Amortization Period

The amortization period is the period of time—most often 15, 20 or 25 years—required to extinguish the debt when payments are made on a regular basis.


Appraisal is the assessment of a property's market value for the purpose of obtaining a mortgage loan. The market value may differ from the purchase price of the home. The appraisal lets the purchaser know how much he should pay for the property. Normally, the lender may use the appraisal ordered by the purchaser for the requirements of the mortgage loan.

Asset Allocation

Asset allocation refers to the manner in which an individual's total assets are invested among the various asset classes.

Banker's Acceptance

A banker's acceptance is a type of short-term negotiable instrument issued by a non-financial corporation. Its capital and interest are guaranteed by the bank.

Bond (Fixed-Income Security)

A bond is a certificate of indebtedness through which the issuer promises to pay the holder a certain amount of interest for a fixed period and to repay the capital at maturity.

Canada Mortgage and Housing Corporation (CMHC)

The Canada Mortgage and Housing Corporation is a Crown corporation that is responsible for administering the National Housing Act. It fosters the improvement of the housing and living conditions of Canadians. In particular, the CMHC creates and offers mortgage insurance products.

Certificate of Location

The certificate of location sets out the boundaries and dimensions of a property as well as the location of the buildings erected on the property. It also indicates the servitudes (easements) and encroachments.

Civil Liability

Civil Liability refers to an individual's obligation to repair all or part of the damage that individual caused to a third person.

In home insurance, the contract covers the personal liability of the insured and his spouse and children, as well as the animals for which he is responsible, for injury or damage caused to third persons.

In auto insurance, third-party liability insurance is mandatory. All drivers must be insured against damage or injury that they could cause to third persons.

Closed-Term Loan

A closed-term loan is a mortgage loan that has a payment amount and an interest rate that are fixed for the mortgage term chosen—between one and five years. It is repayable at maturity only, its conditions cannot be modified during the agreed term and its interest rate is lower than on an open term loan.

Convertible Mortgage

A convertible mortgage is a mortgage that the borrower can convert from a short term to a longer term according to his financial needs.


A creditor is the holder of a debt, in other words the person to whom money is owed.


A discharge is a document signed by the lender and remitted to the borrower when the mortgage loan has been repaid in full.


Diversification is a method that consists of allocating the investment risks by investing in various asset classes. Diversification may also be geographic or carried out on the basis of the sector of activity, the management style or the manager.


The downpayment is the portion of the price of a house that the purchaser must pay before obtaining a mortgage loan. In general, this amount varies between 5% and 25% of the purchase price.

Endorsement (Auto and Home Insurance)

When the initial conditions of the contract are revised (when you move or purchase a new car, for example), the insurer issues an endorsement to validate the insured's new situation and benefits rather than drafting an entirely new contract.

You can also obtain additional protection to meet your specific needs. The insurer will then issue one or more endorsements and add them to your basic contract. Although you are not required to have any endorsements, all of them are useful. Auto insurance endorsements are recognized by the "QEF" code, followed by an identification number.

Evidence of Insurability

Evidence of insurability is provided by documents used by the insurer to evaluate insurance applications according to the insured's medical history, lifestyle, age, sex, weight, height, etc. The risks submitted are then categorized for acceptance or refusal, and the premium corresponding to the insured's risk can be determined.

Gross Debt Service (GDS) Ratio

The gross debt service ratio is the portion of the borrower's gross income that is required to make the monthly payment of principal, interest, taxes, heating costs and, if applicable, half of the condominium fees.

Guaranteed Investment Certificate

A guaranteed investment certificate is a security issued by most financial institutions attesting that an amount has been invested at a fixed rate of interest for a given period.

Guaranteed Sum Insured, Insurance Amount and Premium

The sum insured and the insurance amount are guaranteed when the death benefit remains the same for the term of the insurance contract. A guaranteed premium is a premium that will not be revised during the term of coverage.

Immediate Annuity

An immediate annuity is an annuity that begins to be paid as soon as it is purchased. It provides periodic income generated by the capital invested. There are two categories of immediate annuities: the annuity certain and the life annuity.

  • Annuity Certain

    The annuity certain provides income until the end of the chosen term (for example, 10 years).

  • Life Annuity

    The life annuity is guaranteed, and its payment terminates when the annuitant dies.

Investment Income

Investment income refers to the yield on an investment. There are various types of investment income—interest income, dividend income and capital gains. The taxation rate differs according to the type of investment income.

Investment Vehicle

An investment vehicle is an option in which you can invest amounts to build up savings.

Lending Value

The lending value corresponds to the lesser of the following amounts: the purchase price or the market value of the home.

Life Expectancy

Life expectancy corresponds to the number of years a person is statistically presumed to be able to live. Life expectancy calculations are based on mortality tables.

