Canadian Mortgage Investment Glossary: 121 Terms Defined

An investor who meets a test in National Instrument 45-106 and can buy exempt securities without the offering memorandum exemption's investment limits. For individuals, in summary: financial assets over $1,000,000 net of related liabilities, net income before tax over $200,000 ($300,000 with a spouse) in each of the last two years with the same expected this year, or net assets of at least $5,000,000; confirm current definitions with a registered dealer.

A fee for servicing a mortgage: collecting payments into trust, following up arrears, and handling renewals and discharges. Depending on the agreement, the investor, the borrower or the pool pays it.

The return an investor keeps after income tax, usually estimated by applying the investor's marginal tax rate to the net yield. Mortgage investment income is generally taxed as interest.

An estimate, shown in a lender's financial statements, of losses expected on its loans. Increases in the allowance reduce reported income, so it is worth reading alongside the distributions paid.

Québec's integrated financial regulator. It has regulated mortgage brokerage in Québec since 1 May 2020 and also regulates securities in the province.

The period over which regular blended payments of principal and interest would repay a loan in full. Many private mortgages are interest-only, so no principal is repaid during the term.

An independent opinion of a property's market value, prepared by a qualified appraiser as at a stated effective date. It is the value that loan-to-value is measured against.

Parties deal at arm's length when they act independently of each other; related persons, such as family members or a person and a corporation they control, generally do not. The distinction matters for the prohibited-investment rules on registered plans.

Payments that are due under a mortgage but have not been made. The investor meaning is practical: a loan in arrears is earning less than its contract rate, and arrears are the first warning that default and enforcement may follow.

An appraiser's estimate of what a property will be worth once planned construction or renovation is finished. It depends on the work being completed as planned and on budget.

An appraiser's estimate of what a property is worth in its current condition. On an unfinished project, it is the value available to the lender if work stops.

A security document giving the lender the right to collect rent from a property's tenants if the borrower defaults. It is used mainly on rental and commercial property.

Financial statements on which an independent licensed public accountant has issued an audit opinion. For a MIC they show the loan portfolio, allowances for losses, income, expenses and distributions.

A large final payment of principal due at maturity. On an interest-only mortgage, the entire principal is a balloon payment, which the borrower usually meets by refinancing or selling.

The regulator of mortgage brokers in British Columbia. It administers the Mortgage Services Act, which is scheduled to come into force on 13 October 2026.

The person or company that receives a loan, promises to repay it and grants the mortgage over the property. In Ontario's land registration system the borrower is called the chargor.

A short-term mortgage that covers a gap, such as buying one property before the sale of another closes. Repayment depends on the expected event happening on time.

A dividend a MIC may pay out of its capital gains. Subsection 130.1(2) of the Income Tax Act excludes it from the rule that treats a MIC's other taxable dividends as interest; a Canadian tax professional can confirm how it is taxed.

The federal Crown corporation that insures eligible deposits at member institutions up to $100,000 per insured category. Mortgage investments and MIC shares are not deposits and are not CDIC-insured.

Ontario's term for a mortgage registered in its land registration system, where the registered document is a Charge/Mortgage of Land. In everyday use, charge and mortgage mean the same thing.

Ontario's names for the parties to a charge: the chargee is the lender holding the security, and the chargor is the owner who grants it.

A mortgage registered to secure a separate loan agreement, often for more than the amount first advanced, as with many home equity lines of credit. Because it can be redrawn up to its registered amount, it can grow ahead of later-ranked lenders.

The total of all mortgages ranking at or ahead of a given loan, including that loan, divided by the property's value. It is the measure that matters for a second or later mortgage.

The lender's written offer to lend, setting out the amount, rate, term, fees, security and conditions. It is a core document in any loan file.

Shares that carry the residual interest in a corporation after any preferred shares. Under subsection 130.1(6), a MIC's preferred shareholders must rank equally with common shareholders in any dividends beyond their preferred dividends.

A cap on how much of a portfolio can be exposed to one borrower, region, property type or mortgage position. It limits how far one bad loan or one local downturn can affect the whole pool.

A loan advanced in stages, called draws, as a building is built or renovated. Its risk depends on the project being finished on time and on budget.

An Income Tax Act measure, broadly the tax cost of a property. The MIC tests in subsection 130.1(6), such as the requirement that at least 50% of property be residential mortgages, insured deposits and money, are measured against cost amount.

