Mortgage investing has a vocabulary that is used precisely by the people who work in it and loosely by the people selling it. The same word can mean two different things on two different documents, and a term that sounds reassuring on a brochure often has a narrow technical meaning that does not reassure at all.
The definitions below are grouped by where you will actually meet each term — on the title search, in the offering documents, on the monthly statement, in the enforcement file. Where a term depends on legislation or on provincial rules, the definition describes the mechanics and points you to the source rather than summarising law.
The instrument and the security
| Term | What it means |
|---|---|
| Mortgage | A loan secured against real property, and also the document that creates the security. In conversation it means both; on a title search it means the registered instrument. |
| Charge | The registered interest a lender holds against a parcel of land in a land titles province. Functionally interchangeable with "mortgage" in investor conversation. |
| Hypothec | The Quebec equivalent of a charge, registered in the land register under the Civil Code of Québec. The mechanics of enforcement differ from the common-law provinces. |
| Mortgagee | The lender — the party holding the security. As a mortgage investor, directly or through a vehicle, this is your side of the transaction. |
| Mortgagor | The borrower — the party granting the security over their property. |
| Principal | The amount advanced and outstanding, before interest. On an interest-only private mortgage it does not reduce over the term. |
| Registration | Recording the charge against title so that it binds the land and is visible to anyone searching. An unregistered loan against a property is an unsecured debt with hopeful wording. |
| Land titles system | A provincial system in which the register itself is the authoritative statement of ownership and encumbrances. Most of Canada outside parts of Ontario, Quebec and the Maritimes operates this way. |
| Priority | The order in which claims against a property are paid from sale proceeds. Among mortgages it generally follows registration order rather than funding order. |
| Postponement | A registered agreement by which a lender voluntarily gives up its place in the queue to another charge. Always read it: a postponement can turn a first into a second. |
Position and measurement
| Term | What it means |
|---|---|
| First mortgage | The charge with first priority against the property. Paid in full — principal, accrued interest and advanced costs — before any subsequent charge receives anything. |
| Second mortgage | A charge ranking behind a first. Paid only from what remains after the first is satisfied, which is why it occupies a thin slice of value at the top of the stack. |
| Loan-to-value (LTV) | The loan amount divided by the property's value. A measurement, not a safeguard: it is only as good as the valuation underneath it. |
| Combined loan-to-value (CLTV) | All charges against the property, added together, divided by value. The relevant number for anyone holding a second or subsequent charge. |
| Equity cushion | The portion of value sitting below the charges — the owner's stake, which absorbs a decline in value before a lender's principal is touched. |
| Weighted average LTV | The average LTV of a portfolio, weighted by loan size. More informative than a simple average, and still an average: it conceals the tail. |
| As-is value | What the property is worth in its current condition today. The conservative basis, and the one that matters in an enforcement. |
| As-complete value | What the property would be worth if a proposed project were finished on plan and on budget. A forecast, dependent on assumptions that may not hold. |
| Appraisal | A professional opinion of value under stated assumptions, usually an orderly sale. Enforcement sales are not orderly, so the appraisal is a starting point rather than a recoverable figure. |
Cash flow, yield and fees
| Term | What it means |
|---|---|
| Coupon | The contractual interest rate the borrower pays on the outstanding principal. |
| Interest-only | A payment structure in which the borrower pays interest and no principal. Standard on short private mortgages: your capital is at risk for the whole term rather than shrinking month by month. |
| Amortisation | Repayment of principal over time through the regular payment. Uncommon on short private mortgages. |
| Prepaid interest | Interest for part or all of the term collected at funding and held, rather than paid monthly by the borrower. |
| Interest reserve | An amount set aside at funding to service the loan during a period when the property produces no income, common on construction and land loans. Payments arriving from a reserve are not evidence that the borrower can pay. |
| Lender fee | A fee charged to the borrower at funding. Whether any of it reaches investors depends entirely on the structure, and is worth asking directly. |
| Renewal fee | A fee charged when a borrower extends rather than repays. On a steadily renewing book this is recurring revenue rather than an occasional item. |
| Discharge | Removal of the charge from title once the loan is repaid. For a direct investor, the point at which capital returns and stops earning. |
| Term | The length of the loan. Private mortgages are typically short, which is why renewal and reinvestment matter so much to the return. |
| Gross yield | The return before fees and before tax. The number most often quoted. |
| Net yield | The return after the costs of running the vehicle. Still before your own tax, and still before any trailing fee charged against your holding. |
| Distribution | The payment made to investors in a pooled vehicle. A distribution rate is not a guarantee and can be reduced or suspended. |
| Management fee | The manager's charge for running the vehicle. Ask for it as a percentage of assets, not of revenue. |
| Administration fee | The cost of administering the mortgages — collection, reporting, renewals, discharges — which may be charged separately from the management fee. |
