Canadian real estate glossary

The legal contract between a buyer and seller in Canada. It specifies the purchase price, deposit amount, closing date, and any conditions. Once both parties sign and all conditions are satisfied or waived, the APS becomes a binding contract. Backing out after the APS is firm without valid legal grounds can result in loss of deposit and liability for damages.

The length of time over which a mortgage is repaid in full. In Canada, the standard amortization for insured mortgages (under 20% down) is 25 years, with 30 years available for first-time buyers and new construction as of December 2024. Longer amortization means lower monthly payments but significantly more total interest paid over the life of the loan.

A professional assessment of a property's market value, ordered by the lender. The lender uses the appraisal to confirm the property is worth at least the purchase price before advancing the mortgage. If the appraisal comes in below the purchase price, the lender may reduce the mortgage amount, leaving the buyer to cover the gap. Appraisals typically cost $300–$500 and take 2–5 business days.

A measure of investment property return, calculated as net operating income divided by purchase price. Cap rate does not account for the mortgage — it tells you what return you'd achieve on an all-cash purchase. Useful for comparing properties of different sizes and prices. In Toronto, residential cap rates typically run 3–5%. In secondary Canadian markets, 5–7% is more common.

Insurance required on all Canadian mortgages with less than 20% down payment, provided by the Canada Mortgage and Housing Corporation (CMHC) or private insurers Sagen and Canada Guaranty. The premium ranges from 2.80% to 4.00% of the loan amount depending on the loan-to-value ratio, and is added to the mortgage balance. CMHC insurance protects the lender, not the borrower, but it enables buyers to purchase with as little as 5% down.

Costs paid at closing beyond the purchase price and down payment. For buyers, these include land transfer tax, legal fees ($1,500–$2,500), title insurance ($300–$600), home inspection ($400–$600), and any property tax adjustments. Total closing costs for a buyer typically run 1.5–3% of the purchase price, depending on province and whether Toronto's municipal land transfer tax applies. Sellers pay real estate commission (3–5%) and their own legal fees.

A form of property ownership where you own your individual unit and share ownership of common elements (hallways, lobby, gym, roof, exterior) with all other owners in the building or development, through a condo corporation. Condo owners pay monthly maintenance fees to fund the condo corporation's operating budget and reserve fund. In Ontario, buying a condo requires reviewing a Status Certificate before the sale is firm.

A clause in the Agreement of Purchase and Sale that allows either party to exit the deal if a specified condition isn't satisfied within a set time period. Common conditions: financing (buyer has time to get mortgage approved), home inspection (buyer can inspect and negotiate or withdraw based on findings), and status certificate review (for condos, the buyer has 10 business days to review). Once all conditions are waived, the sale is "firm."

A mortgage with 20% or more down payment. Conventional mortgages don't require CMHC insurance. They have more flexibility: lenders can offer 30-year amortization, higher purchase prices (above $1.5M), and different qualifying criteria. Lenders still apply the stress test on conventional mortgages at federally regulated institutions.

A payment — typically 5% of the purchase price — made by the buyer within 24 hours of offer acceptance. It's held in trust by the listing brokerage and forms part of the down payment at closing. If the sale doesn't close because a condition isn't met, the deposit is typically returned. If the buyer backs out after conditions are removed (firm sale) without legal grounds, the deposit is at risk of forfeiture, and the seller may sue for additional losses.

The portion of the purchase price paid by the buyer from their own funds (not borrowed). Canadian down payment minimums: 5% on homes up to $500,000; 5% on the first $500,000 plus 10% on the remainder for homes $500,000–$1.5M; 20% on homes over $1.5M. Homes over $1.5M cannot be financed with CMHC-insured mortgages. Rules updated December 15, 2024.

The difference between a property's market value and the amount still owed on the mortgage. If a home is worth $800,000 and you owe $450,000, your equity is $350,000. Equity builds through mortgage payments (as the balance decreases) and appreciation (as the value increases). Equity can be accessed through refinancing, a HELOC, or sale of the property.

A registered account introduced in 2023 that lets first-time home buyers save tax-free toward a home purchase. Contributions are tax-deductible (like an RRSP), and withdrawals for a qualifying home purchase are tax-free (like a TFSA). The annual contribution limit is $8,000 and the lifetime limit is $40,000. Unused contribution room carries forward. The FHSA can be combined with the RRSP Home Buyers' Plan.

A sale that has no remaining conditions. Both buyer and seller have signed the Agreement of Purchase and Sale, all conditions have been satisfied or waived, and the deal is legally binding. Backing out of a firm sale without valid legal grounds exposes the buyer to forfeiture of the deposit and potential additional legal liability.

Full ownership of a property, including the land. The owner has complete control: no monthly maintenance fees, no condo corporation to answer to, and no restrictions beyond municipal zoning. Detached houses, semi-detached houses, and freehold townhouses are all freehold properties. Freehold ownership also means the owner is solely responsible for all maintenance and repairs.

One of two ratios lenders use to assess affordability. GDS is the percentage of gross monthly income that goes toward housing costs: mortgage payment (principal and interest), property tax, heating, and 50% of condo fees. CMHC guidelines cap GDS at 39%. If your monthly income is $10,000 and your total housing costs are $3,900, your GDS is 39%.

A revolving credit facility secured against the equity in your home. Lenders can offer up to 65% of a property's appraised value as a HELOC (up to 80% combined with the existing mortgage balance). Interest rates are typically prime plus 0.5–1%. HELOCs are used for renovations, investment property down payments, or other large expenses. The interest is tax-deductible if the funds are used to earn income.