The amount still needed to finish a construction project. Lenders compare it with the undrawn loan and the borrower's own funds to judge whether the project can be finished.

A promise in a mortgage or loan agreement, such as to pay, to keep the property insured, to pay property taxes and to maintain the property. Breaking a covenant can be a default even when payments are current.

The umbrella organisation of Canada's provincial and territorial securities regulators. It coordinates national instruments such as NI 45-106 and runs the National Registration Search for checking dealers.

A property's net operating income divided by its debt payments, used mainly in commercial and rental lending. A ratio below 1 means the property's income does not cover the payments.

A failure to meet a mortgage's terms, most often by missing payments but also by letting insurance lapse or property taxes go unpaid. Default gives the lender the right to begin enforcement under provincial law.

The shortfall when sale proceeds do not cover the debt and costs. Whether a lender can pursue the borrower personally for it depends on the province and the type of loan.

The registered document that removes a mortgage from title once the loan has been repaid.

A payment of income from a MIC or fund to its investors, declared on the schedule set out in its offering documents. Distributions are not guaranteed and can be reduced or suspended.

An option to have distributions buy more shares or units instead of being paid in cash. Outside a registered plan, reinvested distributions are generally still taxable in the year they are paid.

A staged advance under a construction or renovation loan, released as work is completed and verified, for example by a cost consultant or inspector.

The checks an investor or lender makes before committing money, from the offering memorandum and audited financial statements to the title search and appraisal.

An NI 45-106 category that allows higher offering memorandum limits in some provinces. For individuals, in summary: net assets over $400,000 (alone or with a spouse), net income before tax over $75,000 ($125,000 with a spouse) in each of the last two years with the same expected this year, or advice from an eligibility adviser where the rules allow; confirm current definitions with a registered dealer.

Any registered claim or restriction on a property's title, such as a mortgage, lien or easement.

The legal process a lender uses to recover a defaulted loan from its security. It varies by province: power of sale, court processes, an administrative process in Manitoba, or hypothecary recourses in Québec.

A property's value minus all debts secured on it. The borrower's equity is the lender's cushion against a fall in value.

The borrower's right to pay off the debt and recover clear title, which continues until it is ended by a sale or a final foreclosure order.

The market for securities sold without a prospectus, under exemptions such as the offering memorandum and accredited investor exemptions. MIC shares are usually sold in it.

A dealer registered with provincial securities regulators to sell securities under prospectus exemptions. It must collect know-your-client information and assess suitability before a purchase.

How a borrower will repay a loan at maturity, usually by refinancing or selling, together with a fallback if that plan fails. A loan with no realistic exit tends to become a renewal or an enforcement.

The mortgage that ranks first on title and is repaid first from sale proceeds, after the costs of sale and any claims provincial law puts ahead.

A court process that can end the borrower's equity of redemption and vest title in the lender. In British Columbia, judicial foreclosure involves an order nisi and a redemption period and may lead to a court-ordered sale.

A share in a single mortgage held alongside other investors, each entitled to a proportion of its payments. It is a form of syndicated mortgage.

Ontario's financial services regulator. It licenses mortgage brokerages, agents and mortgage administrators under the Mortgage Brokerages, Lenders and Administrators Act, 2006, and publishes private-lending reports.

A limit on how much investors can redeem from a fund or MIC in a period, used when redemption requests exceed available cash. It applies only where the offering documents allow it.

The income a mortgage or portfolio earns before fees, costs, losses and tax, expressed as a percentage of the amount invested.

A person or company that promises to repay a loan if the borrower does not. A guarantor adds a second source of repayment but does not change the property's value.

Part of a loan the lender withholds until a condition is met, such as completion of a stage of work or delivery of a document.

Québec's civil-law form of security on property, equivalent in function to a mortgage. An immovable hypothec is published in Québec's land register.

The remedies a Québec creditor can exercise after default: taking in payment, sale by judicial authority, sale by the creditor, and taking possession for administration.

A mortgage registered against more than one property to secure the same loan, sometimes called a blanket mortgage; inter alia is Latin for "among other things", signalling that the charge also covers other lands. The added property can widen the lender's cushion, but each title, value and prior charge needs its own check, and selling one property usually needs a partial discharge.

The risk that changes in market interest rates reduce an investment's value or income. With short-term mortgages it shows up mainly as lower rates on renewals and new loans.

A mortgage on which the borrower pays only interest during the term and repays the whole principal at maturity. It is common in private lending.

