Glossary

The words that come up around mortgages, debt and money, in plain English. Each one links to the lesson that explains it with an example.

Accelerated biweekly payments: Paying half the monthly payment every two weeks. Over 26 payments a year, that adds up to one extra monthly payment, which goes to principal. Lesson: Paying off your mortgage faster
Amortization: The total time it would take to pay off a mortgage completely at the current payment and rate. Twenty-five years is common in Canada. Lesson: How a mortgage works
Annual percentage rate (APR): The yearly cost of borrowing as a percentage, used to compare loans, cards and other credit. Lesson: Borrowing: from OSAP to payday loans
Blend and extend: An option some lenders offer mid-term: your current rate is blended with today's rate and the term is extended, instead of charging a full penalty. Lesson: Refinancing and breaking a mortgage
Blended rate: A single rate that mixes your existing rate with today's rate on new borrowing, used when porting or blending and extending. Lesson: Moving with a mortgage
Breaking a mortgage: Ending a closed mortgage term before it's up, whether to refinance, switch lenders or sell. It usually costs a prepayment penalty. Lesson: Refinancing and breaking a mortgage
Bridge financing: A short-term loan against the home you're selling, used to cover the down payment on the next one until the sale closes. Lesson: Moving with a mortgage
Buy now, pay later (BNPL): Splitting a purchase into a few payments, often four. Usually interest-free if every payment is on time, with fees if one is late. Lesson: Borrowing: from OSAP to payday loans
Canada Pension Plan (CPP): A government pension you contribute to from each paycheque from age 18, and collect in retirement. Lesson: Your first paycheque
Cash advance: Cash drawn on a credit card. It usually has no interest-free grace period, often carries a higher rate and may come with a fee. Lesson: How credit card interest works
Closed mortgage: A mortgage where paying off more than the allowed prepayments during the term triggers a penalty. Most Canadian mortgages are closed. Lesson: Fixed, variable, term and renewal
Closing costs: The costs due when a purchase completes, on top of the down payment: land transfer tax, legal fees, title insurance, adjustments and, in Ontario, sales tax on any mortgage insurance premium. Lesson: Buying your first home
Compound interest: Interest earned on both your original money and the interest it has already earned. It makes savings grow faster over time, and debt too. Lesson: Saving and compound interest
Credit score: A number from 300 to 900 in Canada, calculated by Equifax and TransUnion from your credit report, that lenders use to judge how likely you are to repay. Lesson: Credit scores and a simple budget
Credit utilization: How much of your available credit you're using, as a percentage. Lower utilization generally helps a credit score. Lesson: Credit scores and a simple budget
Debt avalanche: Paying minimums on every debt and putting any extra money toward the highest interest rate first. It usually costs the least interest. Lesson: Paying down debt
Debt consolidation: Combining several debts into one, usually at a lower rate, for example through a loan, line of credit, balance transfer or refinance. Lesson: Paying down debt
Debt snowball: Paying minimums on every debt and putting any extra money toward the smallest balance first, for quicker wins. Lesson: Paying down debt
Down payment: The part of a home's price you pay yourself rather than borrow. In Canada the minimum depends on the price; under 20% requires mortgage default insurance. Lesson: How a mortgage works
Employment Insurance (EI): A government program, funded by deductions from pay at any age, that provides benefits if you lose your job, have a baby or get sick. Lesson: Your first paycheque
First Home Savings Account (FHSA): A registered account for a first home: up to $8,000 a year and $40,000 in total, tax-deductible going in and tax-free coming out for a qualifying purchase. Open to residents 18 and over. Lesson: Buying your first home
Fixed rate: A mortgage rate that stays the same for the whole term. Fixed rates are priced off Government of Canada bond yields. Lesson: Fixed, variable, term and renewal
Grace period: The interest-free time, at least 21 days in Canada, between a credit card statement and its due date. It applies to new purchases when the full balance is paid. Lesson: How credit card interest works
Gross debt service (GDS) ratio: Housing costs (mortgage payment, property tax, heating and half of condo fees) as a share of gross income. 39% is the common ceiling for insured mortgages. Lesson: Credit scores and a simple budget
Gross pay: What you earn before any deductions: hours worked times your hourly wage, or your salary. Lesson: Your first paycheque
Hard inquiry: A lender checking your credit file because you applied for credit. It can lower a score slightly for a while. Checking your own credit is a soft inquiry and has no effect. Lesson: Credit scores and a simple budget
Home Buyers' Plan (HBP): Lets first-time buyers withdraw up to $60,000 from an RRSP toward a home, repaid to the RRSP over 15 years. Lesson: Buying your first home
Home equity: The part of your home's value you own outright: its value minus what you owe on it. Lesson: HELOCs and home equity
Home equity line of credit (HELOC): A revolving line of credit secured on your home, usually at prime plus a margin, often with interest-only minimum payments. Capped at 65% of the home's value. Lesson: HELOCs and home equity
