Mortgage Glossary
A comprehensive guide to presale mortgage terminology in Canada. Use this glossary to better understand the language used in presale contracts, mortgage documents, and throughout the home buying process.
A
Amortization
The length of time it will take to pay off a mortgage in full. In Canada, the maximum amortization for insured mortgages is 25 years, while uninsured mortgages can go up to 30 years.
Assignment
The sale of a presale contract to another buyer before the building is complete. The new buyer takes over the original buyer's position in the contract.
Adjustable-Rate Mortgage
Similar to a variable-rate mortgage, but the payment amount changes when interest rates change.
Appraisal
A professional assessment of a property's market value, typically required by lenders before approving a mortgage.
B
Bridge Financing
Short-term financing used when a buyer purchases a new property before selling their existing one.
Buyer's Market
A market condition where supply exceeds demand, giving buyers an advantage in negotiations.
C
Closing Costs
The additional expenses beyond the purchase price that buyers pay when they close on their property, such as legal fees, land transfer taxes, and adjustment costs.
Completion Date
The date when the sale of the property is finalized, the buyer pays the remaining balance, and ownership is legally transferred from the seller to the buyer.
Conventional Mortgage
A mortgage loan that does not exceed 80% of the property's value, meaning the buyer has a down payment of at least 20% and does not require mortgage insurance.
Cooling-Off Period
A period (typically 7-10 days) after signing a presale contract during which the buyer can cancel the purchase for any reason without penalty.
Closing
The final step in a real estate transaction where documents are signed, money changes hands, and the property is transferred to the buyer.
CMHC (Canada Mortgage and Housing Corporation)
A Crown corporation that provides mortgage insurance and housing market research in Canada.
Collateral Mortgage
A type of mortgage that secures the loan with the property and allows for additional funds to be borrowed in the future without refinancing.
D
Deposit
Money paid by the buyer to secure a purchase agreement. For presales, deposits are typically paid in installments and held in trust until completion.
Deposit Structure
The schedule of deposit payments required for a presale purchase, typically spread out over time (e.g., 5% on signing, 5% after 6 months, 5% after 12 months).
Disclosure Statement
A legal document provided by developers to presale buyers that contains detailed information about the development, including features, bylaws, and potential risks.
Down Payment
The initial upfront portion of the total purchase price paid by the buyer. In presales, this is typically paid through the deposit structure.
Deficiency Walkthrough
An inspection conducted by the buyer and developer before taking possession to identify any defects or issues that need to be addressed.
Deposit Insurance
Insurance that protects buyers' deposits in presale purchases if the developer fails to complete the project.
E
Equity
The difference between the market value of a property and the amount owed on the mortgage.
F
Fixed-Rate Mortgage
A mortgage where the interest rate remains the same throughout the term of the loan, providing payment stability.
First-Time Home Buyer Incentives
Government programs that provide financial assistance or tax benefits to individuals purchasing their first home.
G
GDS Ratio (Gross Debt Service Ratio)
The percentage of a borrower's gross income that goes toward housing costs. In Canada, lenders typically want this to be below 39%.
GST/HST New Housing Rebate
A partial rebate of the GST or HST paid on the purchase of a new or substantially renovated home in Canada.
H
High-Ratio Mortgage
A mortgage where the loan amount exceeds 80% of the property's value, requiring mortgage insurance in Canada.
Home Inspection
A thorough examination of a property's condition by a qualified inspector, typically done before finalizing a purchase.
I
Interim Occupancy
A period when buyers can move into their new condo units before the condominium corporation is registered and final closing occurs.
Interest Rate Differential (IRD)
A penalty charged by lenders when a borrower breaks a fixed-rate mortgage term, based on the difference between the original rate and current rates.
L
Land Transfer Tax
A tax imposed by provincial and sometimes municipal governments when real estate changes hands.
Lien
A legal claim against a property that must be paid when the property is sold.
Loan-to-Value Ratio (LTV)
The ratio of the mortgage amount to the appraised value of the property, expressed as a percentage.
M
Mortgage Insurance
Insurance that protects the lender if the borrower defaults on the mortgage. Required in Canada for mortgages with down payments less than 20%.
Mortgage Pre-Approval
A preliminary assessment by a lender of how much they might be willing to lend you based on your income, credit, and other factors.
Mortgage Term
The length of time your mortgage agreement with a specific lender lasts, typically 1-5 years in Canada, after which you must renew or refinance.
Mortgage Broker
A professional who acts as an intermediary between borrowers and lenders to help secure mortgage financing.
Mortgage Default Insurance
Insurance that protects lenders if borrowers default on their mortgages, required for high-ratio mortgages in Canada.
O
Occupancy Date
The date when a buyer can move into the property, which may be different from the completion date in presale developments.
P
Pre-Construction
A property that is sold before it is built, based on architectural plans and renderings.
Presale
The sale of a property before it is built or completed, common in new condominium and housing developments.
Principal
The original amount borrowed in a mortgage loan, not including interest.
Property Transfer Tax
A tax paid to the provincial government when purchasing property. Rates vary by province and property value.
S
Strata (Condominium)
A type of property ownership where individuals own their units and share ownership of common areas, governed by a strata corporation.
Strata Fees
Monthly payments made by strata property owners to cover maintenance, repairs, and amenities for common areas.
Stress Test
A Canadian mortgage qualification requirement where borrowers must prove they can afford payments at a higher interest rate than their actual rate.
Seller's Market
A market condition where demand exceeds supply, giving sellers an advantage in negotiations.
T
TDS Ratio (Total Debt Service Ratio)
The percentage of a borrower's gross income that goes toward housing costs plus all other debt payments. In Canada, lenders typically want this to be below 44%.
Title Insurance
Insurance that protects against losses from defects in title to real property and from the invalidity or unenforceability of mortgage loans.
V
Variable-Rate Mortgage
A mortgage where the interest rate fluctuates with changes in market rates, typically tied to the lender's prime rate.
W
Warranty
A guarantee provided by builders or developers for new homes, covering defects in workmanship and materials for a specified period.
Z
Zoning
Municipal regulations that determine how property in specific geographic zones can be used (e.g., residential, commercial, industrial).