The legal form through which an investor holds mortgage exposure: MIC shares, fund units, a limited partnership interest, a fractional interest or a whole mortgage. It is one of the seven axes on which mortgage investments vary.

A sale of mortgaged property ordered and supervised by a court, as in the court processes used in British Columbia and Alberta.

The province whose law governs the property, the loan and its enforcement. Mortgage law, licensing and enforcement differ between provinces, so it is one of the seven axes on which mortgage investments vary.

A registered dealer's obligation to collect information about an investor's finances, objectives, time horizon and risk tolerance before recommending or selling an investment.

The provincial system that records who owns land and the mortgages and other interests registered against it. Registration gives a mortgage public notice and its place in the order of priority.

A fee the borrower pays the lender when a loan is funded, renewed or extended, often deducted from the advance. In a pooled vehicle, the offering memorandum says whether it belongs to the pool or to the manager.

Borrowing to increase the amount invested, which magnifies both income and losses. Under subsection 130.1(6), a MIC's liabilities are capped at three times its equity, or five times where residential mortgages, deposits and money make up at least two-thirds of its assets.

A legal claim against property to secure a debt or obligation, such as a construction lien or a tax lien. Some liens can rank ahead of a registered mortgage under provincial law.

How quickly an investment can be turned into cash without loss. Mortgage investments are generally illiquid: money comes back when loans are repaid or when redemptions are paid.

The loan, plus any loans ranking ahead of it, as a percentage of the property's value. A lower LTV leaves a larger equity cushion before the lender's money is exposed, before costs.

A loss of the amount originally invested, as distinct from a shortfall in income. Mortgage investments are not guaranteed, and principal can be lost.

The date on which a mortgage's term ends and the outstanding principal falls due.

A Canadian corporation that invests in mortgages and meets the nine conditions in subsection 130.1(6) of the Income Tax Act. Its taxable dividends, other than capital gains dividends, are taxed in shareholders' hands as interest.

A term securities regulators use for an issuer whose main business is investing in mortgages, whether or not it qualifies as a MIC for tax purposes.

A loan secured by an interest in real property that the borrower grants to the lender. The word also refers to the security document itself.

The firm that services mortgages for lenders or investors: collecting payments into trust, paying investors, and managing arrears, renewals and discharges. In Ontario, mortgage administrators are licensed by FSRA.

A licensed intermediary who arranges mortgages between borrowers and lenders. Brokers are regulated provincially, for example by FSRA in Ontario, BCFSA in British Columbia, RECA in Alberta and the AMF in Québec.

Insurance, from CMHC or a private insurer, that protects a lender against loss if a borrower defaults on certain loans. It protects the lender rather than the borrower, and private mortgages are generally uninsured.

A pooled vehicle, often a trust or limited partnership, that invests in mortgages without necessarily being a MIC. Its tax treatment, leverage and redemption terms depend on its own documents.

British Columbia's mortgage statute, which received Royal Assent on 3 November 2022 and is scheduled to come into force on 13 October 2026, replacing the Mortgage Brokers Act. It makes mortgage lending and mortgage administration licensed activities.

The Ontario statute, R.S.O. 1990, c. M.40, that sets rules for mortgages, including the notice and procedure for power of sale.

The return after fees, costs and credit losses but before the investor's income tax.

National Instrument 45-106 Prospectus Exemptions, the rule setting out the exemptions, such as the offering memorandum and accredited investor exemptions, under which securities can be sold without a prospectus.

The disclosure document given to investors in an exempt offering, describing the business, risks, fees and redemption terms. For a MIC it typically includes audited financial statements and risk factors.

A prospectus exemption in NI 45-106 for securities sold to investors who receive an offering memorandum. In Alberta, New Brunswick, Nova Scotia, Ontario, Québec and Saskatchewan, individuals face 12-month limits of $10,000, $30,000 or $100,000 depending on their category; accredited investors have no limit.

An open mortgage can be repaid early without penalty; a closed mortgage cannot, or only with a penalty. For an investor, an open loan raises the chance of early repayment and idle cash.

A court order in a British Columbia foreclosure that sets a redemption period during which the borrower can repay before the lender seeks further orders, such as an order for sale.

Latin for on equal footing. Claims that rank pari passu share in payments in proportion, with none ahead of the others.

Historical returns over a stated period, which need their period and source beside them. Past performance does not indicate future results.

