Mortgage glossary
Plain-language definitions of the terms that show up in mortgage quotes, written for first-time buyers in both the US and Canada.
- Accelerated bi-weekly CanadaUS
- Paying half of a monthly payment every two weeks. There are 26 two-week periods a year, so you make 13 monthly payments’ worth instead of 12 — one extra payment a year.
- Amortization USCanada
- The schedule that pays a loan down to zero. Early payments are mostly interest; later ones are mostly principal. In Canada, "amortization" specifically means the full payoff horizon, as opposed to the term.
- Closing costs USCanada
- One-off costs to complete the purchase: legal fees, inspection, title or land transfer tax, appraisal. Budget roughly 2% of the price in the US and 1.5% to 4% in Canada, on top of the down payment.
- CMHC insurance Canada
- Canadian mortgage default insurance, required with less than 20% down. A one-time premium of about 2.8% to 4.0% of the loan, normally added to the principal rather than paid monthly.
- Down payment USCanada
- The cash you put in up front. It sets your loan-to-value, and at 20% it removes mortgage insurance in both countries.
- Escrow US
- A US account your lender uses to collect property tax and insurance alongside the mortgage payment, then pay them when due. It is why a quoted "payment" is usually bigger than principal and interest.
- HOA fee US
- A monthly homeowners association fee for shared maintenance and amenities, common for US condos and planned communities. Not part of the mortgage, but part of what you pay each month. Canada calls the equivalent a condo fee.
- Loan-to-value (LTV) USCanada
- The loan as a percentage of the property value. 20% down means 80% LTV. Mortgage insurance is required above 80%, and US PMI terminates automatically at 78%.
- PMI US
- Private mortgage insurance, charged monthly on US loans above 80% LTV. Roughly 0.3% to 1.5% of the loan a year depending on credit score and LTV. Cancellable at 20% equity.
- Principal USCanada
- The amount you actually owe. Each payment splits between interest (the cost of borrowing) and principal (what reduces the debt).
- Refinance US
- Replacing your mortgage with a new one, usually to capture a lower rate or change the term. Worth modelling when rates fall roughly half a point below what you hold.
- Stress test Canada
- The Canadian rule that you must qualify at the higher of your rate plus 2% or the 5.25% benchmark — so approval is based on a payment larger than the one you will make.
- Term CanadaUS
- In Canada, how long your rate is locked (typically 1 to 5 years) before renewal. In the US, "term" usually means the whole loan length, such as 30 years.
Want to see these numbers on your own scenario? Open the US calculator or the Canadian one.