Home Buying Glossary
This glossary covers the most common terms you will encounter when buying your first home in Canada. Definitions are written in plain language with the Canadian context in mind. If a term is covered in more detail elsewhere in the guide, a link is provided.
Amortization The total length of time it takes to pay off your mortgage in full, assuming you make all scheduled payments. In Canada, the most common amortization period is 25 years for insured mortgages (less than 20% down) and up to 30 years for conventional mortgages. A longer amortization means lower monthly payments but more total interest paid over the life of the mortgage. See Amortization.
Appraisal A professional assessment of a property’s market value, conducted by a licensed appraiser. Your lender may require an appraisal before approving your mortgage to confirm the home is worth what you are paying. Appraisals typically cost $300 to $500 and are usually paid by the buyer.
APS (Agreement of Purchase and Sale) The legally binding contract between a buyer and seller that outlines the terms of a real estate transaction — including the purchase price, closing date, deposit amount, and any conditions. In Canada, the APS is the foundational document of every home purchase. See The Purchase Agreement.
ARM (Adjustable Rate Mortgage) A mortgage where the interest rate adjusts periodically based on a benchmark rate (typically the lender’s prime rate). In Canada, ARMs are less common than variable rate mortgages (VRMs), but the key distinction is that with an ARM, your payment amount changes when rates change, while with a VRM, your payment stays the same but the split between principal and interest shifts.
Assessment (Property) The value assigned to your property by the municipal government for the purpose of calculating property taxes. The assessed value is not the same as the market value — it is determined by the municipal assessment authority (such as MPAC in Ontario or BC Assessment in British Columbia) and is updated periodically.
Blended Payment A mortgage payment that combines both principal (the amount that reduces your loan balance) and interest (the cost of borrowing) into a single fixed payment. Most Canadian mortgages use blended payments, so each payment is the same dollar amount, but the proportion going to principal gradually increases over time while the interest portion decreases.
Bridge Financing A short-term loan that helps you cover the gap when your new home’s closing date falls before your current home’s sale closes. Bridge loans are typically for a few days to a few weeks and carry higher interest rates than a standard mortgage. They are arranged through your lender or mortgage broker.
Broker (Mortgage) A licensed professional who shops multiple lenders on your behalf to find the best mortgage rate and terms. Unlike a bank mortgage specialist (who can only offer their own institution’s products), a broker has access to dozens of lenders, including banks, credit unions, and alternative lenders. Mortgage brokers are typically paid by the lender, not the borrower. See Choosing a Mortgage Provider.
Buyer’s Agent A real estate agent who represents the buyer’s interests in a transaction. In Canada, your buyer’s agent owes you a fiduciary duty — meaning they are legally obligated to act in your best interest, maintain confidentiality, and disclose material facts. See Working with a Realtor.
Carrying Costs The ongoing monthly costs of owning a home beyond your mortgage payment. Carrying costs include property taxes, home insurance, utilities (heat, hydro, water), condo fees (if applicable), and maintenance. Lenders factor carrying costs into your GDS and TDS ratios when determining how much you can borrow.
Chattels Movable items that are not permanently attached to the property. In a real estate transaction, chattels (such as refrigerators, washers, dryers, window coverings, and light fixtures that are not hardwired) are only included in the sale if they are specifically listed in the Agreement of Purchase and Sale. If you want the seller’s appliances, name them in the offer.
Closing Costs The fees and expenses you pay on top of the purchase price when you finalize a home purchase. In Canada, closing costs typically total 3% to 5% of the purchase price and include land transfer tax, legal fees, title insurance, appraisal fees, property tax adjustments, and more. See Closing Costs Overview.
Closing Date The date on which the property legally changes hands — your lawyer transfers the funds to the seller’s lawyer, the title is registered in your name, and you receive the keys. In Canada, closing dates are negotiated between buyer and seller and are specified in the APS. Common closing periods range from 30 to 90 days after the offer is accepted.
CMHC (Canada Mortgage and Housing Corporation) Canada’s national housing agency. CMHC is best known for providing mortgage default insurance (required when your down payment is less than 20%), but it also conducts housing research, publishes market analysis, and administers federal housing programs. See CMHC Insurance.
