the lender.

  • Title

    Legal ownership in a property.

  • Trigger Point

    A mortgage holder is no longer paying down any principal on their loan and is only covering interest

  • Variable Rate Mortgage

    A mortgage with fixed payments, but fluctuates with interest rates. The changing interest rate determines how much of the payment goes towards the principal.