A mortgage – in a common meaning of the word – is a loan that uses a property as security to ensure that the debt is repaid.

The borrower is referred to as the mortgagor, the lender as the mortgagee.

The actual loan amount is referred to as the principal, and the mortgagor is expected to repay that principal, along with interest, over the repayment period (amortization) of the mortgage.

As opposed to the mortgages in USA, where they can be fully amortized, i.e. the term of the mortgage is the same as the amortization period, mortgages in Canada are partially amortized, which means that the TERM of the mortgage is shorter than the Amortization period.

For example, most mortgages in Canada are amortized over 25 - 35 years but they have a 1 – 10 years TERM. This means that during the TERM period, the interest rate of the mortgage will remain as per the original Agreement. At the end of the TERM mortgagor has an option of renewing the Agreement with the current lender (with new interest rate applicable at that time) or they can move their mortgage to another lender, should they find a better offer somewhere else.

A mortgage can be used for financing many different things, including:

• Purchasing or constructing a new home
• Purchasing an existing home
• Refinancing to consolidate debts
• Financing a renovation
• Financing the purchase of investment property