Canadian Real Estate Terms You Need to Know

If you're buying or selling a home in Canada, you'll want to be equipped with key information to facilitate the sale. Learn these key terms to feel more confident in your real estate journey.

Real Estate Terms Table of Contents

• Mortgage
• Mortgage Interest
• Amortization
• Fixed-Rate Mortgage
• Variable-Rate Mortgage
• Down Payment
• Mortgage Insurance and CMHC Insurance
• Home Equity
• Earnest Money Deposit
• Pre-Approval vs. Pre-Qualification
• Cash Flow Positive
• Duplex
• Semi-Detached Home
• Freehold vs. Condo
• Turnkey
• House Hacking
• For Sale By Owner (FSBO)
• Assessed Value
• Home Appraisal and Appraised Value
• Market Value
• Comparative Market Analysis
• Conditional Offer
• Bully Offer
• Holding Offer
• Escape Clause
• Irrevocable Offer
• Power of Sale and Foreclosure
• Title Seach
• Status Certificate
• Real Estate Agent vs. Real Estate Broker
• Multiple Representation and Dual Agency
• Closing Costs
• Closing, Completion, and Pending Date
• Home Inspection
• As-Is

Financing and Mortgage Terms

Mortgage

A mortgage is a loan to a home buyer to help them purchase their house. Most people need a mortgage because they don't have the full amount of money required to buy a house with cash.

Mortgages typically last for 5-year terms. At the end of the 5-year period, unless the mortgage has been fully paid off, the homeowner must refinance or renew for another mortgage term. Many homeowners take 25 years to fully repay their loan.

If a homeowner decides to move to another house before the home is paid off, the loan is portable and may be applied to a new property.

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Mortgage Interest

Interest is an amount that a lender charges a borrower for the privilege of borrowing the money. Interest is added to the mortgage and impacts the final cost to the borrower.

People who have a high credit score and a low debt-to-income ratio generally get better interest rates. The higher the interest rate, the more expensive the loan is to the borrower.

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Amortization

Amortization is the process of paying off your mortgage through fixed installments over time.

The amortization period is how long it takes to pay off your entire mortgage, typically 25 years in Canada (first-time buyers might qualify for 30 years).

Your payments include both principal (the amount you borrowed) and interest (the amount the lender charges to borrow). At first, most of your payment goes toward interest. As time passes, more goes toward the principal, helping you build equity faster. The change in principal vs. interest over time is called an "amortization schedule."

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Fixed-Rate Mortgage

A fixed-rate mortgage keeps the same interest rate throughout your term, making your payments consistent. Most Canadians choose 5-year terms, with terms ranging from 1 to 10 years.

Fixed-rate mortgages might start slightly higher than variable options but provide stability for budgeting and protection against rising rates.

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Variable-Rate Mortgage

A variable-rate mortgage has an interest rate that changes with market conditions, usually tied to the bank's prime rate.

When rates drop, more of your payment goes toward principal. When rates rise, more goes to interest. Some variable mortgages keep the same monthly payment amount, just changing how it's split.

Variable rates often start lower than fixed rates but come with more risk. Make sure your budget can handle possible payment increases.

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Down Payment

The down payment is money you pay upfront when buying a home. In Canada, you need to put down at least 5% of the purchase price for homes under $500,000 and 10% on any portion above $500,000. If you're buying a home worth $1.5 million or more, you need a full 20% down.

If your down payment is less than 20%, you need mortgage insurance, which gets added to your mortgage.

A bigger down payment means borrowing less, paying less interest, and avoiding insurance costs.

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Mortgage Insurance and CMHC Insurance

Mortgage insurance, also called mortgage default insurance, is an insurance policy that pays the lender if you can't pay back your loan. It's a requirement if you get a loan with a down payment of less than 20%. Usually, when you reach 20% equity in your home, you can have the insurance removed.

Mortgage loan insurance is commonly called "CMHC insurance" in Canada because the Canada Mortgage and Housing Corporation is the biggest of the three providers (the others are Canada Guaranty and Sagen).

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Home Equity

Home equity is the percentage of your home's value that you own. When you buy a home with a mortgage, your down payment is your initial equity. Over time, as you make payments toward your mortgage principal and your home appreciates in value, your equity rises. When your equity hits 100%, you fully own your home.

When you sell your home, you get your equity in cash, with the remainder of the sale price going to the bank to pay off your loan. You can also access your equity through home equity loans and lines of credit.

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Earnest Money Deposit

A deposit (usually 2% to 5% of the purchase price) shows sellers you're serious about buying. This money is held in an escrow account until closing, when it counts toward your down payment.

In competitive markets, a larger deposit can strengthen your offer. But be careful—if you back out without valid reasons, you might lose this money.

To back out of an offer while keeping your deposit, you need to write a contingency in your offer and have a valid reason to activate it.

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Pre-Approval vs. Pre-Qualification

A pre-approval letter shows how much a lender is willing to loan you based on your financial situation. To get one, you'll need to provide pay stubs, tax returns, and information about debts and assets.

