Amortization
The repayment of a mortgage by periodic installments.

Assumability
A mortgage feature allowing the homebuyer to assume responsibility for the obligations of a mortgage made by a former owner. In most cases, assumability is not automatic and the buyer must be qualified by the lender in order to assume the mortgage.

Canada Mortgage and Housing Corporation (CMHC)
The Government of Canada's national housing agency, helping Canadians gain access to a wide choice of quality, affordable homes. Access their website at http://www.cmhc-schl.gc.ca/.

Closed mortgage
A closed mortgage is one that cannot be prepaid, renegotiated or refinanced unless an interest penalty is paid. A closed mortgage usually offers a lower interest rate than an open one of the same term.

Conventional mortgage
A conventional mortgage is a loan up to 75% of the appraised value or purchase price of the property, whichever is less. This is the most common type of mortgage and is available through most lenders.

Debt Service Ratio
The percentage of the borrower's gross income that will be used for monthly payments of principal, interest, taxes, space heating costs and condominium fees. Calculations for the Gross Debt Service Ratio (GDSR) and Total Debt Service Ratio (TDSR) are explained under Residential Mortgages.

Fixed interest rate
A fixed interest rate remains the same throughout the term of the mortgage.

High-ratio mortgage
A high-ratio mortgage is available for up to 95% of the appraised value or purchase price, whichever is lower. Since the loan is for more than the usual 75%, it must, by law, be insured against default through the Canadian Mortgage and Housing Corporation (CMHC) or GE Capital Mortgage Insurance. This insurance cost can be a percentage of the mortgage amount, and is added to the mortgage principal.

Open mortgage
An open mortgage allows you to make additional payments on the principal or pay off the mortgage completely, without notice or penalty.

Penalty
A sum of money paid to the lender for the privilege of prepaying a mortgage in part or in full.

Portability
The ability to transfer your mortgage, including rate and terms, from your existing property to a new property.

Prepayment Option
A clause in the mortgage agreement that lets you repay all or part of the mortgage before the maturity date.

Term
The length of time for which the money is loaned at a particular rate of interest. After the term expires, you can either repay the balance of the principal then owing or renegotiate the mortgage at current rates.

Variable interest rate
A variable interest rate floats or varies during the term of the mortgage. If the interest rate increases, then more of your payment goes toward the interest and less towards the principal.