Mortgage Glossary

The mortgage terms you are most likely to meet when buying a home in Toronto and the GTA, in plain English.

Amortization

The process of gradually paying off a mortgage through scheduled payments over a set period.

Appraisal

An estimate of a property's market value, prepared by a professional appraiser.

Balloon Payment

A large lump-sum payment due at the end of a loan term.

Bridge Loan

A short-term loan that covers the gap when you buy a new home before the sale of your current one closes.

Closing Costs

Fees paid to complete a purchase and mortgage, such as legal fees, title insurance, appraisal costs and land transfer tax.

Conventional Mortgage

A mortgage with a down payment of at least 20%, so no mortgage default insurance is needed.

Debt-to-Income Ratio (DTI)

A measure that compares a borrower's monthly debt payments to their gross income.

Down Payment

The upfront amount paid toward a home's purchase price, usually a percentage of the total.

Equity

The difference between a home's market value and the outstanding mortgage balance.

Fixed-Rate Mortgage

A mortgage whose interest rate stays the same for the whole term.

Foreclosure

A legal process in which a lender takes possession of a property after missed mortgage payments. In Ontario this is usually done through a power of sale.

Insurable Mortgage

A mortgage with a down payment of 20% or more that still meets the insurer criteria, so the lender can choose to insure it.

Insured Mortgage

A mortgage with a down payment of less than 20%, which requires mortgage default insurance. It is only available on homes priced below $1.5 million.

Interest Rate

The percentage a lender charges for borrowing money.

Loan-to-Value Ratio (LTV)

A ratio that compares the mortgage amount to the property's appraised value.

Mortgage Insurance

Insurance that protects the lender if the borrower defaults, required when the down payment is less than 20%.

Pre-Approval

A lender's conditional commitment to provide a mortgage, based on the borrower's financial information.

Uninsured Mortgage

A mortgage with a down payment of at least 20% that does not carry mortgage default insurance. Homes priced at $1.5 million or more, which includes most luxury homes, are financed this way.

Variable-Rate Mortgage

A mortgage whose interest rate moves with market conditions.