57 mortgage terms explained

Rates and pricing

Posted rate

Catalog rate published by a financial institution before negotiation. Used as marketing anchor, rarely the rate actually granted.

Rates and pricing

Negotiated rate

Rate actually granted to a borrower after negotiation, generally 0.40 to 0.70% below the posted rate. Often obtained through a mortgage broker.

Rates and pricing

Prime rate

Reference rate set by each chartered bank, used as the basis for variable mortgage rates (e.g. prime minus 0.75%).

Rates and pricing

Policy rate (overnight rate)

Target overnight rate set by the Bank of Canada. Directly influences the prime rate and variable mortgage rates.

Rates and pricing

Fixed rate

Mortgage interest rate guaranteed for the entire term. Stable payments, maximum predictability, but breakage penalties are often steeper.

Rates and pricing

Variable rate

Rate indexed to the bank prime rate (prime ± spread). Moves with Bank of Canada decisions; breakage penalty capped at 3 months interest.

Rates and pricing

Hybrid rate (combination mortgage)

Mortgage combining a fixed-rate portion and a variable-rate portion in negotiable proportions (e.g. 50/50 or 70/30).

Rates and pricing

Capped rate

Variable rate with a contractual ceiling above which the rate cannot rise, even if prime climbs. Offered by some Québec lenders.

Rates and pricing

Interest Rate Differential (IRD)

Penalty for breaking a fixed-rate mortgage before term. Calculated on the spread between your rate and a reference rate; can reach several thousand dollars.

Rates and pricing

Three months interest penalty

Minimum penalty for breaking a variable-rate mortgage before term. Calculated as 3 months of interest on the balance at the contractual rate.

Rates and pricing

Loan-to-Value (LTV) ratio

Percentage that the mortgage represents of the property value. Determines whether CMHC mortgage insurance is required.

Rates and pricing

Negotiated spread

Difference in basis points between the posted rate and the rate granted to the borrower. Measures the actual negotiation margin in a mortgage transaction.

Rates and pricing

Loyalty premium

Surcharge paid at renewal by borrowers who accept the first offer from the outgoing lender without shopping. Often 20 to 50 bps above market.

Types of mortgages

Amortization

Total scheduled duration to fully repay your mortgage. Maximum 25 years for insured loans, up to 30 years for conventional ones.

Types of mortgages

Down payment

Cash paid up front by the buyer at signing, expressed as a percentage of the purchase price. Minimum 5% in Canada, 20% to avoid CMHC insurance.

Types of mortgages

Insured mortgage

Mortgage with LTV > 80% covered by mortgage default insurance (CMHC, Sagen, Canada Guaranty). The lender recovers the premium via the contract.

Types of mortgages

Conventional mortgage

Mortgage with LTV ≤ 80% (down payment ≥ 20%). No mandatory mortgage insurance; amortization up to 30 years possible.

Types of mortgages

CMHC (Canada Mortgage and Housing Corporation)

Federal Crown corporation that insures mortgages with LTV > 80%. Canada's largest mortgage insurer, supervised by OSFI.

Types of mortgages

Sagen

Private Canadian mortgage default insurer (formerly Genworth MI Canada). Alternative to CMHC for mortgages with LTV > 80%.

Types of mortgages

Canada Guaranty

Third Canadian mortgage default insurer, fully private. Owned by OTPP and Ontario Pension Board. Alternative to CMHC and Sagen.

Types of mortgages

B lender mortgage (alternative lender)

Mortgage granted by a non-bank lender to borrowers whose file does not pass A-lender criteria (atypical income, imperfect credit). Higher rates, origination fees.

Types of mortgages

Private lender

Individual or company lending against mortgage security outside the banking system. High rates and fees; used for files refused at A and B levels.

Types of mortgages

Mortgage pre-approval

Preliminary lender assessment of the maximum amount and conditional rate offered to the borrower. Locks in a rate for 90-120 days; does not guarantee final approval.

Types of mortgages

Home Equity Line of Credit (HELOC)

Line of credit secured by a mortgage on your property. Variable rate based on prime + spread, flexible access to funds up to 65% of value (B-20).

Types of mortgages

Mortgage refinancing

Modification of an existing mortgage to change amount, term, rate, or lender. LTV capped at 80% since B-20 (2016).

Types of mortgages

Mortgage renewal

Continuation of your mortgage at the end of the term, with a new rate and terms. Shopping is recommended 4-6 months ahead.

Types of mortgages

Mortgage transfer (switch)

Move of the mortgage to a new lender at maturity, without changing the balance or amortization. Costs are often absorbed by the new lender.

Types of mortgages

Bridge loan

Short-term loan (typically 30-120 days) bridging the purchase of a new property and the sale of the old one. High rate, interest only.

Types of mortgages

Reverse mortgage

Mortgage for homeowners aged 55+ allowing them to withdraw up to 55% of home value with no mandatory monthly payments. Balance due at sale or death.

Types of mortgages

Mortgage portability

Option allowing you to transfer an existing mortgage to a new property, keeping the rate and term, when moving.