This helps you know what you can afford and strengthens your position when making offers. Pre-approvals typically last 60 to 90 days but aren't final loan guarantees.

A pre-qualification is also an estimate of how much a lender is willing to loan you, but it's a much less stringent process that uses self-reported numbers. While they're much quicker to get, they're not as solid an estimate as a pre-approval.

Neither pre-qualification nor pre-approval guarantees that you'll be approved for the mortgage. Your lender will do final underwriting during closing, and if anything's changed for the worse since your pre-approval, you may still be denied financing.

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Cash Flow Positive

A property is cash flow positive when it makes more money than it costs each month. For example, if your rental property brings in $2,500 but costs $2,300 in expenses, you make $200 monthly.

Finding such properties is challenging in expensive markets but remains the goal for investors as it reduces financial stress and improves returns.

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Property Types and Ownership Terms

Duplex

A duplex is one building with two separate living units sharing a common wall. Each unit has a separate entrance, kitchen, and living spaces.

You can buy a duplex as a freehold (owning the building and land) or as a condominium (owning your unit with shared common elements).

Many homebuyers live in one unit and rent the other to help pay their mortgage, making the property a home and an investment.

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Semi-Detached Home

A semi-detached home shares one wall with a neighbouring house. It offers more privacy than a high-rise condo or townhouse but costs less than a fully detached home.

You get your own yard space and own both the building and land. As the owner, you're responsible for all maintenance, including your part of the shared wall.

The technical difference between semi-detached and duplex is that with a duplex, both units are under one title, and with semi-detached homes, each unit has its own title. So if you're buying "half a duplex," you're likely buying a semi-detached home.

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Freehold vs. Condo

With freehold property, you own both the building and land. You make all decisions about your property and handle all maintenance. You pay property taxes but no maintenance fees.

When you buy a condo, you own your unit but share ownership of common areas. A condo corporation manages these shared spaces, and you pay monthly maintenance fees on top of your mortgage and property taxes.

Technically speaking, a condo is the "airspace" inside the unit, with the contract specifying how deep into the walls and floors ownership goes. For example, you might own the paint but not the drywall.

Condos are often referred to as apartments, since the most common form of condo is a unit in a high-rise building. However, "condominium" is an ownership structure, not a property type. You can have an apartment-style condo, a townhouse condo, or even a fully detached condo.

Freeholds offer more control but more responsibility. Condos provide convenience but less freedom to make changes.

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Turnkey

A turnkey property is ready to move into or rent immediately. Everything is renovated with appliances and fixtures already installed.

These appeal to busy people and investors who want to avoid renovation hassles. While convenient, always get a home inspection, as even new-looking homes can have hidden problems.

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House Hacking

House hacking means using your home to generate income that helps pay your mortgage by:

• Renting out a basement apartment
• Leasing extra bedrooms
• Buying a multi-unit property and living in one unit

This strategy can cut housing costs by 50% or more while providing landlord experience for those interested in real estate investing.

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For Sale By Owner (FSBO)

FSBO means selling without a real estate agent. The most common reason is to save on commission fees. You handle pricing, marketing, showings, negotiations, and paperwork yourself.

This works best when selling to someone you know or in very hot markets. Be aware that FSBO homes often sell for less than agent-listed properties due to limited exposure and experience.

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Valuation and Market Analysis Terms

Assessed Value

Assessed value is what the government assigns to your property for tax purposes. It's often different from market value—in hot markets, homes usually sell for much more than their assessed value.

Tax assessors consider property size, location, features, and improvements. If your assessment seems too high, you can appeal it to potentially lower your property taxes.

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Home Appraisal and Appraised Value

A home appraisal is a professional opinion of value required by lenders before approving mortgages. An appraiser evaluates the home's condition, size, location, and comparable sales.

Unlike home inspections that look for problems, appraisals focus on value. If the appraised value comes in lower than your offer price, you'll need to renegotiate for a lower price, add more cash to make up the difference between your loan and offer, or walk away.

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Market Value

Market value is what buyers are willing to pay for a house. Many factors influence market value, from the features of the property itself to larger economic factors like interest rates and job markets.

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Comparative Market Analysis (CMA)

A comparative market analysis determines fair pricing by comparing a home to similar recently sold properties near the target property. Real estate agents create CMAs using recent sales, current listings, and expired listings in the same area.

This analysis adjusts for differences between homes and provides a more accurate price range than general averages. Both sellers and buyers use CMAs to make informed decisions.

The more similar the properties in the CMA are (size, location, age, condition, etc.), the more accurate the CMA is likely to be to the final sold price. In some areas, low home turnover or particularly unusual properties can make accurate CMAs difficult.

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Offer and Purchase Agreement Terms

Conditional Offer

A conditional offer means you'll buy the home only if certain conditions (or "contingencies") are met, such as:

• Securing financing
• Satisfactory home inspection
• Sale of your current home
• Satisfactory review of condo documents

Each condition of sale includes a time frame (usually 5 to 10 days). If conditions aren't met, you can back out and get your deposit returned.

In hot markets, sellers might prefer "clean" offers with no conditions.