A provincial tax paid by the buyer at closing, calculated as a percentage of the purchase price. Most provinces charge LTT; Alberta and Saskatchewan do not. In Ontario, rates range from 0.5% to 2.5% on a marginal basis. Toronto buyers pay both Ontario LTT and an additional Municipal Land Transfer Tax. First-time buyers in Ontario receive a rebate of up to $4,000 on provincial LTT; Toronto first-time buyers receive an additional rebate of up to $4,475. Use the LTT calculator on this site.

A property type defined by converted industrial space or purpose-built units with industrial-style characteristics: high ceilings (typically 10–18 feet), exposed concrete or brick, open-plan layouts, and large windows. Lofts are governed as condominiums in most cases but have distinct financing, insurance, and zoning considerations. Some lofts exist on commercially-zoned land, which affects which lenders will finance them.

A federal rule requiring all borrowers at federally regulated lenders (banks) to qualify for their mortgage at the higher of: their contract rate plus 2%, or the Bank of Canada's minimum qualifying rate floor (currently 5.25% — [verify current figures with a licensed agent or at realtor.ca]). Introduced in 2018, the stress test reduces the maximum mortgage borrowers can qualify for, protecting against rate increases at renewal.

When a single real estate brokerage represents both the buyer and the seller in the same transaction. Also called dual agency. In this situation, the agent cannot fully advocate for either party. Buyers and sellers must provide informed consent in writing. Some provinces have moved to restrict or ban multiple representation. In Ontario, designated agency allows different agents within the same brokerage to represent each party.

For investment properties: gross annual rental income minus all operating expenses, before deducting mortgage payments. Operating expenses include property tax, insurance, maintenance, management fees, and a vacancy allowance. NOI is used to calculate cap rate. It does not include principal or interest payments on the mortgage — those are financing costs, not operating costs.

A date set by the listing agent on which all submitted offers will be reviewed at the same time, creating a competitive bidding environment. Common in hot Toronto and Vancouver markets. Buyers submit offers before the deadline without knowing what competing offers say. Sellers then review all offers and accept, reject, or sign back (counter) one or more. The process often drives final sale prices above the listed price.

A conditional commitment from a lender to advance a mortgage up to a maximum amount, at a specified interest rate, valid for 90–120 days. Pre-approval requires a full credit check, income verification, and review of assets. It is not a guarantee — the lender still needs to approve the specific property. In competitive markets, having pre-approval is effectively a requirement for making a serious offer.

A Canadian tax provision that allows homeowners to sell their principal residence without paying capital gains tax on the appreciation. Each family unit can designate one property per year as their principal residence. The exemption is not automatic — it must be claimed on your tax return for every year the property is designated. Investment properties, cottages, and rental properties are not eligible for full exemption unless they also served as the principal residence for some years of ownership.

Money set aside by a condo corporation to pay for major future repairs and replacements: roof, elevators, windows, parking structure, lobby renovations. Funded by a portion of monthly condo fees. An underfunded reserve means either a special assessment (one-time levy on all owners) or deferred maintenance (which becomes someone else's problem — until it's not). Always check the reserve fund balance and the reserve fund study before buying a condo.

A federal program allowing first-time buyers to withdraw up to $60,000 from their RRSP (raised from $35,000 in April 2024) to fund a home purchase. The withdrawal is not taxed at the time of withdrawal, but must be repaid into the RRSP over 15 years or it becomes taxable income in the year it was due. Couples can each withdraw $60,000 for a combined maximum of $120,000. The HBP can be combined with the FHSA.

When a seller receives an offer and responds with a modified version rather than accepting or rejecting outright. The sign-back changes specific terms — typically price, closing date, deposit amount, or conditions — and resubmits to the buyer. The buyer can accept the sign-back, reject it, or sign back again. This exchange continues until both parties agree on all terms or one party declines to continue.

A one-time fee charged to all condo owners in a building to cover unexpected or emergency costs not covered by the reserve fund. Special assessments range from a few hundred dollars to tens of thousands of dollars per unit, depending on the nature of the work. A building with a habitually underfunded reserve is at high risk of issuing special assessments. This is one of the primary risks to review in a condo Status Certificate.

A document produced by a condo corporation that summarizes the financial and legal health of the building at a specific date. It includes: the reserve fund balance and reserve fund study, the budget, meeting minutes, any pending special assessments, active or threatened litigation, and the rules and declaration of the corporation. Buyers have 10 business days from receipt to review and can exit the deal if they're unsatisfied. Your lawyer should review the status certificate, not just you.

See: Mortgage Stress Test.

The second ratio lenders use alongside GDS. TDS is the percentage of gross monthly income that goes toward all debt payments: housing costs (as calculated for GDS) plus all other monthly debt obligations such as car loans, student loans, and credit card minimums. CMHC guidelines cap TDS at 44%. If GDS is the housing affordability ceiling, TDS is the total debt ceiling.

Insurance that protects property owners and lenders against losses from title defects: undisclosed liens, survey errors, encroachments, fraud, or errors in public records. A lender policy protects the lender's interest in the property; an owner policy protects the buyer's equity. Both are purchased at closing and typically cost $200–$400 each. Title insurance is effectively standard practice in Canada and has largely replaced the traditional survey as a closing requirement.

A mortgage where the interest rate fluctuates with the lender's prime rate, which is tied to the Bank of Canada's overnight rate. When rates fall, more of each payment goes to principal. When rates rise, more goes to interest (and in some variable rate products, the payment itself adjusts). Historically, variable rates have been lower than fixed rates over most holding periods, but come with the risk of rate increases during the term. Most variable rate mortgages can be converted to fixed at the lender's current rate at any time.