Interest rate differential (IRD): A prepayment penalty on most fixed-rate mortgages, based on the gap between your rate and today's rate for the time left. Formulas vary by lender. Lesson: Refinancing and breaking a mortgage
Land transfer tax: A provincial tax on buying property, on a sliding scale by price. Toronto adds a municipal one. First-time buyers get partial refunds. Lesson: Buying your first home
Minimum payment: The smallest payment a credit card accepts to keep the account in good standing. It's often a small percentage of the balance, so it shrinks as the balance does. Lesson: How credit card interest works
Money mule: Someone who moves money for others, often recruited through fake jobs. It's illegal, even if the person didn't know the money was stolen. Lesson: Spotting money scams
Monoline lender: A lender that only does mortgages, usually reached through a mortgage broker. Lesson: Working with a broker or lender
Mortgage broker: A licensed professional who compares mortgages from several lenders for you. On most mortgages, the lender pays the broker. In Ontario, brokers are licensed by FSRA. Lesson: Working with a broker or lender
Mortgage default insurance: Insurance required when the down payment is under 20%. It protects the lender, not the borrower, and the premium is usually added to the mortgage. Lesson: How a mortgage works
Net pay (take-home pay): What's left of your pay after deductions like CPP, EI and income tax. Lesson: Your first paycheque
Open mortgage: A mortgage that can be paid off in any amount at any time without a penalty, in exchange for a higher rate. Lesson: Fixed, variable, term and renewal
OSAP: The Ontario Student Assistance Program: grants that don't need to be repaid, and loans that do, for college and university. Lesson: Borrowing: from OSAP to payday loans
Payday loan: A small, short-term loan until your next paycheque. Fees of around $14 to $15 per $100 for two weeks make it one of the most expensive ways to borrow. Lesson: Borrowing: from OSAP to payday loans
Phishing: Messages that pretend to come from a real company or agency to trick you into clicking a link or sharing passwords or card details. Lesson: Spotting money scams
Porting a mortgage: Moving your mortgage's balance, rate and term to a new home when you move, usually avoiding the penalty if you requalify in time. Lesson: Moving with a mortgage
Pre-approval: A lender's review of your income, debts and credit before you shop, usually with a rate hold. It isn't a final approval. Lesson: How much can you borrow?
Prepayment privileges: The extra payments a closed mortgage allows without a penalty, such as a yearly lump sum or a higher regular payment. Lesson: Fixed, variable, term and renewal
Prime rate: The base rate a lender uses to price variable loans. It follows the Bank of Canada's policy rate. Lesson: Fixed, variable, term and renewal
Principal: The amount you borrowed and still owe, not counting interest. Lesson: How a mortgage works
Readvanceable mortgage: A mortgage combined with a HELOC, where the HELOC limit grows as the mortgage is paid down. Lesson: HELOCs and home equity
Refinancing: Replacing a mortgage with a new one, often to borrow against home equity. In Canada it's generally capped at 80% of the home's value. Lesson: Refinancing and breaking a mortgage
Renewal: Signing a new term when the current one ends, with the same lender or a different one. Moving lenders at renewal doesn't trigger a prepayment penalty. Lesson: Fixed, variable, term and renewal
Rule of 72: A shortcut for how long money takes to double: 72 divided by the yearly interest rate. At 6%, about 12 years. Lesson: Saving and compound interest
Secured credit card: A credit card backed by a deposit, often equal to the limit. A common way to start building credit. Lesson: Your first credit card
Social Insurance Number (SIN): The nine-digit number you need to work in Canada. Only your employer, bank and government usually need it; keep it private. Lesson: Your first paycheque
Stress test (qualifying rate): The rate lenders use to check you can afford a mortgage: the greater of your contract rate plus 2%, or 5.25%. Lesson: How much can you borrow?
Tax-Free Savings Account (TFSA): An account, open to residents 18 and over, where interest and investment growth aren't taxed, even when withdrawn. Room builds up each year. Lesson: Saving and compound interest
Tenant insurance: Insurance for renters that covers your belongings and your liability for damage you accidentally cause. Many leases require it. Lesson: Renting your first place
Term: The length of your current mortgage contract, often five years, during which the rate and rules are set. It's shorter than the amortization. Lesson: Fixed, variable, term and renewal
Three months' interest: A common prepayment penalty, especially on variable mortgages: roughly the balance times the rate, divided by 12, times 3. Lesson: Refinancing and breaking a mortgage
Total debt service (TDS) ratio: Housing costs plus all other debt payments as a share of gross income. 44% is the common ceiling for insured mortgages. Lesson: Credit scores and a simple budget
Trigger rate: On a fixed-payment variable mortgage, the rate at which the whole payment goes to interest and none to principal. Lesson: Fixed, variable, term and renewal
Variable rate: A mortgage rate set as prime plus or minus a discount, so it moves when the lender's prime rate does. Lesson: Fixed, variable, term and renewal