Understand the words behind your mortgage decision, then follow the links to more detailed guides.
Mortgage terms A–Z
Plain-language starting points. The mortgage contract and applicable lender or program requirements control your situation.
- Amortization
- The estimated repayment period under the mortgage payment schedule. It differs from the length of the current contract.
- Appraisal
- An opinion of a property’s value for a stated purpose and date. The value accepted by a lender can differ from the purchase price.
- Closing costs
- Transaction expenses beyond the down payment, such as land transfer tax, legal work, adjustments and title insurance. Use your lawyer’s estimate for the working budget.
- Conditional approval
- An approval that still depends on specified requirements. Check the conditions and deadlines before treating financing as ready to fund.
- Debt service ratios
- Measures comparing qualifying housing costs and debt payments with qualifying gross income. Accepted expenses, income and limits depend on the lender or program.
- Fixed mortgage rate
- A rate that stays unchanged during the agreed fixed-rate term, subject to the contract.
- HELOC
- A home equity line of credit secured against a property. Interest, limits and repayment terms depend on the agreement.
- Loan-to-value (LTV)
- The loan amount divided by the value accepted for the calculation, expressed as a percentage. Confirm which loans and value are included.
- Mortgage default insurance
- Insurance protecting the lender against specified losses if the borrower defaults. It differs from home insurance and optional life or disability coverage.
- Mortgage term
- The period covered by the current mortgage contract. The remaining balance may need to be renewed or repaid when the term ends.
- Pre-approval
- A preliminary financing assessment based on information reviewed. It does not guarantee acceptance of a particular property or final funding.
- Prepayment privilege
- An amount or payment increase permitted without a prepayment charge, subject to the contract’s limits and timing.
- Prepayment penalty
- A charge that may apply when a mortgage is repaid or changed beyond its privileges. Use the contract and a current lender payout quote.
- Refinance
- Replacing or restructuring mortgage financing, often to change the balance, terms or use of equity. Qualification and transaction costs need review.
- Renewal
- Arranging a new term when the current term ends. Compare the full terms and future plans before accepting an offer.
- Variable mortgage rate
- A rate that can change under the contract, commonly with the lender’s prime rate. Whether the payment changes depends on the product.