Mortgage Glossary

On this site and in the documentation from the lenders, you may see some terms that you might not be familiar with. Here are some helpful definitions:


Agreement of Purchase and Sale  TOP

A contract by which one party agrees to sell and another agrees to purchase.

Amortization  TOP

The gradual repayment of a debt by means of partial payments on the principal 

at regular intervals. The amortization period is the time required to repay the debt 


Appraisal  TOP

Process by which the mortgage lending value of a property is determined.

Bridge Financing  TOP

Interim financing to bridge between the closing date on the purchase of the new home and 

the closing date on the sale of the current home.

Broker  TOP

An intermediary between the buyer and seller who is licensed to carry out such activities.

Building Permit  TOP

A certificate that must be obtained from the municipality by the property owner or 

contractor before a building can be erected or renovated.

Closing Date  TOP

The date of which the sale of the property becomes final and the new owner 

takes possession.

Commitment  TOP

A notice from a mortgage lender to a prospective borrower that the lender will advance mortgage funds of a specified amount under certain conditions.

Condition  TOP

A clause in a contract that calls for the happening of some event, or 

performance of some act before the agreement becomes binding.

Conditional Offer  TOP

An offer to purchase subject to specified conditions. These conditions could be 

the arranging of a mortgage, or the selling of a present home. Usually a time 

limit in which the specified conditions must be met is stipulated.

Conventional Mortgage  TOP

A mortgage loan of up to a maximum of 80% of the lending value of the property 

for which a lender does not require loan insurance.

Bridge Financing  TOP

The percentage of the borrower’s income that will be used for monthly payments.

Default  TOP

Non-payment of installments due under the terms of the mortgage.

Deposit  TOP

Payment of money or other valuables in consideration as a pledge for fulfillment 

of the contract.

Discharge  TOP

The removal of all mortgages and financial encumbrances on the property.

Easement  TOP

The right acquired for access to or over another person’s land for a specific purpose, 

such as for a driveway or public utilities. 


Gross Debt Service Ratio is a primary calculation used by lenders and 

mortgage insurer to determine an applicant's ability to service their respective 

mortgage request. The calculation is determined as follows:

Mortgage Principle, Interest & Taxes


Heating Cost
and/or 1/2 of Condo Fees


Gross annual income of borrower(s)

High Ratio Mortgage  TOP

Loan that exceeds 80% of the property’s lending value, and which is 

insured through a mortgage insurance plan.

Hold-back  TOP

An amount of money withheld by the lender during the progress of construction 

of a house to ensure that construction is satisfactory at every stage. The 

amount of hold-back is generally equivalent to the estimated cost to complete 



Land Transfer Tax Refund Program

Mortgage Insurance Premium  TOP

A premium which is added to the mortgage and paid by the borrower over 

the life of the mortgage. The mortgage insurance insures the lender 

against loss in case of default on the part of the borrower.

Mortgage Life Insurance  TOP

A form of reducing term insurance available for all mortgagors. In the event 

of a death of the owner or one of the owners, the insurance pays the 

balance owing on the mortgage. The intent is to protect survivors from losing their home.

Mortgage Loan Insurance (High Ratio)  TOP

High ratio mortgages must be insured through CMHC (Canada Mortgage and Housing Corporation) or Genworth (G.E. Capital Corporation). These Insurers guarantee the 

risk of lending to home buyers who need a high ratio mortgage. An insurance premium 

is paid by the borrower on behalf of the lender. The insurance premium that is paid to 

CMHC is to protect the lender in the event that the mortgage is not paid. This is not 

life, disability, or job loss insurance. The insurance premium is calculated as a 

percentage of the mortgage amount, depending on the loan to value, and 

may be added to the mortgage amount. The premiums are as follows:

Loan to Value Premium

80.1 - 85% 


85.1 - 90% 


90.1 - 95% 


Other high ratio financing costs could include an appraisal of $300.00 plus 8% PST 

on the insurance premium.

Mortgagee  TOP

The entity who lends the money.

Mortgagor  TOP

The entity who borrows the money.

