Mortgage glossary, decoded

The total time to pay the mortgage off completely. Stretching it lowers your monthly payment but means more interest overall.

How much the home's value grows each year. Ontario's long-run average is roughly 4–5%, but any five-year window can be far higher or negative.

Mixing your current rate with today's rate and starting a fresh term. Usually carries no penalty, so it's always worth asking about.

How many months of savings it takes to pay back the penalty. Past that point you're ahead; before it, you're behind.

Everything due on closing day: down payment, land transfer tax, legal fees, title insurance, adjustments. Always more than the down payment alone.

The rate you actually pay. Different from the rate you're tested at, and different again from a lender's posted rate.

Rolling high-interest debt into your mortgage at a much lower rate. The payment drops sharply — but the debt now spans decades, so total interest can rise.

What the home is worth minus what you still owe on it.

Up to $4,000 off Ontario land transfer tax, plus $4,475 more in Toronto. Applied by your lawyer at closing.

Fixed locks your rate for the term. Variable moves with prime. Penalties differ sharply: variable is always just three months' interest.

The two ratios lenders use. GDS is the share of gross income going to housing — capped near 39%. TDS adds every other debt payment — capped near 44%.

Lenders add a standard heating cost — usually around $100 a month — when testing your ratios, whatever your real bill is.

Under 20% down means insured — lower rates, but a premium. 20% or more means uninsured — no premium, slightly higher rates, more lender flexibility.

A penalty roughly equal to the interest the lender loses by you leaving early. Big banks calculate it against posted rates, making it far larger.

What your down payment could earn if invested instead. This assumption drives the rent-vs-buy answer more than the mortgage rate does.

A tax paid when ownership transfers to you. Ontario charges one; buying inside Toronto means a second, roughly equal one on top.

Your mortgage divided by the home's value. Above 80% you must buy default insurance; below 80% you don't.

5% on the first $500,000, 10% on the portion between $500,000 and $1.5M, and 20% on anything above $1.5M.

Required when you put down less than 20%. It protects the lender if you stop paying — not you. The premium gets added to your mortgage.

First-time buyers of newly built homes may qualify for a GST/HST rebate worth up to $50,000, claimed through the CRA rather than your lender.

A lender's official advertised rate, usually well above what anyone actually pays. It exists mainly for penalty calculations.

What a lender charges to end a mortgage before the term is up. For fixed mortgages, the greater of three months' interest or the rate differential.

How much you can pay down each year without penalty — typically 10% to 20% of the original balance.

Principal is the part of each payment that reduces what you owe. Interest is the cost of borrowing. Early on, most of your payment is interest.

Ontario charges 8% sales tax on the premium. Unlike the premium itself this can't be added to the mortgage — it's due in cash on closing day.

Replacing your mortgage with a larger one to access equity. Capped at 80% of the home's value, and it requires re-qualifying.

When your term ends, the remaining balance rolls into a new term. You're free to move lenders — most people just sign what their bank mails them.

Realtor commission plus legal fees when you sell — usually around 5% of the sale price. It's why short ownership periods rarely pay off.

Canadian mortgage interest compounds twice a year, not monthly. It makes payments slightly lower than an American-style calculator would show.

Lenders must approve you at a higher rate than you'll actually pay: your rate plus 2%, or 5.25%, whichever is higher. A cushion in case rates rise by renewal.

A switch moves your existing balance to a new lender at renewal — no penalty, and the new lender usually covers costs. A refinance changes what you owe.

How long your rate and contract are locked in — usually 5 years. At the end you renew the remaining balance. It is not when the mortgage is paid off.

Lenders count half your monthly condo fee against your ratios. A $600 fee is treated as $300 of housing cost.

The simpler penalty — three months of interest on your balance. The minimum for a fixed mortgage and the only penalty on a variable one.

Credit card minimums, car payments, student loans, lines of credit, support payments. Rent, groceries, and utilities don't count.

Savings, gifts from immediate family, an FHSA (up to $40,000 lifetime), or an RRSP under the Home Buyers' Plan (up to $60,000 each).

Banks, credit unions, and monoline lenders each set their own rules on income, credit, property, and penalties. The same file can be approved at one and declined at another.