Glossary of mortgage-related terms

Principal

This is the amount you borrow. It is the difference between the purchase price of your property and your down payment.

Interest

The cost of your loan, paid regularly and expressed as a percentage, for as long as funds are advanced by your caisse.

Payments

The amounts you must regularly pay against your loan. They consist of a portion of your principal and some of the interest on your loan.

Amortization period

Number of years, up to a maximum of 25 years, over which you have chosen to repay your loan. The longer the amortization period, the lower your payments, but the more interest you pay.

Term

Period during which your interest rate and regular loan payment remain unchanged if you have chosen a fixed-rate loan. In the case of a variable-rate loan, the regular payment may remain unchanged, but the interest rate varies according to market fluctuations. At the end of the term, a new term is negotiated with your financial institution.

Prime rate

Annual interest rate periodically announced by the Bank of Canada as a reference point for determining applicable interest rates for commercial loans in Canadian dollars. This rate, which is granted by financial institutions to their best clients, benefits those with the highest credit ratings.

Fixed rate

Interest rate that stays the same until the end of the term and can apply to an open or closed loan.

Variable rate

An interest rate that is lower than the fixed rate, but varies according to the prime rate.

Open loan

A flexible loan you can pay back anytime, in full or in part, without penalty.

Closed loan

Cannot be repaid in full before maturity. You can make accelerated payments of up to 15% of the initial loan amount without penalty.

Penalty

Amount required by the lender for a partial or full repayment of the loan before maturity.