Mortgage Term  TOP

The actual length of time money is loaned at the contractual rate of interest. Terms range from three months to twenty five years. Traditionally the longer the term the higher the rate.

Mortgage Types  TOP

Open Mortgage  TOP

Allows borrowers to repay a portion or the total amount of their mortgage at 

any time without penalty. Ideal for those who plan to sell their homes in the near future.

Closed Mortgage  TOP

A good choice for those that want security in knowing their monthly payments are fixed for a certain term. Lacks the option of repaying the entire amount of the mortgage upon request.

Conventional Mortgage  TOP

Regulations under The Bank Act prohibit lenders from lending in excess of 80% of the 

purchase price or the appraised value of a property without obtaining Hi-Ratio Insurance. 

A loan for up to 80% of the purchase price of a property is a conventional mortgage.

Convertible Mortgage  TOP

A short term mortgage usually six or twelve months, allowing the borrower to 

switch into a longer term at any time without penalty.

High Ratio Mortgage  TOP

A loan for 80% to 95% of the purchase price of a property.

Variable Rate Mortgage  TOP

A mortgage where payments can be fixed from one to five years, but the 

interest rate could change from month to month or quarterly depending on 

market conditions. Payments and balance outstanding are adjusted 


First Mortgage  TOP

Mortgage given the first priority at the registry office. Can be conventional or high ratio. 

They give borrowers the best rate of interest.

Second Mortgage  TOP

A higher interest rate loan that provides borrowers with additional financing if the first 

mortgage does not meet their total financial requirements.


Ontario Home Ownership Plan.

Offer to Purchase  TOP

A written contract setting forth the terms under which a buyer agrees to purchase 

a property. Upon acceptance by the seller, it forms a contract, which will form the 

basis for the final document to be prepared by a lawyer or notary. It includes the 

legal and/or municipal description (this may consist of lot numbers as well as 

street address), purchase price, closing date, mortgage and terms of repayment, and lists specific items included as part of the sale.


Principal, interest and taxes due on a mortgage.


Principal and interest due on a mortgage.

Penalty  TOP

A sum of money paid to a lender for the privilege of prepaying a mortgage in part or in full.

Power of Sale  TOP

The right of a mortgagee to force the sale of the property without judicial proceedings 

should default occur.

Prepayment Option  TOP

The right to prepay a specified amount of the principal balance. Penalty 

interest may be incurred on prepayment options.

Prepayment  TOP

Full or partial payment of all or part of the principal, separate from the 

regular payments called for under a mortgage agreement.

Principal  TOP

The amount owing to the lender at any time.

Purchase Plus Plan  TOP

The Purchase Plus Plan lets you add the cost of improvements to your home 

onto your mortgage.

Rate (interest)  TOP

The return the lender receives for loaning you the money for the mortgage.

Real Estate  TOP

Includes real property, leasehold and business whether with or without premises, fixtures, 

stock in trade, good of chattels in connection with the operation of the business.

Roll-Over Mortgage  TOP

A mortgage loan where the interest rate is established for a specific term. At the 

end of this term, the mortgage is said to "roll-over" and the borrower and lender 

may agree to extend the loan. If satisfactory terms cannot be agreed upon, the lender is 

entitled to be repaid in full. In this case, the borrower may seek alternative financing.

Sales Representative  TOP

A licensed employee of a Real Estate Broker authorized to trade in real estate.

Survey  TOP

The accurate mathematical measurement of land and building there on.


Total Debt Service Ratio is a secondary calculation used by lenders and 

mortgage insurers to determine an applicant's ability to service their respective mortgage 

request in addition to their other debt obligations. The calculation is determined as follows:

Mortgage, Principle Interest & Taxes


Heating Cost
and/or Condo Fees


1/2 of Other Debts


Gross annual income of borrower(s)

Term  TOP

The length of time which you pay a specific interest rate on your mortgage loan. 

At the end of the term you may repay the balance of the loan or re-negotiate at current 

rates and conditions.

Title  TOP

Evidence of ownership.

Vendor Take Back  TOP

Where the seller of a property provides some or all of the mortgage financing in order 

to sell the property.

Zoning Laws  TOP

Municipal laws restricting the use of land for special purposes.



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