Mortgage terms, in plain English.

Adjustable-rate mortgageARM

A mortgage whose rate moves with prime AND whose payment moves with it. When prime rises your payment rises immediately, so the principal/interest split and the amortization stay roughly on schedule. You carry the rate risk in your monthly cash flow rather than in your amortization.

Worth knowing. Commonly lumped in with "variable". An ARM has no trigger rate and no trigger point — those only exist because a VRM payment is fixed.

Amortization

The total time it would take to pay your mortgage down to zero at the current payment — commonly 25 years. It is not the length of your contract. A longer amortization lowers each payment and raises the total interest you pay, because the balance falls more slowly.

Worth knowing. Different from your term. Most Canadians hold several terms over one amortization.

Blend and extend

Combining your existing rate with the current rate on new money, and restarting the term at the blended figure. Lenders offer it as a way to change your mortgage without an explicit penalty — but the penalty is often recovered inside the blended rate, so compare the total cost against simply breaking and paying.

Closing costs

The one-time costs of completing a purchase, beyond the down payment: land transfer tax where it applies, legal fees, title insurance, appraisal, and adjustments for prepaid property tax or utilities. The total is driven mostly by the land transfer tax, which is why it varies so much by province.

Scope: Total varies materially by province and municipality

Collateral charge

A mortgage registered for MORE than you borrowed — often up to the property’s value — so the lender can lend you more later without a new registration. That flexibility has a cost at renewal: another lender generally cannot simply take the charge over, so switching usually means discharging and re-registering, with legal costs you would not face on a standard charge.

Worth knowing. A real consumer consequence, not a technicality. Ask which type you are being offered before you sign, not at renewal.

Conventional mortgage

A mortgage with 20% or more down. No default insurance is required, and the lender carries the loss risk itself — which is why conventional pricing can sit above insured pricing for an otherwise identical borrower.

Discharge fee

The lender’s administrative charge for removing its registration from your title when you pay out or move the mortgage. Separate from any prepayment penalty, and separate again from the provincial registration cost.

Scope: Amount varies by province and lender

Discount off prime

The spread below prime you negotiated, e.g. "prime minus 0.90". The discount is fixed for the term even though prime moves, so it is the part of a variable rate you actually shop for — comparing two variable offers means comparing their spreads, not their rates on the day.

Fixed rate

An interest rate locked for the whole term. Your rate does not move, whatever the Bank of Canada does. Fixed rates are priced off Government of Canada bond yields of a similar term rather than off the policy rate, which is why a fixed rate can move on a day the Bank does nothing.

Gross debt serviceGDS

The share of your gross income that housing would consume — mortgage payment, property tax, heat, and typically half of any condo fees. Lenders cap it, and the cap is a lender guideline rather than a fixed law, so it varies at the margins.

High-ratio mortgage

A mortgage with less than 20% down. It requires mortgage default insurance, and it often carries a LOWER rate than an uninsured mortgage — counter-intuitive until you notice the insurance protects the lender, not you, so the lender is taking less risk.

Worth knowing. The 20% line is federal law, not a lender preference — a federally regulated lender cannot hold an uninsured mortgage below it. Unlike the stress-test qualifying rate, this threshold is structural and long-stable, which is why it appears here as a number when the qualifying rate does not.

Home equity line of creditHELOC

A revolving credit line secured against your home, usually registered as a collateral charge. You draw, repay and re-draw up to a limit, paying interest only on the drawn balance. The rate is variable, and the payment is often interest-only, which means the balance does not fall unless you make it fall.

Insured, insurable, uninsured

Three pricing tiers, not two. INSURED: under 20% down, the borrower pays the default-insurance premium. INSURABLE: 20% or more down but the file still meets the insurer’s rules, so the lender can insure it in bulk at its own cost and price accordingly. UNINSURED: the file cannot be insured at all — for example a property above the insurable price ceiling, a rental, or a longer amortization — and is priced highest of the three.

Worth knowing. This is why a bigger down payment sometimes raises your rate. The tier, not the equity, sets the pricing band.

Interest rate differentialIRD

A prepayment penalty on fixed mortgages, calculated from the gap between your contract rate and a comparison rate the lender selects for the time you have left. On a fixed mortgage the penalty is usually the greater of the IRD and three months’ interest.

Worth knowing. The method is NOT standard across lenders. Some compare against their posted rate rather than a discounted one, which can multiply the penalty several times over for the same mortgage. The formula is in your contract — ask for the figure in writing before you commit to breaking.

Land transfer taxLTT

A tax on the transfer of property title, charged by most — not all — provinces and calculated on the purchase price. Some municipalities levy a second one on top of the provincial charge.

Scope: Province-specific. Alberta and Saskatchewan charge registration fees rather than a transfer tax; Toronto adds a municipal LTT on top of Ontario’s.

