Mortgage and borrowing glossary
Commonly used terms to help you borrow wisely.
This is the length of time it will take for you to pay off your mortgage. Maximum amortization is up to 25 or 30 years, depending on the mortgage, which means your payments may be extended over a 25-year period. Keep in mind, the shorter your amortization, the faster you pay off your mortgage and the more you save on interest costs.
The yearly fee you are charged for holding a credit card.
Annual percentage rate (APR)
The interest rate you’ll be charged if you don’t pay off your entire credit card balance by the end of each billing cycle.
Money withdrawn from your credit card account. Cash advances can be costly, as credit card providers will usually charge higher interest rates and fees on the withdrawal, and interest is charged daily from the time you withdraw the cash until you pay off your balance.
Your ability to borrow money from a lender so that you can pay for goods and services.
Your credit history is an objective measurement of your record of repaying loans in a timely manner, along with any applicable financing or interest charges.
The maximum amount you can borrow with your credit card.
A type of debt refinancing where you take out a line of credit, equity link line, or loan so you can make one payment each month at a lower interest rate.
The amount of money you put toward the purchase of your home. The minimum amount you need for your down payment depends on the purchase price of the home.
First Time Home Buyers’ Program (FTHB)
A program that allows you to use your RRSP funds as part of your down payment, with 15 years to pay it back.
Fixed-rate mortgages lock in your interest rate for your mortgage term, which means your principal and interest vary from month to month, but your total borrowing cost is fixed.
A period of time during which, if you pay your full balance by the due date, you won’t be charged interest on credit card purchases. This grace period will apply to new purchases, even if you carry a balance from the past month.
A valuation of your home based on a variety of factors. A home appraisal is usually required when purchasing a home with a mortgage.
The difference between what you owe on your mortgage, and what your home is worth.
A mortgage covered by mortgage default insurance to protect the lender against default. Mortgage insurance is often required for homebuyers whose down payment is under a certain percentage.
Line of credit
A line of credit is a revolving account that allows you to repeatedly withdraw and repay money.
Money you borrow and pay back with interest over a set period of time.
The lowest amount you must pay for your credit card, loan, or line of credit every month to avoid penalties.
A type of loan that allows you to buy a home, or borrow against the value of a home you already own.
The outstanding balance of your mortgage.
Mortgage rate guarantee
The length of time a lending specialist will lock in your quoted rate (should mortgage rates increase within that period of time). Note, rate guarantees don't mean you are approved for the mortgage.
This is the length of time that you lock in your rate and mortgage choice, and ranges from one to five years depending on the mortgage you choose. You’ll likely have several terms over the course of your mortgage amortization period.
Offer to Purchase
A legally binding contract where the buyer makes the seller a formal offer to purchase their home.
This is how often you’ll make your mortgage payments. We can help you choose a payment frequency that suits your cash flow and budget, including ensuring your payment dates coincide with your payroll schedule for ease of budgeting. Choose from monthly, semi-monthly, bi-weekly, or weekly. Special payment options are available, so be sure to speak to a lending specialist for details.
A preliminary evaluation to determine whether you qualify to borrow, and what amount you can borrow. Preapprovals only valid for a specific period of time, and are subject to review if your financial circumstances change.
The ability to make a mortgage or loan payment ahead of your payment schedule without any penalty.
Renegotiating your mortgage contract by essentially paying off the mortgage you currently hold and replacing it with a new one. This solution comes with some extra fees and penalties associated with breaking a contract.
Secured line of credit
A secured line of credit typically has a higher maximum credit limit and uses assets you own as collateral.
A secured loan typically has a higher maximum credit limit and uses assets you own as collateral.
This is our way of determining how much house you can afford. We use two guidelines to determine the answer to this question:
GDSR (gross debt service ratio): Your total monthly home-related expenses, including mortgage payment, heating cost, property taxes, and condo fees, if applicable. GDSR should not exceed 32% of your gross family income.
TDSR (total debt service ratio): Your total monthly debt load, which includes: mortgage, property tax, utilities, and condo fees, along with debt re-payment such as loans or lines of credit, car loans, credit cards, lease payments. TDSR should not exceed 40% of your monthly gross family income.
The work you put into building your own home has value called sweat equity.
Unsecured line of credit
An unsecured line of credit will tend to have a lower maximum credit limit as no assets are acting as collateral.
An unsecured loan will tend to have a lower maximum credit limit as no assets are acting as collateral.
Your interest rate and payment amount will change over the term, which means the amount you pay for principal and interest fluctuates.