Mortgage glossary: A–Z

A–Z mortgage terms

Amortization

The scheduled period over which regular payments repay a mortgage. It is different from the term of the current contract.

Bridge financing

Short-term borrowing that may cover a gap between a home purchase closing and the closing of an existing sale.

Collateral charge

A registered security that can support borrowing under a lender’s arrangements. Its scope and switching implications depend on the documents.

Down payment

The buyer’s contribution toward the purchase price, separate from closing costs. The lender must accept its amount and source.

Equity

The difference between a property’s value and the debts secured against it. Accessing equity generally requires an approved borrowing arrangement.

eXtra payment

An additional principal payment, commonly called a prepayment. Permitted amounts and timing depend on the mortgage agreement rather than a universal rule.

Fixed rate

An interest rate that stays unchanged for the agreed term. Payment and penalty details still depend on the mortgage contract.

Gross debt service

A lending calculation comparing qualifying housing costs with qualifying income. It is not the same as a complete household budget.

HELOC

A home equity line of credit secured against the property. Its variable borrowing cost and repayment requirements need careful review.

Interest rate differential

A possible fixed-mortgage prepayment charge calculation. The applicable rates, comparison term and method depend on the lender’s agreement.

Joint borrower

A person who borrows with another applicant. Responsibilities come from the loan agreement, not merely an informal plan to share payments.

Known closing costs

Expenses identified for completing the transaction, such as legal charges and adjustments. Estimates should be confirmed before funds are provided.

Loan-to-value

A comparison of the loan amount with the property value used by the lender. It helps assess the financing structure.

Mortgage default insurance

Insurance protecting the lender against borrower default. It differs from home insurance and does not remove the borrower’s repayment obligation.

Notice of assessment

A tax authority’s assessment of a filed return. A lender may request it when reviewing income or outstanding tax obligations.

Open mortgage

A mortgage allowing repayment without the same restrictions as a closed product. Read the actual terms and compare the cost.

Portability

A mortgage feature that may allow transfer to another property, subject to timing, lender approval and the conditions in the contract.

Qualification

The lender’s assessment of whether the borrower and property meet its requirements. A calculator result is not a qualification decision.

Renewal

The point at which a mortgage term ends and new terms are arranged for the remaining balance, with the same or another lender.

Switch

Moving an existing mortgage to another lender. The structure, costs and approval requirements differ from taking additional funds through a refinance.

Term

The length of the current mortgage contract. A balance can remain when the term ends even though scheduled payments have been made.

Underwriting

The lender’s review of the application, supporting documents and property. Approval may include conditions that must be satisfied before funding.

Variable rate

An interest rate that changes according to the contract’s benchmark. The payment may change or the payment’s principal-interest allocation may change.

Written commitment

A lender document setting out proposed financing and conditions. Read it carefully; outstanding conditions can prevent the mortgage from funding.

Year-to-date income

Income shown for the current year so far. Lenders may compare it with past earnings rather than treating it as a full annual total.

Zero balance

A statement showing no amount owing on an account. Closing the account or discharging registered security can require separate steps.