Life Income Fund (LIF)

The locked-in life income fund (LIF) is to the locked-in retirement account (LIRA) what the registered retirement income fund (RRIF) is to the registered retirement savings plan (RRSP). The only difference between these two types of contracts is the maximum withdrawal limit imposed on locked-in plans. Like the RRIF, the locked-in LIF requires a minimum withdrawal, but it also imposes a maximum withdrawal per year. Certain provincial regulations require that when the annuitant reaches the age of 80, the minimum for the year be paid out of the LIF and the remaining funds used to purchase a life annuity.

Lifetime Income

Lifetime income is income you receive throughout your life until you die.

Loan-to-Value Ratio

The loan-to-value ratio is the relationship of the loan to the value of the property, expressed as a percentage. For example the loan-to-value ratio of a $90,000 loan for a house costing $100,000 is 90%.

Locked-in Retirement Account (LIRA)

A locked-in retirement account (LIRA) is a special registered retirement savings plan (RRSP) into which you can transfer the amounts that are in your supplemental pension plan (SPP). The amounts held in this type of contract are "locked in" and cannot be withdrawn until you retire. They can be used only for retirement income.

At maturity, a LIRA or a locked-in RRSP may be:

Lump-Sum Payment

A lump-sum payment is a fixed benefit equal to the coverage amount determined upon issuance of a critical illness insurance contract. This benefit is tax-free and is paid when a critical illness is diagnosed.

Lump-Sum Withdrawal

A lump-sum withdrawal is a withdrawal that is made without any pre-established frequency.

Management Fees

Management fees correspond to the amounts paid to the manager of a stock brokerage firm to administer a portfolio.


A manager is a finance professional to whom amounts of money are entrusted for management.


A mortgage guarantees the loan granted for the purchase of a home. It personally obliges the borrower to repay the loan and binds the property as a guarantee.

Mortgage Insurance

Mortgage insurance enables an individual who does not have the minimum downpayment required to purchase a home—25% of the purchase price or the market value of the property—to obtain a mortgage loan of up to 95% of the purchase price of the property.

Mortgage Payment

A mortgage payment is a periodic payment that includes repayment of the principal and the payment of interest on the loan.

Mutual Fund

A mutual fund is composed of amounts pooled by investors to make a collective investment that is managed by a third person, who must, on demand, redeem the units at their net asset value. The value of the securities forming the fund influences the current price of the fund units.

Non-Registered Savings

Contrary to the registered retirement savings plan (RRSP), non-registered savings do not provide the tax deferral on the amounts invested. Interest income, dividend income and capital gains earned during a year must be included in the income tax return for the taxation year concerned. The investment options are very similar to those offered for RRSPs and have no foreign-content limit.

Offer to Purchase

An offer to purchase is a written agreement establishing the terms and conditions of purchase to which the purchaser has agreed. Once accepted by the seller, the offer becomes legally valid, and its conditions must be respected.

Open-Term Loan

An open-term loan is a mortgage loan with a fixed interest rate and a term that is limited to six months or one year. It is repayable at any time, in whole or in part, its conditions are renegotiable and its interest rate is higher than on a closed term loan. This type of loan is suitable for persons who are considering selling their property in the short term or who are expecting a significant decrease in interest rates.


An option is the right or obligation to purchase or sell a given number of a company's shares at a price and within a period that are determined in advance.

Pension Adjustment (PA)

A pension adjustment (PA) exists if contributions to a registered pension plan (RPP) have been made on behalf of a contributor. When a contributor is a member of a RPP, the PA corresponds to the contributions made to the pension plan by the employee and the employer. The PA reduces the amount that a contributor may pay into his registered retirement savings plan (RRSP). This amount is indicated on the T4 slip.

Periodic Withdrawal

A periodic withdrawal is a withdrawal that is made from an account on a regular basis, according to a set frequency (monthly, quarterly, semi-annually, annually).

Pre-Authorized Withdrawal

A pre-authorized withdrawal is the authorization an investor gives to a company to withdraw a predetermined amount from his bank account on a date and according to a frequency that are determined in advance.


A premium is an amount that the insured pays to the insurer in exchange for the insurer's promise to pay amounts to the insured in the event of specific losses.


The principal is the amount of money actually borrowed.


Probate is a legal process that validates the authenticity of a document.

Redemption Fees

Redemption fees are charged when units of a mutual fund or a segregated fund are sold to a third person.


The purpose of refinancing is to settle a mortgage loan when the borrower negotiates a new mortgage loan, or even a new loan from a new lender.