Conditions (Financing, Inspection, Status Certificate) Clauses in an offer that must be satisfied before the sale becomes final (“firm”). Common conditions include financing (you have a set period to secure mortgage approval), home inspection (you can have the home inspected and walk away if issues are found), and status certificate review (for condos, allowing your lawyer to review the condo corporation’s financial and legal health). See Conditions.
Conventional Mortgage A mortgage where the buyer’s down payment is 20% or more of the purchase price. Conventional mortgages do not require mortgage default insurance (CMHC, Sagen, or Canada Guaranty), which saves the buyer thousands of dollars in insurance premiums and allows for up to 30-year amortization.
Credit Score A number (typically ranging from 300 to 900 in Canada) that represents your creditworthiness based on your borrowing and repayment history. Most lenders require a minimum credit score of 680 for their best mortgage rates, though some will lend with scores as low as 600 (at higher rates). A score of 760+ generally qualifies you for the most competitive rates. See Credit Score.
Deed The legal document that transfers ownership of a property from one person to another. In Canada, when you buy a home, the deed (or “transfer”) is registered with the provincial or territorial land titles office. Your lawyer handles the deed registration as part of the closing process.
Default Failing to meet the terms of your mortgage agreement — most commonly, missing mortgage payments. If you default on your mortgage, the lender can take legal action to recover the debt, which may include foreclosure (selling the property to repay the loan). Mortgage default insurance (CMHC insurance) protects the lender, not you, in the event of default.
Deposit The money you provide when your offer is accepted, as a show of good faith that you intend to complete the purchase. In Canada, deposits are typically 1% to 5% of the purchase price for resale transactions and are held in trust by the listing brokerage or the seller’s lawyer. The deposit is applied to your purchase price on closing day. See Deposits and Earnest Money.
Disbursements Out-of-pocket expenses your real estate lawyer incurs on your behalf during the closing process — such as title search fees, registration fees, courier charges, and land transfer tax filing fees. Disbursements are itemized on your lawyer’s closing statement and typically total $300 to $800 on top of the lawyer’s professional fees.
Down Payment The portion of the purchase price you pay upfront out of your own funds (not borrowed through the mortgage). In Canada, the minimum down payment is 5% on the first $500,000 of the purchase price and 10% on the portion between $500,000 and $1,499,999. Homes priced at $1,500,000 or more require a minimum 20% down payment. See Down Payment Rules.
Dual Agency A situation where one real estate agent (or brokerage) represents both the buyer and the seller in the same transaction. Dual agency creates inherent conflicts of interest and is prohibited in some provinces (including British Columbia, where it has been banned since 2018). In provinces where it is still permitted, it must be disclosed to and consented to by both parties.
Easement A legal right that allows someone other than the property owner to use a specific part of the property for a defined purpose. Common easements include utility easements (allowing hydro or gas companies to access equipment on your property) and right-of-way easements (allowing a neighbour to cross your property to access theirs). Easements are registered on the property title and transfer with the property when it is sold.
Encroachment When a structure (such as a fence, shed, driveway, or part of a building) extends beyond the property boundary onto a neighbouring property, or vice versa. Encroachments are identified through a survey or Real Property Report and can create legal complications. Title insurance can protect against losses caused by unknown encroachments.
Encumbrance Any claim, lien, charge, or liability attached to a property that may affect its title or reduce its value. Mortgages, easements, unpaid property taxes, and liens from contractors or the CRA are all examples of encumbrances. Your lawyer conducts a title search before closing to identify and resolve any encumbrances.
Equity The difference between your home’s current market value and the amount you still owe on your mortgage. If your home is worth $500,000 and you owe $350,000, you have $150,000 in equity. Equity builds over time as you pay down your mortgage and as your property (ideally) appreciates in value. See Building Equity.
Escrow Funds held by a neutral third party (such as a lawyer or brokerage) on behalf of the buyer and seller until certain conditions are met. In Canadian real estate, your deposit is held “in escrow” (in trust) until the transaction closes. The term is more commonly used in the United States, but the concept applies in Canada as well.
