Mortgage Glossary (A–Z)

Not sure what mortgage terms mean?  This simple A–Z guide explains the most common words you’ll encounter when buying, renewing, or refinancing a home.

A

Amortization The total time it takes to fully repay a mortgage, usually 25 or 30 years in Canada.

Appraisal An estimate of a property’s market value completed by a qualified professional.

B

Balance The amount of money still owed on your mortgage.

BOC Bank of Canada

C

Closed Mortgage A mortgage with limits on early payout or extra payments. It usually offers a lower interest rate.

CMHC (Mortgage Default Insurance) Insurance required when the down payment is less than 20%. It protects the lender, not the borrower.

Credit Score A number that reflects your credit history and helps lenders assess risk.

D

Down Payment The amount you pay upfront when purchasing a home.

E

Equity The portion of your home you own, calculated as the home’s value minus what you owe.

F

Fixed-Rate Mortgage A mortgage with an interest rate that stays the same for the entire term.

G

Gross Debt Service (GDS) The percentage of your income used to cover housing costs such as mortgage payments, taxes, and heating.

H

HELOC (Home Equity Line of Credit) A revolving line of credit secured against your home’s equity.

I

Interest Rate The cost of borrowing money, shown as a percentage.

L

Loan-to-Value (LTV) The ratio of your mortgage amount compared to the value of the property.

M

Mortgage A loan used to purchase or refinance a property.

Mortgage Pre-Approval An estimate of how much you may be able to borrow before purchasing a home.

Mortgage Term The length of time your mortgage rate and conditions are in effect.

O

Open Mortgage A mortgage that can be paid off at any time without penalty, usually at a higher rate.

P

Prepayment Privileges Options that allow you to make extra payments on your mortgage without penalties.

Prime Rate A benchmark interest rate used by lenders to set variable rates.

R

Refinance Replacing an existing mortgage to access equity or change terms.

Renewal Choosing a new mortgage term when your current term ends.

S

Stress Test A rule requiring borrowers to qualify at a higher interest rate to ensure affordability.

V

Variable-Rate Mortgage A mortgage with an interest rate that can change during the term.