Registered Education Savings Plan (RESP)

A registered education savings plan (RESP) is a means of accumulating savings to provide for an individual's post-secondary education. The plan offers a tax deferral on investment income earned on the amounts contributed. The contributions to an RESP may qualify for the Canada Education Savings Grant (CESG). The CESG corresponds to 20% of eligible annual contributions paid into the plan. The maximum CESG amount is $500 per year, per beneficiary. Grants may be deferred in certain situations:

  • Maximum annual contributions providing entitlement to the CESG: $2,500
  • Maximum annual contributions per beneficiary: None
  • Maximum lifetime contributions per beneficiary: $50,000

Contributions paid into an RESP are not deductible from the subscriber's income.

  • Individual RESP

    In an individual RESP, there can be only one beneficiary. Any individual may become the initial subscriber, even if he is not related to the designated beneficiary.

  • Family RESP
    In a family plan, there can be one or more beneficiaries. However, each beneficiary must be related by blood or adoption to each subscriber under the plan.

Registered Pension Plan (RPP)

A registered pension plan is a trust registered with the Canada Revenue Agency and established by an employer to provide retirement income for its employees. The employer and the employee may both contribute to the plan, and these contributions are deductible from their taxable income. The most popular types of registered pension plans are the defined contribution plan and the defined benefit plan.

  • Defined Contribution Plan

    In the defined contribution plan, the amount of the contributions paid into the pension fund is fixed in advance.

    The amount of the retirement benefit depends on the total amounts accumulated in an account on behalf of the employee. The amount corresponds to the total of the following amounts:

    • The employee's contributions;
    • The employer's contributions;
    • The interest and the return credited on the contributions.
  • Defined Benefit Plan

    The defined benefit plan guarantees a benefit of a pre-determined amount generally corresponding to a percentage of the salary multiplied by the credited years of service under the plan.

    Actuaries establish the cost of the benefits and determine the contributions that must be made to the plan.

    Example of a frequently used calculation method:

    2% × number of years of service × five-year average salary

Registered Retirement Income Fund (RRIF)

The registered retirement income fund (RRIF) enables the annuitant to gradually withdraw his registered funds and to pay taxes only on the portion withdrawn each year. The minimum withdrawal is calculated according to a percentage of the value of the plan as of January 1 each year and according to the annuitant's age. The calculation may be made by using the age of the younger spouse in order to minimize the withdrawals. There is no fixed maximum amount for the withdrawals.

A registered retirement savings plan (RRSP) must be converted to a RRIF or an annuity must be purchased by December 31 of the year in which the contributor turns 71. This conversion has no tax repercussions. The balance or a portion of the RRIF may be converted to an annuity at any time.

Registered Retirement Savings Plan (RRSP)

The registered retirement savings plan (RRSP) is administered by the federal government. The amounts that accumulate in an RRSP are tax sheltered and are generally used to provide retirement income. The contributions paid into an RRSP are tax deductible, and the maximum contribution amount for the current year is established on the basis of the income earned in the previous year.

The maximum amount that may be contributed to an RRSP is 18% of the income earned in the previous year, less the previous year's pension adjustment (PA), subject to a maximum of $20,000.

Contributions may be paid into an RRSP until December 31 of the year in which the contributor turns 71. However, if the contributor is over 71 years of age and declares earned income, he may contribute to his spouse's RRSP if his spouse is 71 years of age or under.

Rider (Life and Health Insurance)

A rider is an addition to the policy that forms an integral part of the insurance contract and has the same legal value as any other component of the contract.


A servitude (easement) is a right of access to the land of another person for a very specific purpose such as parking or public services.


A share is a portion of ownership in a company that, in certain cases, confers voting rights. An individual may hold shares directly or through mutual funds and segregated funds.

Stock Market Index

A stock market index is an indicator that measures stock market trends. The most representative index of the Canadian market is the S&P/TSX.

Strip Bond

A strip bond is a bond that has had its coupons removed. The holder of this bond is entitled to its par value at maturity, but not to the annual interest payments.


The term is the period during which the borrower pays a certain interest rate on his mortgage loan. The borrower may not be able to repay the principal in full during that period, since the amortization period is generally longer than the term.

Total Debt Service (TDS) Ratio

The total debt service ratio is the percentage of the borrower's gross annual income required to make the monthly payments associated with housing, as well as to satisfy all other debts, such as payments on a car loan.

Treasury Bill

A treasury bill is a short-term debt security issued by the government at a value that is lower than its par value. The difference represents the interest.


A trust is a contractual institution through which a person (called a "trustee") is given the responsibility to administer the property entrusted to him up to a date on which he must restore such property to the beneficial owner.

Volatility (Risk Measurement)

Volatility is the fluctuation in the value of a security, a fund or an index. The more volatile the investment, the more quickly and the more significantly its value fluctuates.

Waiting Period

The waiting period is the continuous period during which a plan member must be absent from work as a result of a disability before being entitled to receive disability income benefits.

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