10 Helpful Words to Know when Buying a Home

KellyHudsonMortgages • November 26, 2025

Buying a home is one of the most important financial decisions you will make and tends to be stressful with all the new terminology.


To help you understand the process and have confidence in your choices, check out the following common terms you will encounter during the home buying process. 

1. Amortization – Length of time over which the mortgage debt will be repaid


2. Mortgage Term – Length of time that the contract with your mortgage including interest rate is fixed (typically 5 years)


3. Closing Costs – Costs you need to have available in addition to the purchase price of your home. Closing costs can include: legal fees, taxes, transfer fees, disbursements and are payable on closing day. They can range from 1.5% to 4% of a home’s selling price.


4. Down Payment – The portion of the home price that is NOT financed by the mortgage loan. The buying typically pays the down payment from their own resources (or other eligible sources) to secure a mortgage.


5. Equity – The difference between the price a home could be sold for and the total debts registered against it (i.e. mortgage). Equity usually increases as the mortgage is reduced by regular payments. Rising home prices and home improvements may also increase the equity in the property.


6. Fixed / Variable Mortgage Interest Rate – a fixed mortgage interest rate is locked-in and will not increase for the term of the mortgage. A variable mortgage interest rate is based on the Bank of Canada rate and can fluctuate based on market conditions, the Canadian economy. Fixed vs. Variable Rate Mortgages – Pros & Cons


7. Gross Debt Service Ratio (GDS) and Total Debt Service Ratio (TDS) 

  • GDS – Typically mortgage lenders only want you spending a maximum 32% of your gross income on your mortgage (principle & interest), property taxes, heat and 50% of your strata fees.
  • TDS – typically, lenders want you spending a maximum 42% of your gross income on your GDS – PLUS any other debt obligations you have (credit card debt, car payments, lines of credit & loans). 3 “Rules of Lending” what Banks look at when you apply for a Mortgage in Canada

8. High-ratio mortgage / Conventional Mortgage – a high ratio mortgage is a mortgage loan higher than 80% of the lending value of the home. A conventional mortgage is when you have more than 20% down payment. In Canada, if you put less than 20% down payment, you must have Mortgage Default Insurance (see below) and your mortgage affordability (GDS & TDS) is “stress tested” with the Bank of Canada’s qualifying rate (currently 4.64%).


9. Mortgage Default Insurance – Is required for mortgage loans with less than a 20% down payment and is available from Canadian Mortgage & Housing Corp. (CMHC) or 2 other private companies. This insurance protects the lender in case you are unable to fulfil your financial obligations regarding the mortgage.


10. Open / Closed Mortgage 

  • An open mortgage is a flexible mortgage that allows you to pay off your mortgage in part or in full before the end of its term, because of the flexibility the interest rates are higher.
  • Closed mortgages, typically cannot be paid off in whole or in part before the end of its term. Some lenders allow for a partial prepayment of a closed mortgage by increasing the mortgage payment or a lump sum prepayment. If you try and “break your mortgage” or if any prepayments are made above the stipulated allowance the lender allows, a penalty will be charged. Mortgage Penalties – Ouch… How Much??


Mortgages are complicated, but they don’t have to be… Engage an expert!


Give me a call and let’s discuss a mortgage that works for you (not the bank)!


Kelly Hudson

Mortgage Expert

Mobile: 604-312-5009

Kelly@KellyHudsonMortgages.com

www.KellyHudsonMortgages.com

Kelly Hudson
MORTGAGE ARCHITECTS
RECENT POSTS 

Joint Tenants vs. Tenancy in Common – What You Need to Know When Purchasing a Home!

By Kelly Hudson • March 6, 2026
Decisions relating to real estate can have significant financial and legal consequences. Before deciding how to share ownership of what is likely one of the largest investments of your life, I recommend consulting a real estate lawyer. Many Canadians purchase property together — including spouses, common-law partners, family members, friends, and business partners. Because ownership structure affects estate planning, taxes, creditor exposure, and control over the property, it’s important to understand your options before you sign. In Canadian property law, there are two primary forms of co-ownership: Joint Tenancy Tenancy in Common While these terms may sound similar, they have very different legal and financial effects — particularly if one owner dies, sells their interest, separates, or faces creditor claims.

Reverse Mortgages in Canada: The Pros and Cons

By Kelly Hudson • February 18, 2026
If you’re 55 or older and own your home, chances are you’ve heard about reverse mortgages. Sometimes they’re described as a “retirement lifesaver.” Other times they sound risky or confusing. The truth? They’re neither magical nor terrible. They’re simply a financial tool — and like any tool, they work well in some situations and not so well in others – EDUCATION is the key! Let’s break it down in plain English. So… What Is a Reverse Mortgage? A reverse mortgage allows you to borrow money against the value of your home — without making monthly mortgage payments. Instead of you paying the lender every month, the interest gets added to the balance. The loan is typically repaid when: The home is sold You move out permanently Or you pass away In Canada, reverse mortgages are currently offered by: HomeEquity Bank (CHIP Reverse Mortgage) Equitable Bank Bloom Financial You still own your home and your name stays on title. That part often surprises people. How It Works (Simple Version) To qualify: You must be 55 or older You must own your home (you can still have a regular mortgage — it just needs to be paid out) You can usually borrow up to about 55% of your home’s value (the older you are, the more you may qualify for) You don’t make monthly payments. But you must continue to: Pay property taxes Keep home insurance in place Maintain the home The money you receive is tax-free. It can come as: A lump sum Monthly advances Or a combination of both That flexibility is one reason many retirees like this option. Why Do People Consider Reverse Mortgages? Most of the homeowners I speak with aren’t looking for luxury spending money. They’re trying to solve real life situations: Covering rising living costs Paying off debt before retirement Managing health or care expenses Staying in their home longer Helping adult children with a down payment For many Canadians, their house is their largest asset — but it doesn’t create monthly income. A reverse mortgage turns some of that home equity into usable cash. The Pros (The Reasons People Like Them) 1. No Monthly Mortgage Payments This is the big one. If you’re living on CPP and OAS, removing a monthly mortgage payment can dramatically reduce stress. Cash flow improves immediately. 2. You Can Stay in Your Home Most people I meet don’t want to move. They love their neighborhood. Their friends are nearby. Family visits often. A reverse mortgage can allow you to age in place instead of selling before you’re ready. 3. The Money Is Tax-Free Because it’s borrowed money — not income — it does not affect: Old Age Security (OAS) Guaranteed Income Supplement (GIS) That’s a major advantage compared to withdrawing from investments. There are no rules about spending. Some clients use the funds to stay in place – health care at home. Some clients renovate. Some travel. Some gift funds to children. Some simply create a safety cushion. It’s your equity – you decide. 5. You Keep Ownership The bank does not own your home. As long as you live in your home, maintain it, insure it, and pay property taxes — you own your home and can stay. 6. No Negative Equity Guarantee In Canada, reverse mortgages include protection so that you (or your estate) will never owe more than the home is worth — even if property values decline. That protection matters.