FCAC (Financial Consumer Agency of Canada) The federal agency that oversees and regulates financial institutions in Canada to ensure they comply with consumer protection laws. FCAC publishes educational resources about mortgages, credit, and financial products, and handles complaints about federally regulated financial institutions (banks).
FHSA (First Home Savings Account) A registered savings account introduced in 2023 that gives Canadian first-time buyers a double tax advantage: contributions are tax-deductible (like an RRSP), and qualifying withdrawals for a home purchase are tax-free (like a TFSA). The annual limit is $8,000, with a lifetime maximum of $40,000. See First Home Savings Account.
Firm Offer An offer to purchase that has no remaining conditions. Once an offer becomes firm (either because it was submitted without conditions or because all conditions have been fulfilled), both the buyer and seller are legally bound to complete the transaction. Walking away from a firm deal can result in the loss of your deposit and potential legal action.
Fixed Rate (Mortgage) A mortgage where the interest rate is locked in for the entire term (commonly 1 to 5 years in Canada). Your payment amount stays the same throughout the term, making budgeting predictable. Fixed rates are typically slightly higher than variable rates at the time of signing, but they protect you from rate increases during the term. See Fixed vs. Variable.
Fixtures Items that are permanently attached to the property and are automatically included in the sale unless specifically excluded. Examples include built-in shelving, hardwired light fixtures, plumbing fixtures, built-in appliances, and attached window blinds. The distinction between a fixture (included) and a chattel (excluded unless listed) can sometimes be unclear — when in doubt, specify in the APS.
Foreclosure The legal process by which a lender takes possession of a property after the borrower defaults on their mortgage. In Canada, foreclosure laws vary by province. In some provinces (like Alberta and BC), lenders use a judicial sale process through the courts. In Ontario, lenders more commonly use a power of sale process, which is faster and does not require court approval.
GDS Ratio (Gross Debt Service) The percentage of your gross household income needed to cover housing costs — specifically your mortgage payment (principal + interest), property taxes, heating costs, and 50% of condo fees (if applicable). Canadian lenders generally require your GDS ratio to be no more than 39%. See GDS and TDS Ratios.
Gift Letter A signed letter from a family member confirming that money given to you for a down payment is a gift, not a loan, and does not need to be repaid. Canadian lenders require a gift letter whenever part of your down payment comes from a family member. The letter must state the amount, the donor’s name and relationship to you, and confirm that no repayment is expected.
GST/HST Rebate (New Housing) A federal rebate that returns a portion of the GST paid on newly constructed homes. The rebate is worth up to $6,300 on homes priced at $350,000 or less, phased out between $350,000 and $450,000. Provincial rebates are also available in Ontario (up to $24,000), Quebec, and some Atlantic provinces. See Buying Pre-Construction & New Builds.
HBP (Home Buyers’ Plan) A federal program that allows you to withdraw up to $60,000 from your RRSP tax-free to buy your first home ($120,000 per couple). Unlike the FHSA, the HBP is a loan from yourself — you must repay the withdrawn amount to your RRSP over 15 years, starting the second year after withdrawal. If you miss a repayment, the missed amount is added to your taxable income. See RRSP Home Buyers’ Plan.
HBTC (Home Buyers’ Tax Credit) A federal non-refundable tax credit worth $1,500 (calculated as $10,000 x 15%) for first-time home buyers. You claim it on your tax return (line 31270) for the year you purchased your home. If your tax owing is less than $1,500, the remainder is not refunded, but it can be shared with your spouse or partner. See Federal Programs.
High-Ratio Mortgage A mortgage where the down payment is less than 20% of the purchase price. High-ratio mortgages require mortgage default insurance (from CMHC, Sagen, or Canada Guaranty), which protects the lender if you default. The insurance premium ranges from 2.8% to 4.0% of the mortgage amount and is typically added to the mortgage balance.
Home Inspection A visual examination of a home’s structure, systems, and components by a qualified inspector. Inspections typically cost $400 to $600 and cover the foundation, roof, plumbing, electrical, HVAC, insulation, and more. A home inspection is one of the most important investments you make during the buying process. See The Home Inspection.
Insured Mortgage Another term for a high-ratio mortgage — a mortgage with less than 20% down that is backed by mortgage default insurance. Insured mortgages often receive slightly lower interest rates because the lender’s risk is covered by the insurer, but the insurance premium (2.8% to 4.0%) adds to your overall cost.
