Reference
Glossary of Canadian pre-approval terms.
The OSFI, CMHC, FCAC, and lender-side vocabulary that shows up in every commitment letter — defined by the desk that reads them.
Underwriting
- Amortization
- Standard amortizations are 25 years on insured and up to 30 on uninsured (or 30 on insured first-home or new-construction files). Longer amortization lowers the monthly payment and raises affordability — at the cost of total interest paid.
- Beacon-only approval
- Some automated 'pre-approvals' rely on the credit pull and consumer-stated income. They look real but are not underwritten — they fall apart when documents are requested.Read the guide →
- Bridge financing
- Bridge financing covers the timing gap when a buyer's existing property closes after the purchase. Typical terms are 30–120 days and require a firm sale agreement.
- Conditional commitment
- The output of a real pre-approval is a conditional commitment letter — approval subject to specific outstanding conditions (typically appraisal, property documents, and any income items).
- Conditional offer
- Conditional offers carry financing conditions that protect the buyer. Waiving the financing condition before a real pre-approval is the single most common cause of distressed Canadian mortgage files.Read the guide →
- GDS ratio
- GDS = (principal + interest + property tax + heat + 50% of condo fees) ÷ gross monthly income. Insured deals cap GDS around 39%.Read the guide →
- MIC (Mortgage Investment Corporation)
- MICs pool investor capital to fund mortgages outside prime and B-lender appetite. Terms are typically 1 year with higher rates and lender fees.Read the guide →
- Pre-approval
- A real pre-approval is a fully underwritten file with a rate hold and a written conditional commitment. It is not a website calculator result. Most consumer 'pre-approvals' in Canada are actually pre-qualifications.Read the guide →
- Pre-qualification
- Pre-qualifications are unverified estimates. They give a comfort number but no commitment, no rate hold, and no protection if the file changes.Read the guide →
- Stress test
- The mortgage stress test requires borrowers to qualify at the higher of their contract rate plus 2% or the OSFI floor of 5.25%. Insured and uninsured deals both apply it; credit unions on uninsured deals are not federally required to.Read the guide →
- TDS ratio
- TDS = (GDS housing costs + all other monthly debt payments) ÷ gross monthly income. Insured deals cap TDS around 44%.Read the guide →
Regulatory
- FINTRAC
- FINTRAC compliance requires lenders to document source of funds for large or unusual deposits. This is why underwriters ask for 90 days of statements and explanations for non-payroll deposits.
- Mortgage broker
- Brokers are provincially licensed (FSRA, BCFSA, AMF, etc.) and submit files to lenders on behalf of borrowers. Compensation is typically paid by the lender on prime deals.
- OSFI B-20
- OSFI Guideline B-20 sets the standards federally regulated lenders use to underwrite uninsured residential mortgages — including the stress test, documentation expectations, and prudent lending practices.Read the guide →
Rate
- Fixed rate
- Fixed rates lock the contract rate for the full term (commonly 5 years). Breakage penalty is the greater of three-month interest or IRD.
- IRD penalty
- IRD is the lender's calculation of the income they lose if you break a fixed mortgage early. Big-Six banks usually compute IRD against the posted rate at funding, not your discounted rate — the result is typically much higher than borrowers expect.Read the guide →
- Posted rate
- Posted rates are published bank rates rarely received by qualified borrowers. They are used inside Big-Six IRD penalty formulas, which is why those penalties tend to be larger.
- Rate hold
- A real pre-approval includes a written rate hold — typically 90 to 120 days. The hold protects against rate increases while you shop.
- Three-month interest
- Variable-rate mortgages typically charge three months' interest as the penalty for breaking the term. Fixed mortgages charge the greater of three-month interest or IRD.Read the guide →
- Variable rate
- Variable rates track the lender's prime rate. Payments may be static (adjusting principal allocation) or fluctuating depending on lender. Breakage penalty is typically three months' interest.
Closing
- Land Transfer Tax (LTT)
- Most provinces charge a Land Transfer Tax at closing on a tiered scale. Toronto and Montreal add municipal layers. Alberta, Saskatchewan, Yukon, NWT, and Nunavut have no LTT, only registration fees.Read the guide →
Insurance
- CMHC insurance
- Down payments under 20% require default insurance from CMHC (or Sagen / Canada Guaranty). The premium is added to the mortgage; PST on the premium is paid out of pocket at closing in ON, QC, MB, and SK.Read the guide →
- Insurable mortgage
- Insurable mortgages have 20%+ down payment but still meet CMHC/Sagen criteria. Lenders can bulk-insure them on the back end, which often yields better pricing than purely uninsured mortgages.
Income
- FHSA
- The FHSA combines RRSP-style deduction with TFSA-style tax-free withdrawal for qualifying first-home purchases. Contribution room is $8,000 per year up to $40,000 lifetime.Read the guide →
- Gift letter
- Gift letters confirm the donor is an immediate family member, the funds are a true gift, and no repayment is expected. Lenders use standard templates and trace the funds.Read the guide →
- Home Buyers' Plan (HBP)
- Up to $60,000 may be withdrawn tax-free from an RRSP under the Home Buyers' Plan, repayable over 15 years.
- Notice of Assessment (NOA)
- Lenders use the NOA to verify reported income. Self-employed files almost always need two consecutive years with no balance owing.Read the guide →
- Probation clause
- Probation clauses on employment letters typically delay or disqualify a file at prime lenders. Underwriters often call HR to confirm probation status.
- Source of funds
- Source-of-funds documentation is FINTRAC-driven. Underwriters trace 90 days of statements for every contributing account and request explanations for large or unusual deposits.
- Stated income
- Stated-income programs at B-lenders use 12–24 months of business bank statements to verify income when NOAs understate true earnings. Rates and fees are higher than prime.Read the guide →
- T1 General
- Self-employed borrowers qualify on Line 15000 of the T1 General — net of legitimate business write-downs. The gap between gross business revenue and Line 15000 is the most common self-employed pre-approval friction.Read the guide →
Credit
- Beacon score
- Equifax beacon scores are the most common Canadian lender pull. Prime lenders generally want 680+; below 620 routes the file to alternative or B-lenders.
Property
- Reserve fund study
- Reserve fund studies forecast condo capital expenses. Thin reserves or recent special assessments can affect lender appetite — particularly on older buildings.
- Status certificate
- Status certificates disclose condo finances, reserve funds, special assessments, and rules. Lenders review them as part of property underwriting on condo purchases.