Every Canadian mortgage term, in plain English
Definitions written by a FSRA-licensed mortgage agent. Each term links to the related calculators, articles, and questions where it matters.
Amortization is the total number of years your mortgage would take to pay off in full at the current payment. In Canada it is usually 25 or 30 years. It is different from your term — the length of time your current rate and contract are locked in.
A short-term loan that bridges the gap between the purchase of a new home and the sale of your current one. Usually 30–120 days, interest-only, at prime + 2%–5%. Requires firm sale documents.
A standard Canadian mortgage: rate and payment locked for the term, with prepayment limits (typically 15%–20% per year) and penalties for early payout. Nearly all renewal offers are closed mortgages.
A mortgage registration type where the lender registers a claim for more than the loan amount (often 100%–125% of home value). Lets the lender add credit later without re-registering — but makes switching to another lender more expensive.
The portion of your home you own outright — appraised value minus mortgage balance. Equity grows through principal payments and home-price appreciation. You can access it via a refinance, HELOC, or reverse mortgage.
A fixed-rate mortgage keeps your interest rate and payment constant for the entire term. The 5-year fixed is Canada's most popular product. Fixed rates are set from Government of Canada bond yields plus a lender spread.
A home equity line of credit — a revolving credit line secured against your home, up to 65% of appraised value combined with your mortgage (max 80% total loan-to-value). Priced at prime + a spread. Interest-only payments allowed.
A mortgage backed by default insurance from CMHC, Sagen, or Canada Guaranty. Required when the down payment is under 20%. Insured mortgages get the lowest rates because the lender carries no default risk.
The ratio of your mortgage balance to your home's appraised value. LTV below 80% is 'conventional'; above 80% requires default insurance (CMHC, Sagen, Canada Guaranty). LTV affects the rates you qualify for.
A renewal happens at the end of your mortgage term when your existing contract matures. You sign a new term with your current lender, switch to a new lender, or pay the mortgage off. There is no penalty to switch at renewal.
A mortgage you can pay off or refinance at any time without penalty. Rates are materially higher than closed mortgages — usually 1%–3% above. Rarely the right choice unless you know you're selling within 12 months.
Transferring your existing mortgage — rate, term, and remaining balance — to a new property when you move. Avoids breaking the mortgage and paying a penalty. Usually requires closing the sale and purchase within 30–120 days.
A penalty charged when you break a closed mortgage before term end. For fixed rates, it's the greater of 3 months' interest or IRD (interest rate differential). For variables, it's typically 3 months' interest. There is no penalty at renewal.
Prime rate is the benchmark interest rate that Canadian banks charge their best commercial customers. Variable mortgages, HELOCs, and lines of credit are priced as 'prime plus/minus X'. Prime moves in step with the Bank of Canada's overnight rate.
A refinance is breaking your existing mortgage mid-term (or restructuring it at renewal) to change the loan amount, amortization, or rate. Refinancing mid-term triggers a prepayment penalty; refinancing at renewal does not.
The OSFI stress test requires uninsured borrowers to qualify at the greater of their contract rate + 2%, or 5.25%. Since November 2024, borrowers switching lenders at renewal without increasing loan or amortization are exempt.
Moving your existing mortgage balance from one lender to another at renewal, without increasing the loan or amortization. Since November 2024, uninsured renewal switches are exempt from the OSFI stress test.
Your term is the length of time your rate, payment, and lender are locked in — most commonly 5 years in Canada. At the end of the term, your mortgage matures and you renew, switch lenders, or pay it off. Amortization is different (see amortization).
The interest rate at which a variable-rate mortgage's fixed monthly payment no longer covers the interest owed. When hit, the lender either raises the payment or (in some products) capitalizes interest onto the principal.
A variable-rate mortgage moves with the lender's prime rate, which follows the Bank of Canada's overnight rate. Your rate is quoted as 'prime minus X%'. Payments may or may not change with each rate move, depending on whether it's a VRM or ARM.