Interest Adjustment Date The date from which your lender begins calculating interest on your mortgage. If your closing date does not align with a regular mortgage payment date, you will owe interest from the closing date to the interest adjustment date. This amount appears as a cost on your closing statement and typically ranges from a few hundred to a few thousand dollars.
Interest Rate Differential (IRD) A penalty calculation used by lenders when you break a fixed-rate mortgage before the term expires. The IRD is based on the difference between your current mortgage rate and the rate the lender can now charge for a term similar to your remaining term. IRD penalties can be $5,000 to $20,000+ — significantly higher than the typical three-month interest penalty charged for breaking a variable-rate mortgage.
Irrevocability Period The window of time during which an offer to purchase cannot be withdrawn. When you submit an offer, you specify an irrevocability date and time (for example, “this offer is irrevocable until 11:59 PM on March 20, 2026”). Until that deadline passes, you cannot retract or change your offer. If the seller does not accept by the deadline, the offer expires automatically.
Joint Tenancy A form of co-ownership where two or more people own a property together with equal shares and a right of survivorship. If one owner dies, their share automatically passes to the surviving owner(s) — bypassing the deceased’s will. Joint tenancy is the most common form of ownership for married or common-law couples buying a home together. Compare with tenants in common.
Knob-and-Tube Wiring An early electrical wiring system found in homes built before the 1950s. It uses ceramic knobs and tubes to run wires through wall and ceiling cavities. Knob-and-tube wiring is not inherently dangerous if undisturbed, but it cannot safely be covered with insulation (fire risk), and many insurance companies will not insure homes with active knob-and-tube wiring. Upgrading costs $8,000 to $15,000+.
Land Transfer Tax A provincial or municipal tax paid when you purchase a property, calculated as a percentage of the purchase price. Land transfer tax rates and structures vary significantly by province. Some provinces (like Alberta and Saskatchewan) do not have a land transfer tax (only registration fees). Ontario and BC have tiered tax rates, and Toronto charges its own municipal LTT on top of Ontario’s provincial tax. See Land Transfer Tax.
Lien A legal claim on a property by a creditor. Common liens include construction liens (filed by contractors who were not paid for work on the property), tax liens (filed by the CRA or municipality for unpaid taxes), and mortgage liens (your lender’s claim on the property until you pay off the mortgage). Your lawyer conducts a title search before closing to identify any existing liens.
Listing Agent The real estate agent who represents the seller in a transaction. The listing agent markets the property, coordinates showings, receives offers, and negotiates on the seller’s behalf. The listing agent’s duty is to the seller — not to you as the buyer.
LTV (Loan-to-Value) The ratio of your mortgage amount to the appraised value of the property, expressed as a percentage. If you buy a $500,000 home with a $25,000 down payment (5%), your mortgage is $475,000 and your LTV is 95%. LTV is a key factor in determining whether you need mortgage default insurance (required above 80% LTV in Canada).
Mill Rate The rate used to calculate property taxes in many Canadian municipalities. One mill equals $1 of tax per $1,000 of assessed property value. For example, if your property is assessed at $400,000 and the mill rate is 12, your annual property tax is $400,000 / $1,000 x 12 = $4,800. Mill rates vary widely by municipality.
MLS (Multiple Listing Service) The centralized database used by Canadian real estate agents to list properties for sale. Operated by the Canadian Real Estate Association (CREA) and regional real estate boards, MLS is the primary tool for searching available homes. The public-facing website is Realtor.ca. See Reading MLS Listings.
Mortgage Broker See Broker (Mortgage) above.
Mortgage Default Insurance Insurance that protects the lender (not you) if you default on your mortgage. Required in Canada when your down payment is less than 20%. Provided by CMHC, Sagen, or Canada Guaranty. Premiums range from 2.8% to 4.0% of the mortgage amount and are typically added to your mortgage balance. On a $475,000 mortgage, the premium is approximately $19,000. See CMHC Insurance.
