Mortgage Terminology Glossary

Amortization Period - The actual number of years it will take to repay a mortgage loan in full. This may go beyond the term of the loan. For example, mortgages often have five-year terms but 25-year amortization periods.

Appraised Value - An estimate of the value of the property offered as security for a mortgage loan. The appraisal is done for mortgage lending purposes and the appraisal value may be less than the purchase price of the property.

Canada Mortgage and Housing Corporation (CMHC) - The Corporation of the Federal Government that provides mortgage insurance to lenders against borrower default, under the National Housing Act (NHA).

Closed and Open Mortgages - A closed mortgage agreement does not provide options for payout before the maturity date. A lender may permit early payout of a closed mortgage under certain circumstances but will charge a prepayment charge for doing so. An open mortgage provides you the flexibility for prepayment or a full payout at any time.

Closing Date - The date on which the sale of the property becomes final and the new owner takes possession.

Collateral Mortgage Charge - security is provided in favour of The Bank of Nova Scotia (carrying on business as “Scotiabank”), registered in first position priority on the land and building. The specific details of the mortgage loan are not included in the charge that is registered on the title to your home. A separate credit agreement contains the specific terms of the mortgage loan. This collateral charge may secure other debt besides the mortgage loan.

Condominium - A form of ownership in which the owner has title to a dwelling unit and owns a share of the common elements (such as elevators, hallways and the land).

Conventional Mortgage Charge - (in Quebec, an immovable hypothec): security is provided in favour of Scotia Mortgage Corporation (SMC), a wholly owned subsidiary of Scotiabank, registered in first position priority on the land and building. The specific details of the mortgage loan such as the amount, term and interest rate are included in the charge registered on title to your home. This conventional charge secures only the mortgage loan.

Debt Service Ratios (GDSR & TDSR) - The Gross Debt Service Ratio (GDSR) is the percentage of gross annual income required to cover payments associated with the principal residence (mortgage principal and interest, taxes, secondary financing, heating, and 50% of condominium fees, if any). The GDSR should not exceed 32% of gross annual income. The Total Debt Service Ratio (TDSR) is the percentage of gross annual income required to cover payments associated with housing and all other debts and obligations, such as payments on a car loan. The TDSR should not exceed 40% of gross income.

Down Payment - The amount of money (usually in the form of cash) put forward by the purchaser. It represents the difference between the purchase price and the amount of the mortgage loan.

Equity - Equity is the difference between the price for which a property could be sold and the total debts registered against it.

Fixed Rate Mortgages - A fixed rate mortgage is where the rate of interest and payment amount are fixed for a specific term.

Flexible Mortgage - A closed mortgage agreement does not provide options for payout before the maturity date. A lender may permit early payout of a closed mortgage under certain circumstances but will charge a prepayment charge. The flexible mortgage agreement offers flexibility allowing you to renew your mortgage at an earlier date into a fixed rate closed term of one year or longer without incurring a prepayment charge.

Genworth - Genworth Financial Canada, a private mortgage default insurance provider.

High Ratio Mortgage - A mortgage loan that exceeds 80% of the lesser of the appraised value or purchase price of the property. This mortgage must be insured and borrowers must pay an application fee and the insurance premium (which may be added to the mortgage) to the insurer.