The Ultimate Homebuyer & Seller Mortgage Glossary
Buying or selling a home is exciting, but it often comes with unfamiliar terms — especially when it comes to mortgages. From pre-qualification to prepayment penalties, knowing what these terms mean can give you confidence and clarity throughout the process.
This glossary is designed to help homebuyers and home sellers understand the mortgage language you’ll encounter along the way.
Mortgage Basics
Amortization Period
The total time it takes to pay off your mortgage in full, assuming regular payments. In Canada, the maximum amortization period for insured mortgages is 25 years.
Appraisal
A professional evaluation of a property’s value, typically required by lenders to ensure the home is worth the mortgage amount being borrowed.
Closing Costs
The fees and expenses required to complete a real estate transaction, in addition to your down payment. Closing costs often include:
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Legal fees
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Land transfer taxes
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Title insurance
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Adjustments for property taxes or utilities
💡 Tip: Budget 1.5%–4%+ of the purchase price for closing costs.
Collateral Charge Mortgage
A type of mortgage registration that may allow you to borrow additional money in the future without refinancing, but it can also limit your ability to switch lenders easily.
Down Payment
The upfront portion of the home’s purchase price paid by the buyer. In Canada, the minimum down payment is 5% (with different rules as the home price increases).
Equity
The difference between the current market value of your home and the remaining balance on your mortgage.
Principal
The amount of money you borrow from the lender, not including interest.
Qualification & Affordability
Pre-Qualification
An initial estimate of how much you might be able to borrow, based on unverified details you provide about income, debts, and assets. This is only a rough guideline.
Pre-Approval
A stronger step where your lender reviews your credit, income, and debt documents to confirm how much you can borrow. Often comes with a rate hold for 60–120 days.
Firm Pre-Approval (Ready-to-Buy)
Also called “fully underwritten,” this means your lender has verified your documents, leaving only property-specific details (like an appraisal) to finalize the mortgage.
👉 Why it matters: A firm pre-approval makes you a stronger buyer, showing sellers you’re truly ready to purchase.
GDS (Gross Debt Service Ratio)
The percentage of your gross monthly income that goes toward housing costs (mortgage, property taxes, heating, and half of condo fees, if applicable). Most lenders want this below 32%.
TDS (Total Debt Service Ratio)
The percentage of your gross monthly income that goes toward all debts (housing plus loans, credit cards, car payments, etc.). Lenders typically prefer this below 40–42%.
Mortgage Stress Test
A government rule requiring buyers to qualify at the higher of either the Bank of Canada benchmark rate or their contract rate + 2%. This ensures you can handle potential rate increases.
Types of Mortgages
Fixed-Rate Mortgage
Your interest rate and payments remain the same for the entire mortgage term. This provides stability and predictable budgeting.
Variable-Rate Mortgage
Your interest rate can change during the term, usually tied to the lender’s prime rate. Payments may remain steady, but the split between interest and principal can fluctuate.
Open Mortgage
Lets you pay off your mortgage in full or make large prepayments without penalty. Typically has higher interest rates.
Closed Mortgage
Restricts how much extra you can pay without penalty. Usually offers lower rates than open mortgages.
Flexibility, Fees & Insurance
Prepayment Privilege
The option to make extra payments on your mortgage principal without penalty, reducing interest costs and shortening your amortization.
Penalty (Prepayment Penalty)
A fee charged if you break your mortgage contract early, refinance outside the agreed terms, or make payments beyond your prepayment allowance.
CMHC (Canada Mortgage and Housing Corporation)
One of three Canadian organizations (along with Sagen and Canada Guaranty) that provide mortgage default insurance. Required for down payments under 20%.
Mortgage Default Insurance
Protects lenders if the borrower defaults. It’s mandatory for high-ratio mortgages and the cost is added to the mortgage balance.
Title Insurance
Protects homeowners and lenders against potential issues with the property title, such as fraud, undisclosed liens, or clerical errors.
Special Mortgage Situations
Bridge Financing
A short-term loan that allows you to buy a new home before the sale of your current one closes.
Refinancing
Replacing your existing mortgage with a new one, often to access home equity, secure a lower rate, or change terms.
Porting a Mortgage
Moving your existing mortgage (with its rate and terms) from your current home to a new property.
Second Mortgage
An additional loan taken against a home that already has a mortgage, usually with a higher interest rate.
Why This Matters in Windsor-Essex
Whether you’re buying a downtown Windsor condo, upgrading to a family home in Tecumseh, or a waterfront property in Amherstburg, or ready to downsize, understanding these terms gives you the confidence to make informed decisions.
Final Thoughts
Financing doesn’t need to feel overwhelming. By understanding the language, you can approach your purchase or sale with clarity.
At The Dan Gemus Real Estate Team, we walk Windsor-Essex County buyers and sellers through every step of the process, from pre-qualification to closing, and connect you with trusted mortgage professionals who explain your options in plain language. The professionals at The Dan Gemus Real Estate Team Ltd., Brokerage serves all of Windsor and Essex County with professional and experienced representation. Reach out to our team for professional representation and guidance anywhere in the Windsor and Essex County region. You can also call us 519-566-5565 , find us online at www.DanGemus.com, or tune into The Dan Gemus Real Estate Show on AM800 CKLW every Saturday and Sunday between 12-1pm for practical tips, advice and Windsor and Essex County market updates.
📲 Thinking of making a move in Windsor and Essex County? Connect with The Dan Gemus Real Estate Team today to get started.
Contact us today for your free home market evaluation and let’s find the right path forward—together.
www.dangemus.com
About The Dan Gemus Real Estate Team
The Dan Gemus Real Estate Team is a top trusted real estate team located in the heart of Windsor and Essex County, ON, offering exceptional service and expertise with helping clients successfully buy and sell homes and navigate the homebuying and selling process in Windsor and Essex County with ease. With a proven track record of success and deep roots in the community, The Dan Gemus Team is committed to helping clients achieve their real estate goals with integrity, professionalism, and a client-first approach. Whether you’re thinking of buying, selling, or investing, we’re here to guide you every step of the way. Tune in to The Dan Gemus Real Estate Show for expert real estate insights and Windsor and Essex County market updates, and don’t forget to explore our exclusive VIP Perks Program, offering incredible discounts and benefits from local businesses. Discover how we can make your real estate journey exceptional at dangemus.com.
Buying or selling, reach out to our team of professionals serving and supporting our amazing Windsor and Essex County communities.
This blog is for informational purposes only and is not intended to replace legal, tax or financial advise nor is it intended to solicit those currently under contract with another brokerage.