MLTT (Municipal Land Transfer Tax) An additional land transfer tax charged by certain municipalities on top of the provincial land transfer tax. In Canada, Toronto is the most notable city that charges an MLTT — first-time buyers in Toronto can receive a rebate of up to $4,475 on the municipal portion. See Ontario Programs.
NOA (Notice of Assessment) The form the CRA sends you after processing your tax return, summarizing your income, deductions, credits, and RRSP contribution room. Mortgage lenders commonly request your most recent NOA (along with T4s and tax returns) to verify your income during the mortgage approval process. Self-employed buyers may need to provide two or more years of NOAs.
Net Worth The total value of everything you own (assets) minus everything you owe (liabilities). Your net worth includes savings, investments, property, vehicles, minus debts such as student loans, credit card balances, car loans, and mortgages. While lenders focus primarily on income and credit score, your overall net worth is a useful personal measure of financial readiness for homeownership.
Offer A formal proposal to purchase a property, presented in writing as an Agreement of Purchase and Sale. In Canada, offers include the price, closing date, deposit, conditions, inclusions, and exclusions. Offers can be conditional or firm and are subject to an irrevocability period. See The Purchase Agreement.
Open Mortgage A mortgage that allows you to pay off all or part of the balance at any time without penalty. Open mortgages offer maximum flexibility but come with higher interest rates than closed mortgages (typically 1% to 2% higher). They are most useful if you plan to sell your home or pay off the mortgage in the near future.
Owner’s Title Insurance A one-time insurance policy that protects you (the homeowner) against title defects, fraud, survey issues, unpaid liens, and other problems with your property’s legal title. Owner’s title insurance costs $250 to $500 and provides coverage for as long as you own the home. It is separate from the lender’s title insurance (which only protects the lender). See Title Insurance.
Porting (Mortgage) Transferring your existing mortgage (with its current rate and terms) from your current home to a new one. Porting allows you to avoid breaking your mortgage and paying a penalty when you sell and buy at the same time. Not all mortgages are portable, and the lender may require you to qualify for the new amount at current rates if the new mortgage is larger.
Pre-Approval A written commitment from a lender stating the maximum mortgage amount you qualify for, based on a review of your income, credit, debts, and down payment. Pre-approvals in Canada typically include a rate hold lasting 90 to 120 days, guaranteeing a specific interest rate. A pre-approval is not a final mortgage commitment — the lender still needs to approve the specific property. See Pre-Approval.
Pre-Construction A home that has not yet been built — you are purchasing based on floor plans, renderings, and model suites. Pre-construction purchases involve unique deposit structures, longer timelines, and different contracts than resale purchases. See Buying Pre-Construction & New Builds.
Prepayment Privilege The amount of extra money you can pay toward your mortgage each year (above your regular payments) without triggering a penalty. Most Canadian mortgages allow prepayments of 10% to 20% of the original mortgage amount per year. Using prepayment privileges aggressively can save you tens of thousands of dollars in interest and shave years off your amortization.
Principal The amount of money you borrowed from the lender (the mortgage amount), as opposed to the interest charged on that amount. Each mortgage payment is split between principal repayment and interest. Over time, as the principal decreases, more of each payment goes toward principal and less toward interest.
Property Tax An annual tax levied by your municipality based on the assessed value of your property and the local mill rate (or tax rate). Property taxes fund municipal services — roads, schools, fire departments, water and sewage, parks, and transit. Taxes are typically paid monthly (through your mortgage lender) or quarterly/annually (directly to the municipality).
PTT (Property Transfer Tax — BC) British Columbia’s land transfer tax, calculated on a tiered system based on the property’s fair market value. First-time buyers in BC may qualify for a full PTT exemption on homes up to $500,000 (saving up to approximately $8,000), with a partial exemption on homes between $500,000 and $525,000. See British Columbia Programs.
Qualifying Rate The interest rate used to “stress test” your mortgage application, ensuring you can afford payments even if rates rise. In Canada, the qualifying rate (or stress test rate) is the higher of your contracted rate plus 2% or the Bank of Canada’s benchmark rate (currently 5.25%). See The Stress Test.
Rate Hold A guarantee from a lender that a specific mortgage interest rate will be available to you for a set period — typically 90 to 120 days. Rate holds are issued as part of a pre-approval and protect you if rates rise between your pre-approval date and your closing date. If rates drop, you can usually take the lower rate.