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Bully Offer

A bully offer is a strong offer made before the seller's planned offer date, designed to pressure early acceptance. Successful bully offers typically:

• Offer above the expected price
• Include few or no conditions
• Set short acceptance time frames
• Include large deposits

If rejected, you can still return on the original offer date.

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Holding Offer

A holding offer is submitted before the official offer date but asks the seller to "hold" it until then. This puts you in early while respecting the seller's timeline.

The seller agrees not to accept other offers until the specified date. This approach benefits both parties by creating a clear timeline.

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Escape Clause

An escape clause lets sellers continue marketing their home after accepting your conditional offer.

If they receive a better offer before your conditions are met, they must notify you first. You then have a specified time (usually 24 to 72 hours) to remove your conditions, improve your offer, or walk away.

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Irrevocable Offer

An irrevocable offer can't be withdrawn for a specific period (usually 24 to 48 hours). Most offers in Canada are irrevocable, giving sellers time to consider without worrying about the buyer changing their mind.

If the seller doesn't respond by the deadline, your offer expires, and you can submit a new one or walk away.

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Power of Sale and Foreclosure

These are legal processes when homeowners default on mortgage payments.

Power of Sale: The lender sells the property to recover the debt. Any remaining money goes to the original homeowner.

Power of Sale is used in Ontario, New Brunswick, Newfoundland and Labrador, and Prince Edward Island.

Foreclosure: The lender takes full ownership, and the homeowner loses all equity.

Foreclosure is used in British Columbia, Alberta, Manitoba, Nova Scotia, Quebec, and Saskatchewan.

These properties often sell below market value but come with risks—they're sold "as is" and may have complicated legal or tenant issues. Be extra vigilant when buying foreclosed homes.

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Title Search

A title search checks for legal issues before you buy, showing who legally owns the property and what claims exist against it. The search looks for:

• Liens (debts secured by the property)
• Easements (others' rights to use parts of the property)
• Restrictions on property use
• Unpaid taxes
• Judgments against the current owner

Title insurance protects you if problems are discovered after purchase.

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Status Certificate

Used for condos, a estoppel certificate (also called an status certificate) provides crucial information about:

• Financial health
• Reserve fund balance
• Monthly condo fees
• Upcoming special levies
• Rules and restrictions
• Legal issues or lawsuits

This document costs up to $100 (typically paid by the seller) and must be provided within 10 days of request. Having your lawyer review it can prevent buying into a poorly managed building.

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Legal Roles and Representation Terms

Real Estate Agent vs. Real Estate Broker

A real estate agent is licensed to help buy, sell, or rent properties but must work under a broker.

A broker is a real estate agent who has additional training and licensing that allows them to run a brokerage, supervise agents, and handle escrow accounts. Some brokers are also real estate attorneys.

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Multiple Representation and Dual Agency

Multiple representation (or dual agency) occurs when one agent represents the buyer and seller in the same transaction. This creates potential conflicts of interest and is restricted or banned in some provinces.

When this happens, your agent must disclose the situation, get your consent, limit their advice, and carefully handle confidential information. You may receive less negotiating help since they can't favour either party.

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Closing and Transaction Terms

Closing Costs

Closing costs are extra upfront expenses beyond the purchase price, typically 1.5% to 4% of the home's price. These can include:

• Legal fees
• Land transfer tax
• Title insurance
• Inspection and appraisal fees
• Property tax adjustments
• Prepaid expenses
• Moving expenses

First-time buyers can get rebates in some provinces. Budget for these on top of your down payment, and be prepared to bring a certified cheque or bank draft to closing.

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Closing, Completion, and Pending Date

Before closing, your sale goes through a "pending" period after conditions are met. During this time, your lawyer conducts a title search, your mortgage is prepared, and you arrange homeowners insurance.

The closing date is when the property legally becomes yours. This is also called the completion date. Final payments are made, documents are signed, and keys are handed over.

The time between accepted offer and closing day is typically 30 to 90 days, as agreed by both parties. This is called the escrow period.

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Inspections and Property Condition Terms

Home Inspection

A home inspection is a detailed evaluation of a property's condition, checking:

• Structure
• Roof and exterior
• Plumbing and electrical
• Heating and cooling
• Appliances
• Foundation

Notably, the typical home inspection doesn't include:

• Features that can't be visually inspected without causing damage, such as pipes underground or behind walls
• Asbestos and other environmental hazards
• Swimming pools
• Septic tanks
• Pests (beyond anything immediately noticeable)

You'll have to get specialized inspections if you have concerns about these.

Attending the inspection lets you ask questions about maintenance. If serious problems are found, you can negotiate repairs, price reductions, or walk away from the deal.

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As-is

When a property is sold "as-is," the seller won't make repairs or give credits regardless of inspection findings. This is common with bank-owned properties, estate sales, and homes needing major renovation.

Always get a thorough inspection and budget for necessary repairs, plus extra for surprises, when considering such properties.

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Improve Your Real Estate Knowledge

Understanding these key real estate terms helps you make better decisions when buying or selling a home in Canada. Keep this guide handy as a reference throughout your real estate journey to feel confident and avoid costly mistakes.