Regulation and legal framework

AMF (Autorité des marchés financiers)

Québec's single financial-sector regulator. Issues mortgage broker licences and supervises the practice in Québec since 2020.

Regulation and legal framework

OSFI (Office of the Superintendent of Financial Institutions)

Federal regulator of Canadian chartered banks. Publishes Guideline B-20 framing mortgage underwriting (stress test, LTV).

Regulation and legal framework

Guideline B-20 (OSFI)

Federal mortgage underwriting framework. Imposes the stress test, LTV caps, and income documentation rules.

Regulation and legal framework

Mortgage stress test

Mortgage qualification calculation at a stressed theoretical rate (contractual + 2% or 5.25%, whichever is higher). Aims to ensure payment capacity under rising rates.

Regulation and legal framework

Law 25 (Québec personal information protection)

Québec law modernizing personal information protection in the private sector. Applies to mortgage brokers since September 22, 2023.

Regulation and legal framework

Privacy Officer (RPRP)

Person designated within an organization to ensure Law 25 compliance. Public contact details mandatory on the website and in the brokerage mandate.

Regulation and legal framework

FICAM (Central housing insurance file)

Database shared among Canadian P&C insurers, used to verify a borrower's claims history during mortgage underwriting.

Regulation and legal framework

Certificate of location

Legal document prepared by a land surveyor describing a property's situation regarding cadastre, easements, and municipal regulations. Required by the lender and notary.

Regulation and legal framework

AMF brokerage mandate

Mandatory written agreement between client and mortgage broker, framed by the AMF. Specifies mission, compensation, conflicts of interest, and client rights.

Borrower profile and programs

TDSR (Total Debt Service Ratio)

Percentage of gross income devoted to all debt payments (mortgage + cards + autos + other). OSFI cap 44% for standard qualification.

Borrower profile and programs

GDSR (Gross Debt Service Ratio)

Percentage of gross income devoted to housing costs (mortgage + taxes + heating + condo). OSFI cap 39% for standard qualification.

Borrower profile and programs

Credit score (Beacon score)

Numerical score between 300 and 900 summarizing borrower risk. Calculated by Equifax (Beacon) and TransUnion. Threshold 680 for standard A, 720+ for best rates.

Borrower profile and programs

Credit file

Detailed history of your credit accounts (cards, lines, loans, mortgages), maintained by Equifax and TransUnion. Source of your credit score.

Borrower profile and programs

Beacon (Equifax score model)

Equifax proprietary model for calculating credit scores. Several versions coexist (Beacon 9, Beacon 10). It is the score most Canadian lenders see.

Borrower profile and programs

Notice of Assessment (T1 / NOA)

Document issued by the Canada Revenue Agency after filing your tax return. Standard income proof for mortgage qualification.

Borrower profile and programs

T4 (annual employment slip)

Federal annual tax slip issued by the employer. Shows compensation, CPP/EI contributions, tax withheld. Complementary to the NOA for qualification.

Borrower profile and programs

Self-employed

Person carrying on an economic activity without a salaried employment relationship. Mortgage qualification based on the NOA, sometimes with a dedicated program (BFS, Stated Income).

Borrower profile and programs

First-time buyer

Person purchasing a principal residence for the first time (or who has not owned in the last 4 years). Unlocks the HBP, FHSA, and 30-year insured amortization.

Borrower profile and programs

HBP (Home Buyers' Plan)

Federal program letting a first-time buyer withdraw up to CA$60,000 from their RRSP tax-free for a purchase. Repayable over 15 years.

Borrower profile and programs

FHSA (First Home Savings Account)

Federal savings account combining RRSP benefits (deduction) and TFSA benefits (tax-free withdrawals) for first-time buyers. CA$40,000 lifetime cap.

Actors and process

Mortgage broker

AMF-licensed professional who shops and negotiates a mortgage at 30+ lenders on behalf of the borrower. Paid by the lender, free for the client on standard A files.

Actors and process

Mortgage lender

Financial institution (chartered bank, credit union, alternative lender) granting a loan secured by a mortgage on a property. Classified A, B, or private in Canada.

Actors and process

Notary (Québec)

Public officer member of the Chambre des notaires du Québec, mandatory to draft and register the mortgage deed at the Land Registry. Fees CA$1,200-2,500 for a standard purchase.

Actors and process

Appraiser

Professional member of the OEAQ, tasked with producing an independent appraisal report of the property's market value. Required by the lender, costs CA$300-500.

Actors and process

Pre-purchase home inspection

Non-destructive visual examination of a property by a building inspector to identify apparent defects and risks before purchase. Costs CA$500-900 in Québec.

Actors and process

Funds disbursement (funding)

Final step where the lender transfers the principal to the notary on the day of deed signing. Conditional on prior mortgage registration at the Land Registry.

Actors and process

Collateral mortgage charge

Mortgage deed registered for an amount higher than the initial loan, allowing future advances without new notarial registration. Reduces portability.