RRSP (Registered Retirement Savings Plan) A registered investment account designed for retirement savings. Contributions are tax-deductible, and investments grow tax-free inside the account, but withdrawals are taxed as income. First-time home buyers can withdraw from their RRSP tax-free under the Home Buyers’ Plan (HBP). See RRSP Home Buyers’ Plan.
Refinancing Replacing your existing mortgage with a new one, typically to access equity, get a lower rate, consolidate debt, or change your mortgage terms. Refinancing before your term expires may trigger a penalty (three months’ interest for variable, or the IRD for fixed). See Mortgage Renewal.
Reserve Fund The savings account maintained by a condominium corporation to pay for major repairs and replacements (such as roof replacement, elevator upgrades, or parking garage repairs). A healthy reserve fund reduces the risk of special assessments. Your lawyer should review the reserve fund study as part of the status certificate review before you buy a condo.
RPR (Real Property Report) A legal document prepared by a licensed surveyor that shows the boundaries of a property and the location of all structures (buildings, fences, decks, garages) relative to those boundaries. RPRs are commonly required in Alberta and some other western provinces and are used to identify encroachments and ensure structures comply with municipal setback requirements.
Semi-Annual Compounding The way most Canadian mortgages calculate interest. By law, fixed-rate mortgages in Canada must compound interest semi-annually (twice per year), rather than monthly (as is common in the United States). This results in a slightly lower effective interest rate than the stated rate. Variable-rate mortgages in Canada typically compound monthly.
Special Assessment A one-time charge levied by a condominium corporation on unit owners to cover unexpected or major expenses that exceed the reserve fund balance. Special assessments can range from a few hundred dollars to $10,000 to $50,000+ per unit for major building repairs. Reviewing the condo’s reserve fund study and recent meeting minutes can help you assess the risk of a special assessment. See Condo vs. Freehold.
Status Certificate A document issued by a condominium corporation that provides a snapshot of the corporation’s legal, financial, and operational status. It includes the declaration, by-laws, rules, financial statements, reserve fund study, insurance details, and any pending litigation. In Ontario, you can request a status certificate for a fee (typically $100) and your lawyer should review it before you buy a condo. Your offer should include a condition allowing time for this review.
Stress Test A federal requirement that mortgage applicants must qualify at an interest rate higher than their actual mortgage rate — specifically, the greater of the contracted rate plus 2% or the Bank of Canada benchmark qualifying rate. The stress test ensures you can afford your mortgage even if interest rates rise. It applies to all mortgages from federally regulated lenders. See The Stress Test.
Strata The British Columbia term for a condominium corporation. A strata corporation manages the common property and enforces by-laws for a strata-titled development. “Strata fees” in BC are equivalent to “condo fees” in Ontario and other provinces.
Survey A legal document prepared by a licensed surveyor that shows property boundaries, the location of structures, easements, and encroachments. In some provinces, a survey or Real Property Report (RPR) is required before closing. In others, title insurance can be used in place of a survey. See also RPR.
Sunset Clause A provision in a pre-construction purchase agreement that allows the developer (and sometimes the buyer) to cancel the contract if certain conditions are not met by a specific date. Sunset clauses are controversial because some developers have used them to cancel contracts when property values rise, allowing them to resell units at higher prices. Ontario has introduced legislation to limit the abuse of one-sided sunset clauses. See Buying Pre-Construction & New Builds.
TDS Ratio (Total Debt Service) The percentage of your gross household income needed to cover all debt payments — including housing costs (mortgage, property taxes, heating, condo fees) plus all other debts (car loans, student loans, credit card minimum payments, lines of credit). Canadian lenders generally require your TDS ratio to be no more than 44%. See GDS and TDS Ratios.
Tarion Ontario’s new home warranty corporation. Tarion administers the mandatory warranty program for all new homes built in Ontario, covering defects in workmanship (1 year), systems (2 years), and major structural defects (7 years). Tarion also provides deposit protection for pre-construction buyers. See Buying Pre-Construction & New Builds.
