Mortgage Glossary

We know the mortgage world can be confusing, so get educated on all of the terms and lingo in the industry with our helpful glossary.

Amortization Period Expand/Collapse

The amortization of your mortgage is the amount of time it would take you to repay your mortgage in full based on your current payment amount, your payment frequency and your current interest rate. Typically, amortization in Canada is up to 25 years (30 years amortization available for conventional mortgages at RCU). A longer amortization lowers your monthly payments and allows you to have increased cash-flow on a month to month basis; however, with a longer amortization your cost of borrowing will be higher.

Annual Property Taxes Expand/Collapse

These are the property taxes due each year for the subject property.

Appraised Value Expand/Collapse

The appraised value of your property is the ‘market value’ of your home as deemed by an appraiser (RCU approved). We will use the appraised value of your home to make a decision as to how much we may be willing to loan to you against the value of your home.

Annual Percentage Rate (APR) Expand/Collapse

The APR represents the total cost of your loan or mortgage including the interest and any additional fees such as legal fees or appraisal fees on your home. The APR is typically higher than your interest rate because it includes the additional fees required.

Breaking Your Mortgage Expand/Collapse

Breaking your mortgage is to opt out of your mortgage before the agreed upon term is finished. Banks and lending institutions will typically charge you the greater of two penalties: three (3) months interest or an IRD (Interest Rate Differential) penalty. Home-owners often break a mortgage to try and take advantage of lower interest rates in the market. A qualified Mortgage Professional should be able to determine if breaking your mortgage is worth it for you.

Closed Mortgage Expand/Collapse

A closed mortgage is a mortgage that cannot be fully repaid before the end of your term without incurring some kind of penalty. Open mortgages, those that can be repaid before the end of a term without penalty are available, however; these open mortgages typically come with a higher interest rate than that of closed mortgages.

Closing Date Expand/Collapse

The big day! The closing date is the day in which your house purchase or refinance takes place. A lending institution will grant you the agreed upon funds and sellers transfer home-ownership (and the keys!) to the buyer.

Conventional Mortgage Expand/Collapse

A conventional mortgage is a mortgage where the total mortgage amount does not exceed 80% of the property value. By putting at least 20% down payment you also avoid paying any mortgage loan insurance costs.

Convertible Mortgage Expand/Collapse

A convertible mortgage is a variable rate mortgage that can be ‘locked-in’ or converted into a fixed rate mortgage without penalties.

Cost of Borrowing Expand/Collapse

The total costs of obtaining your mortgage. These costs typically include your appraisal fees as well as any other charges required to close your mortgage. These costs are included in your Annual Percentage Rate.

Deed Expand/Collapse

A deed is a document confirming the ownership of a particular property.

Down Payment Expand/Collapse

Your down payment is the amount of money you have on hand to put towards the payment of your home. The larger your down payment, the smaller your mortgage amount will be. In Canada, a minimum of 5% down payment is typically required. Mortgages greater than 80% of a home’s value are referred to as ‘high-ratio mortgages’ and require that the borrower pay for mortgage default insurance. Buyers with 20% or greater of a down payment typically do not have to pay for mortgage default insurance.

Estimated Value Expand/Collapse

This is the estimated value of your home. You may use the value of comparable homes in your area or your municipal annual property tax assessment to find estimated value of your property.

Estoppel Certificate Expand/Collapse

An estoppel certificate is a legal document that shows the various finances and legal status of a condominium corporation. It is important that your lawyer reviews this document to advise you on the financial health of a condominium you plan on buying.

First Mortgage Expand/Collapse

The first mortgage is the mortgage that takes precedence above any other mortgages or loans registered against your home. If there are any other mortgages registered against your property, the first mortgage must be paid out first upon selling of your property.

Guarantor Expand/Collapse

A guarantor is the person who agrees to make repayments on a mortgage if the borrower of that mortgage does not do so. Some lenders may require a guarantor depending on your particular situation and borrowing request.

High Ratio Mortgage Expand/Collapse

A high ratio mortgage is a mortgage greater than 80% of the value of a property. High ratio mortgages require that the borrower pays mortgage default insurance.

Home Equity Expand/Collapse

Home equity, or the equity in your home, is the difference between the value of your home and what you owe on it.

Prime Rate Expand/Collapse

The prime rate is an interest rate set by banks and lending institutions based on the Bank of Canada’s overnight lending rate. The Prime Rate usually moves in lock-step with the overnight lending rate. Variable rate mortgage holders should pay attention to the prime rate.

