Glossary
Plain-English definitions of Canadian mortgage terms, with the practitioner-level distinctions that actually matter. Most entries link to a relevant calculator, strategy explainer, or blog post for the deeper read.
Mortgage basics
- Amortization
The total time it takes to pay off the mortgage. Distinct from term, which is how long you're locked into your current rate.
- Term vs Amortization
Term is how long you're locked into the current rate. Amortization is how long until the mortgage is paid off. Confusing them is one of the most common borrower mistakes.
Rate and payment
- Accelerated Bi-Weekly
Pay every two weeks at half your monthly payment, ending up with one extra monthly payment per year. Three to five years off a typical Ontario mortgage with no behaviour change.
- Interest Rate Differential(IRD)
The prepayment penalty fixed-rate mortgages charge if you break mid-term. Calculation method varies by lender; the gap can be a factor of ten.
Qualification
- Add-backs(Income add-backs, Underwriting add-backs)
Lender allowances that add specific T1 expenses back to a self-employed borrower's qualifying income. The lever that makes a tax-efficient return read as a stronger mortgage file.
- Alt-A(Alternative-A, B-lender (informal))
Lender category between A-lenders (banks, monolines) and subprime/private. More flexible on income documentation and credit history, with a rate premium of 0.5 to 1.5%.
- B-20 Stress Test(Stress test, Guideline B-20)
Federal regulation that qualifies you at the higher of (your contract rate + 2%) or 5.25%. The reason most Canadians qualify for less than they expect.
- Business For Self(BFS, Self-employed mortgage program)
Mortgage program category for self-employed borrowers. Accepts a stated income figure rather than full T1-based verification, usually with a small rate or insurance premium.
- GDS and TDS(Gross Debt Service, Total Debt Service)
The two ratios lenders use to size your maximum mortgage. GDS caps housing costs as a share of income; TDS caps all debt service.
- Loan-to-Value(LTV)
Mortgage balance divided by property value. Determines whether you need CMHC/Sagen/Canada Guaranty insurance and what HELOC capacity is available.
- Notice of Assessment(NOA)
CRA's official confirmation of your tax filing. Stamped, third-party verified. Lenders use the NOA (not the T1 itself) as the official income document.
- Stated Income Mortgage(Stated income, No-doc mortgage (informal))
The older name for what's now usually called BFS. Mortgage program where the lender accepts a stated income backed by business bank statements rather than full T1 verification.
- T1 General(T1, Personal income tax return)
The Canadian personal tax return. The first document any lender asks for on a self-employed file. Line 15000 (net income) is usually what banks read for qualifying.
- T2 Corporate Return(T2, Corporate income tax return)
The Canadian corporate tax return. Filed by incorporated businesses. Tells the lender what the business actually generates, separate from what the owner draws personally.
Strategy
- Cash Damming
CRA-recognized way for landlords to convert non-deductible personal mortgage interest into deductible rental-expense interest by routing rental income to the personal mortgage and paying rental expenses via HELOC.
- HELOC(Home Equity Line of Credit)
A revolving line of credit secured against home equity. Variable rate, interest-only minimum payment, drawable on demand. The plumbing for most advanced strategies.
- Readvanceable Mortgage
A mortgage with an attached HELOC sub-account that grows automatically as principal pays down. The foundation product for Investment Leverage, Cash Damming, Debt Swap, and Velocity Banking.
Investor
- Cap Rate(Capitalization Rate)
Net operating income divided by property value. The yield on a property divorced from financing. Useful for comparing buildings; useless for predicting your cash flow.
- DSCR(Debt Service Coverage Ratio)
Net operating income divided by annual debt service on a rental property. The lender's headline metric. Below 1.0 means the property doesn't cover its own mortgage.
- MLI Select(CMHC MLI Select)
CMHC's multi-unit rental insurance program with significant LTV, amortization, and DSCR concessions in exchange for affordability, energy-efficiency, or accessibility commitments.
- NOI(Net Operating Income)
Gross rental income less vacancy and operating expenses, before debt service. The standardized definition lenders and investors use to compare rentals.
Tax and regulatory
- Bill 23(More Homes Built Faster Act)
Ontario legislation passed late 2022 that opened up garden suite and ADU zoning across nearly every municipality, with significantly reduced or eliminated development charges.
- CMHC(Canada Mortgage and Housing Corporation)
Federal Crown corporation, primary mortgage insurer in Canada. Insures lender risk on high-ratio mortgages and runs MLI Select for multi-unit rentals.
- FSRA(Financial Services Regulatory Authority)
Ontario's mortgage and insurance regulator. All Ontario mortgage agents and brokerages are licensed and supervised by FSRA.
- ITA 20(1)(c)(Income Tax Act 20(1)(c), Interest deductibility)
The Income Tax Act paragraph that governs interest deductibility in Canada. Borrowed money used to earn income from a business or property generates deductible interest, subject to the four-part test.