Tenants in Common A form of co-ownership where two or more people own a property together but can hold unequal shares and there is no right of survivorship. If one owner dies, their share passes according to their will (not automatically to the other owner). This structure is sometimes used by friends or family members buying together, or in blended family situations. Compare with joint tenancy.
Title The legal right to ownership of a property. When you buy a home, the “title” is transferred from the seller to you and registered with the provincial or territorial land titles office. A clear title means there are no liens, encumbrances, or competing claims on the property.
Title Insurance Insurance that protects against defects in a property’s title — such as fraud, forgery, survey errors, unknown liens, encroachments, and building code violations by previous owners. There are two types: lender’s title insurance (required by most lenders) and owner’s title insurance (optional but strongly recommended). See Title Insurance.
Title Search A review of the public land records to verify the current ownership of a property and identify any registered encumbrances — such as mortgages, liens, easements, and rights of way. Your lawyer conducts a title search before closing to ensure the seller can deliver clear title.
Trigger Rate The interest rate at which your variable-rate mortgage payment no longer covers even the interest portion of the loan, meaning your mortgage balance starts growing instead of shrinking. When rates rose sharply in 2022-2023, many Canadian variable-rate mortgage holders hit their trigger rate, leading to negative amortization. Your lender must notify you if you hit your trigger rate.
Trust Account An account held by a lawyer, brokerage, or trustee to safeguard funds on behalf of another party. In Canadian real estate, your deposit is held in the listing brokerage’s trust account (or a lawyer’s trust account) until closing. Pre-construction deposits are held in the developer’s lawyer’s trust account. Trust accounts are regulated and audited to protect buyers’ funds.
Underwriting The process by which a lender evaluates your mortgage application to determine whether to approve the loan. Underwriters assess your income, employment, credit history, debts, down payment source, and the property itself. The underwriter makes the final approval decision — a pre-approval is not a guarantee that underwriting will approve the specific property and deal.
Uninsured Mortgage A mortgage that does not have mortgage default insurance — meaning the buyer made a down payment of 20% or more. Uninsured mortgages do not require CMHC, Sagen, or Canada Guaranty insurance, but they may carry slightly higher interest rates than insured mortgages because the lender bears more risk.
Variable Rate (Mortgage) A mortgage where the interest rate fluctuates based on the lender’s prime rate, which is influenced by the Bank of Canada’s policy rate. Variable-rate mortgages in Canada can be structured as VRMs (fixed payment, varying principal/interest split) or ARMs (payment changes with rate). Variable rates are typically lower than fixed rates at the time of signing, but they carry the risk of increasing during your term. See Fixed vs. Variable.
VRM (Variable Rate Mortgage) A type of variable-rate mortgage where your payment amount stays the same even when rates change, but the split between principal and interest shifts. When rates rise, more of your payment goes to interest and less to principal. If rates rise enough, you may hit your trigger rate. See Trigger Rate and Fixed vs. Variable.
Vendor Take-Back Mortgage A mortgage where the seller (vendor) lends the buyer part of the purchase price, effectively acting as the lender for that portion. Vendor take-back mortgages are uncommon in standard residential transactions in Canada but may appear in certain situations — such as rural properties, commercial sales, or deals where the buyer has difficulty qualifying for traditional financing.
Walk-Through A final inspection of the property by the buyer, conducted shortly before closing (typically the day before or the morning of closing day). The walk-through confirms that the property is in the condition agreed upon in the APS — that any agreed repairs have been made, that all included chattels are present, and that no damage has occurred since the offer was accepted. See Closing Day.
Welcome Tax (Quebec Land Transfer Tax) Quebec’s equivalent of a land transfer tax, officially called the taxe de bienvenue or “welcome tax.” It is paid to the municipality on every property purchase and is calculated on a tiered system based on the higher of the purchase price or the municipal assessment. Unlike Ontario, Quebec does not offer a first-time buyer rebate on the welcome tax. See Quebec Programs.
Zoning Municipal regulations that dictate how land and buildings in a specific area can be used — for example, residential, commercial, industrial, or mixed-use. Zoning also regulates building height, setbacks, density, and lot coverage. Before buying a property, confirm that the current use (and any planned use) complies with the local zoning by-law. Your lawyer can check this as part of the due diligence process.