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Agreement of Purchase and Sale

The contract between the buyer and the seller of a home. The agreement of purchase and sale outlines the terms and conditions both the buyer and seller promise to abide by when the property is sold, including the purchase price, property features included in the price, closing date and more.


The length of time it takes you to pay off your mortgage in full. The maximum amortization period in Canada is 25 years for high-ratio mortgages (those that require CMHC insurance), and can go up to 35 years for conventional mortgages.


The valuation of a property, used to determine the market value. There are a number of times you may choose to get a home appraisal, including: when you’re buying a home, selling a home, refinancing, taking out equity, and even when you’re appealing a property tax assessment.

Basis Point

A unit of measure for 1/100th of a percent (0.01%). For example, if you heard that interest rates increased by 30 basis points, it means they went up by 0.30%.

Closed Mortgage

A mortgage that cannot be prepaid (by more than the limit set in the terms and conditions), negotiated or refinanced throughout the mortgage term, without the borrower having to pay a hefty prepayment penalty. Closed mortgage rates can be fixed or variable, and are lower than open mortgage rates.

Closing Costs

The legal and administrative costs associated with any real estate transaction. Whether you’re buying, selling or refinancing, your closing costs may include any of the following: a home inspection, deposit, down payment, land transfer tax, title insurance, legal fees, GST/HST, any prepaid property taxes or utilities, a prepayment penalty and more.

Closing Dates

The date of a real estate transaction, typically set to occur several weeks after an Offer to Purchase is accepted. On closing day, real estate lawyers ensure funds are moved so the seller is paid and the buyer’s mortgage is taken out. As well, all closing costs are paid, ownership of the property is transferred and the buyer can pick up the keys to their new home.

Credit Score

A number between 300 and 900 that is used by lenders to determine whether or not you can afford to repay any money they potentially lend you. The higher your number is, the better your chances are of being able to borrow money – and at a low interest rate.

Down Payment

The amount of money you pay upfront when purchasing a home. In Canada, the minimum down payment you can make is 5% of the purchase price. A down payment of less than 20% leaves you with a high-ratio mortgage – one that legally requires mortgage default insurance (or CMHC insurance). A down payment of 20% or more leaves you with a conventional mortgage.

Early Mortgage Renewal

If you still have an outstanding balance on your mortgage at the end of your term, you have to renew for another term. Most lenders allow you to renew and stay with them anytime in the final 120 days of your current mortgage term; this is known as an early mortgage renewal.

First Mortgage

The mortgage in first position on the property that was used to secure your mortgage loan. If you ever defaulted on your loan, the lender in first position would be repaid before any other lenders you had used your home as security in order to borrow money from.

First-Time Home Buyers' Tax Credit

A $750 rebate for qualifying first-time homebuyers in Canada. To receive your $750 rebate, you must claim it with your personal income tax return under line 369.

Fixed Mortgage Rate

A mortgage rate that stays the same for the duration of a mortgage term. For example, if you agree to a 5-year fixed rate at 2.89%, your mortgage rate – and mortgage payment amount – will stay the same for those 5 years. Fixed mortgage rates are the most popular type, representing 66% of all mortgages in Canada.

Home Buyers' Plan (HBP)

The Canadian government’s Home Buyers’ Plan (HBP) allows you to borrow up to $25,000 from your RRSP, tax-free, to help you purchase a home. Note that this is considered a loan and you must repay it within 15 years.

Home Inspection

A visual inspection of both the interior and exterior of your home. The report that follows will tell you whether or not everything is up to code, as well as when certain features of your home may need to be fixed or replaced. Most buyers include the successful completion of a home inspection as one condition in their Offer to Purchase.


Typically expressed as an annual percentage rate, interest is the charge you have to pay in order to borrow money.


The loan you borrow from a lender, in order to purchase a home.

Mortgage Application

The document you submit to the lender, in order to be approved for a mortgage loan. A mortgage application will include information about the property, as well as the financial and background information about the borrower(s). Mortgage underwriters use the information to determine how much money they will lend to the borrower(s), for how long and at what interest rate.

Mortgage Approval

Not to be confused with a mortgage pre-approval, a mortgage approval comes after you’ve submitted an Offer to Purchase, the seller has accepted and you want to secure financing to purchase the home. At this stage, you submit your completed mortgage application and wait to find out if its been approved.

Mortgage Broker

A licensed mortgage specialist who has access to multiple lenders and mortgage rates. A mortgage broker can find the right mortgage product for you, negotiate a better rate on your behalf and pass on volume discounts to you.

Mortgage Pre-Approval

An evaluation of your credit score, down payment amount and debt service ratios, used to determine your maximum affordability. A mortgage broker or lender can then show you the maximum purchase price you can consider, as well as the mortgage rate and payment that would go along with it. When you get pre-approved, you can also get a rate hold, which guarantees the lowest rate for a specific period of time.

Mortgage Rate

The interest rate changed by the lender you borrow money from to purchase a home.

Mortgage Renewal

At the end of your current mortgage term, if you still have a balance on your mortgage, you will need to renew it for another term. It’s important to shop around for the best mortgage rate and product before your maturity date, otherwise your lender may automatically renew your mortgage for another term.

Mortgage Term

The length of time you commit to one mortgage rate, lender, and associated mortgage terms and conditions. The term you choose will have a direct effect on your mortgage rate, with short terms historically proven to come with lower rates than long terms.

New to Canada Mortgage

The mortgage financing process that those who are new to Canada must undergo, which includes having to submit extra supporting documentation than permanent residents, and potentially needing to use one of the mortgage default insurance providers’ New to Canada mortgage programs.

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