Interest Rate Expand/Collapse

The interest rate is the amount charged, expressed as a percentage of principal, by a lender to a borrower for the use of assets. Interest rates are typically noted on an annual basis, known as the annual percentage rate (APR).

Loan to Value (LTV) Ratio Expand/Collapse

The ratio of the principal amount of a mortgage to the value of the property.
For example, if your property is worth $100,000 and you made a down payment of $25,000, your mortgage amount will be $75,000 and your LTV is 75%.
The LTV helps determine whether or not mortgage default insurance is required. LTV of 80% or less will be a conventional mortgage and will generally not need mortgage default insurance. LTV of more than 80% will be a high-ratio mortgage and will need mortgage default insurance. Other circumstances may also cause you to need mortgage default insurance.

Lump Sum Payment Expand/Collapse

The best mortgages allow home-owners to pay off their mortgage faster using prepayment options. Each mortgage year, home-owners can make one-time or on-going lump sum prepayments equal to a certain of their original mortgage balance without penalty.

Maturity Date Expand/Collapse

The maturity date is the last day of the term of your mortgage. Any outstanding balance is due on this date. However, if you have an outstanding balance you will usually have the opportunity to renew your mortgage with a new principal amount, interest rate, term and amortization.

Mortgage Expand/Collapse

A mortgage is a loan that is secured by property.

Mortgage Default Insurance Expand/Collapse

Mortgage Default Insurance is not life or disability insurance. Mortgage Default Insurance transfers the risk of default from the lender to the insurer. This insurance is required by law for high ratio mortgages (those for an amount greater than 80% of the value of the property) and may be required under other circumstances.

Mortgage Life Insurance Expand/Collapse

Creditor insurance that pays off the remaining mortgage debt in the event of a borrower’s death.

Mortgage Penalties Expand/Collapse

At funding or when renewed, a mortgage is set for a pre-determined amount of time or term. If the mortgage is terminated before its maturity date, either through sale of the home, early renewal or discharge, there may be penalties. The applicable penalties would be equal to the greater of the interest rate differential or 3 months interest plus any applicable fees related to the discharge request.

Mortgagee Expand/Collapse

The lending institution or bank providing you the mortgage on your home.

Mortgagor Expand/Collapse

The borrower of the mortgage.

MLS Listing Expand/Collapse

The listing of a particular property from Multiple Listing Service (MLS) which includes the particular details of a property. Typically the most pertinent details are property taxes, maintenance fees and measurements of the property.

Portable Mortgage Expand/Collapse

A portable mortgage is a mortgage that you can transfer over with you to a new property. The benefit of a portable mortgage is the ability to keep the rate and terms of your current mortgage.

Pre-Approved Mortgage Expand/Collapse

Many lenders will pre-approve a mortgage to a set maximum principal amount before you’ve found the house you want to buy. Pre-Approvals are useful as they can guarantee your interest rate for up to 120 days on fixed term loans and can help you determine your budget for your next housing purchase. A pre-approval won’t cost you anything and can help you hold on to today’s interest rates.

Principal Expand/Collapse

The principal is the amount of money you’ve borrowed for your property. This doesn’t include any interest costs that might be required.

Purchase Price Expand/Collapse

The purchase price is the actual price you’ve agreed upon for the purchase of your new home. This price doesn’t include any closing fees, transfer taxes or interest costs.

Security Expand/Collapse

This is an asset that is used as collateral for the sake of a loan. In the case of your mortgage, your home is the asset used as security.

Term Expand/Collapse

A mortgage term is the length of time, usually in years, in which the parameters of a mortgage have legal effect. Many lenders offer mortgages with terms up to 10 years. At the end of the term (on the maturity date), you must repay the outstanding principal amount or renew the mortgage with a new principal amount, interest rate, term and amortization. The mortgage term should not be confused with the mortgage amortization period. The mortgage term is much shorter.

Title Expand/Collapse

The title designates the ownership of a particular property.

Title Insurance Expand/Collapse

Title Insurance is a product that protects you from any fraud, errors or survey matters associated to the title of your property.

Variable Rate Mortgage Expand/Collapse

A Variable Rate Mortgage is a mortgage of any given term (usually 1-5 years) where the interest rate moves in lock-step with your mortgage lender’s Prime Rate.

Zoning Expand/Collapse

Zoning refers to the geographic zone designations allotted by municipalities.

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Fixed Rate Mortgages Rates
1 year 3.20%
2 years 3.30%
3 years 3.40%
4 years 3.50%
5 years 3.60%
Variable Rate Mortgages Rates
Open (1, 2, 3 years) 3.20%
Closed 2.70%
Home Equity Line of Credit Rates
Home Equity Line of Credit 3.60%