A statement from the lender or administrator showing the exact amount needed to repay a mortgage on a given date, including interest and fees.

A written agreement by a lender to rank behind another mortgage or interest, changing the order that registration would otherwise set.

A remedy that lets a lender sell the mortgaged property after default and statutory notice, without a court order. It applies in Ontario under the Mortgages Act, and in New Brunswick, Newfoundland and Labrador and PEI.

Shares with a preference over common shares for dividends or capital. A MIC may issue investor shares as preferred shares, which subsection 130.1(6) requires to rank equally with common shares in dividends beyond their preferred dividends.

Repaying some or all of a mortgage before maturity. For an investor, it returns capital early and may leave cash to reinvest at lower rates.

The order in which claims on a property are paid from sale proceeds. In Canada it generally follows the order of registration, subject to postponements and claims given priority by provincial law.

A mortgage funded by individuals or private lenders, such as MICs, rather than by banks or other regulated institutions. It usually carries a higher rate, a shorter term and more risk.

An investment that attracts special tax when held in a registered plan, under section 207.01 of the Income Tax Act. MIC shares can become one if, for example, the plan holder and non-arm's-length persons hold 10% or more of any class.

A full disclosure document filed with securities regulators, which must issue a receipt before securities are sold to the public under it. Exempt offerings, such as most MIC share sales, are made without one.

An investment a registered plan such as an RRSP or TFSA is permitted to hold. MIC shares are generally qualified investments, subject to the prohibited-investment rules.

The regulator of mortgage brokers in Alberta under the Real Estate Act. Securities in Alberta are regulated separately by the Alberta Securities Commission.

A shareholder's request for the issuer to buy back shares, or the buyback itself. In a MIC it follows the articles and offering memorandum, with notice periods, and the board may be able to defer or suspend it.

In a foreclosure, the time the court allows the borrower to repay the debt before the lender can seek further orders against the property.

A mortgage recorded in the provincial land registry, giving public notice of the lender's interest and fixing its priority against later claims.

A tax-advantaged account under the Income Tax Act, such as an RRSP, RRIF, TFSA, RESP, RDSP or FHSA. MIC shares are held in one through a self-directed plan trustee.

The risk that money returned early or at maturity can be reinvested only at a lower rate, or sits idle in the meantime.

An agreement to extend a mortgage for a further term at maturity, usually on new terms and sometimes with a renewal fee.

A shareholder's right, set out in the share terms, to require the corporation to buy back its shares. MIC documents often call the same request a redemption; either way, notice periods and the limits in the articles and offering memorandum apply.

A form an investor signs under certain prospectus exemptions, such as the offering memorandum exemption, confirming they understand the risks, including that they could lose all of the money invested.

A mortgage that ranks behind a first mortgage on the same property and is repaid only after the first is paid in full.

A mortgage's rank on title, first, second or later, which sets the order of repayment from sale proceeds. It is one of the seven axes on which mortgage investments vary.

A trust company that administers a registered plan in which the holder chooses the investments. MIC shares are held in RRSPs, TFSAs and similar plans this way, and the trustee charges its own fees.

A clause in a property insurance policy that protects the lender's interest, so insurance proceeds are paid to the lender up to its interest even where the owner's own claim is refused for some breaches.

A registered dealer's obligation to assess, using know-your-client information, whether an investment is suitable for a client before recommending it or accepting an order.

A mortgage in which two or more investors hold interests. Since 1 March 2021 (1 July 2021 in Ontario and Québec), syndicated mortgages can no longer rely on the private issuer or mortgages prospectus exemptions.

The Statement of Investment Income slip issuers send investors and the Canada Revenue Agency. A MIC reports its taxable dividends on a T5, and they are taxed as interest.

The length of time a mortgage runs before its principal is due. Private mortgage terms are usually short, and term is one of the seven axes on which mortgage investments vary.

Insurance against certain losses from title defects, fraud and some matters a search can miss. It does not cover physical damage to the property or a fall in its value.

A search of the land registry showing a property's registered owner and every mortgage, lien and other interest registered against it.

A bank account held for the benefit of others and kept separate from a firm's own money. Mortgage administrators and lawyers hold borrowers' payments and loan funds in trust.

The lender's assessment of a loan before approving it: the property, the borrower's ability to pay, and the exit.

Income from an investment expressed as a percentage of the amount invested, usually per year. A yield figure needs to say whether it is gross, net or after tax, and higher yield comes with higher risk.