Worth knowing. Never assume the Ontario rule is the national one. Rates, brackets and first-time-buyer rebates all differ by jurisdiction.

Loan-to-valueLTV

Your mortgage as a percentage of the property’s value. A 20% down payment means an 80% LTV. It drives whether default insurance is required, and it is one of the main inputs to the rate you are offered.

Maturity date

The last day of your term — the date the outstanding balance is contractually due. It is the deadline that matters when shopping a renewal, because a switch has to be arranged and registered before it.

Mortgage default insurance

Insurance that pays the LENDER if you default. Required on high-ratio mortgages and provided in Canada by CMHC, Sagen or Canada Guaranty. The premium is a percentage of the mortgage that scales with your loan-to-value, and it is usually added to the balance rather than paid up front.

Worth knowing. Not mortgage life insurance, which pays your mortgage if you die and is a life product — see LifeRate.ca. The two are routinely confused because both are sold at the same moment.

Mortgage term

The length of your current mortgage contract — often 5 years, but anywhere from 6 months up. At the end of the term the balance comes due, and in practice you renew it for another term. The rate, the prepayment rules and the penalty formula are all fixed for the term, not for the amortization.

Porting

Carrying your existing mortgage and its rate to a new property when you move, instead of breaking it. Lenders impose a window between the sale and the purchase closing, and porting is subject to re-qualifying on the new property.

Prepayment privilege

How much extra you may pay each year without triggering a penalty — typically a lump sum expressed as a share of the original principal, plus the right to increase your regular payment. The percentages, the timing and whether unused room carries forward all vary by lender and are set in your contract.

Prime rate

Each lender’s own posted reference rate for variable lending. Lenders move prime in step with the Bank of Canada’s policy rate in practice, though they set it themselves and are not obliged to match. Your variable rate is usually quoted as prime plus or minus a spread.

Rate hold

A lender’s commitment to honour a quoted rate for a set window while you shop or wait to close. If rates fall during the hold you generally get the lower one; if they rise you keep the held rate. It is a commitment on the rate, not an approval.

Refinance

Replacing your mortgage mid-term with a new, usually larger one — to access equity or consolidate debt. Because you are breaking the term, a prepayment penalty normally applies, and refinances are uninsurable, so the new rate is priced in the uninsured tier.

Renewal

What happens at the end of your term: the balance comes due and you sign a new term, usually with the same lender. Renewing with your current lender needs no new approval, which is convenient and is also why renewal offers are not always the sharpest number available.

Standard charge

A mortgage registered against your title for the mortgage amount only. When the term ends you can move it to another lender as a straight switch, because the new lender is replacing a registration that matches the loan.

Stress test

The federal rule requiring a lender to qualify you at a rate higher than the one you will actually pay, so your file has room if rates rise. The qualifying rate is the greater of your contract rate plus a set margin, or a minimum qualifying rate floor.

Worth knowing. The margin and the floor are set by OSFI and have changed more than once. This definition deliberately states no number — check the current qualifying rate with a lender rather than trusting any figure you read, including an older version of this page.

Switch (transfer)

Moving your existing balance to a new lender at renewal, without increasing it. There is normally no prepayment penalty at renewal, but there are discharge and registration costs — which the new lender often covers. A collateral charge makes a switch more expensive than a standard charge does.

Three months’ interest

The simpler of the two prepayment penalty calculations: roughly three months of interest on the amount you are prepaying. It is the usual penalty on variable mortgages, and the floor on fixed ones where the IRD works out lower.

Title insurance

A one-time policy covering title defects, survey problems and certain frauds affecting ownership. Most lenders require a lender policy; an owner policy covering you is separate and optional.

Total debt serviceTDS

GDS plus every other debt payment you carry — car loans, credit cards, lines of credit, support obligations. It is the ratio that usually binds first for people who otherwise qualify comfortably on housing alone.

Trigger point

On a VRM only: the point at which the balance has grown enough — typically back up to the original principal, though the contract defines it — that the lender requires action. Usually that means increasing the payment, making a lump sum, or converting to a fixed rate.

Worth knowing. A later and more consequential event than the trigger rate. Check your own contract for how yours is defined; it is not standardised.

Trigger rate

On a VRM only: the interest rate at which your fixed payment no longer covers even the interest owed. Reaching it does not automatically change anything, but past that point the unpaid interest starts being added to your balance instead of the balance falling.

Worth knowing. Not the same as the trigger point, and it does not exist on an ARM.

Variable-rate mortgageVRM

A mortgage whose interest rate moves with your lender’s prime rate, but whose PAYMENT stays the same. When prime rises, more of each fixed payment goes to interest and less to principal; when prime falls, the reverse. Your amortization stretches or shortens instead of your payment changing.

Worth knowing. Most sources call this simply "variable" and use the word for adjustable mortgages too. Ask which one a lender means — the difference is whether your payment can change.