| Servicing fee | The cost of collecting payments and maintaining the loan file, sometimes bundled into administration and sometimes not. |
| Trailing fee | An ongoing fee attached to your holding, often paid to the party who placed the investment. It reduces your return every year you hold. |
| Dealer commission | Compensation paid on the sale of the investment. Ask whether it is paid out of the vehicle's assets or charged separately. |
| Fee stack | The complete set of fees between the borrower's payment and your account. Almost never presented as one all-in number; adding it up yourself is the single most useful hour of diligence available. |
| DRIP | A distribution reinvestment plan, under which distributions buy additional shares or units instead of paying out. Over years the compounding effect is large, and it has nothing to do with the mortgages performing better. |
How capital is pooled
| Term | What it means |
|---|---|
| Mortgage Investment Corporation (MIC) | A Canadian corporate structure that holds a portfolio of mortgages and flows income to shareholders. Its qualification conditions and tax treatment are set out in section 130.1 of the Income Tax Act; the statutory requirements are specific and are not summarised here. |
| Mortgage investment entity (MIE) | The term regulators tend to use for the broader category of pooled mortgage vehicles, of which a MIC is one form. Industry and regulators use different words for overlapping things. |
| Mortgage fund | A pooled mortgage vehicle structured other than as a MIC — commonly a trust or limited partnership. The economics can resemble a MIC's while the structure and tax treatment differ. |
| Syndicated mortgage | A single mortgage funded by several investors who each hold an interest in the same charge. The rules governing how these may be distributed changed materially in 2021. |
| Fractional mortgage | An arrangement in which an investor holds a stated fraction of one mortgage. Diversification is whatever the investor builds loan by loan. |
| Pooled vehicle | Any structure in which investor capital is combined and deployed across multiple mortgages, so that gains and losses are shared. |
| Direct mortgage investment | Funding a mortgage so that the charge is registered in the investor's own name. Maximum control, no diversification, and the investor carries any enforcement personally. |
| Redemption | The process by which an investor exits a pooled vehicle. The terms live in the offering documents and commonly include notice periods, queues and suspension rights. |
| Offering memorandum | The disclosure document for an exempt-market offering, setting out the structure, the risks, the fees, the conflicts and the redemption terms. The redemption and fee sections are where the surprises are. |
| Subscription agreement | The contract by which an investor buys in. It records what was represented and what was agreed; read it against the offering memorandum rather than instead of it. |
Underwriting and the loan file
| Term | What it means |
|---|---|
| Underwriting | The assessment of whether a loan should be made and on what terms — the property, the borrower, the position, the exit. |
| Personal covenant | The borrower's personal promise to repay, separate from the security over the land. Worth something only if the person has reachable assets, and subject to provincial rules on pursuing a borrower after a sale. |
| Guarantor | A third party who agrees to be liable if the borrower does not pay. A second covenant, with the same question attached: does the guarantor actually have assets? |
| Exit strategy | How the loan is expected to be repaid — a sale, a refinance, completion of a project. A loan with no credible exit is a loan that will need renewing or enforcing. |
| Debt service | The cost of servicing all debt against the property, measured against the income the property produces. Relevant where the property is income-producing. |
| Marketability | How readily the property could actually be sold, and at what discount. A unique rural property and a standard suburban townhouse can carry the same LTV and present very different risks. |
| Title search | The search of the register that reveals ownership and every registered encumbrance. The only version that matters is the one dated at funding. |
| Title insurance | Insurance covering defects in title that a search may not reveal. Confirm the lender is a named insured, not just the owner. |
| Loss payee | The party named on the property insurance to receive proceeds. If the building burns and the lender is not a loss payee, the proceeds go to the borrower. |
| Condition precedent | Something that must be satisfied before funds are advanced — an insurance binder, a clear tax certificate, a signed postponement. Funding before conditions are met is how files go wrong quietly. |
Construction and bridge lending
| Term | What it means |
|---|---|
| Bridge loan | Short-term financing covering a gap — typically between buying one property and selling another, or between purchase and longer-term financing. Fast turnover, and reinvestment risk to match. |
| Construction mortgage | A loan advanced in stages as work progresses, rather than in one lump at funding. |
| Draw schedule | The agreed sequence of advances tied to construction milestones. Advancing ahead of the schedule puts investor capital into a building that is not yet worth it. |
| Cost to complete | The remaining money required to finish the project. The decisive number if a builder stops: a half-finished building is worth less than the land plus the money spent. |
| Holdback | An amount retained from each advance as required under provincial construction legislation, available to satisfy lien claims. The rules and percentages differ by province. |
| Construction lien | A claim registered by a party who performed work or supplied materials and was not paid. It can be registered after a lender's charge while relating back to earlier work. |
| Progress inspection | An independent check that the work claimed in a draw request has actually been done, at the claimed cost. The control that makes a draw schedule meaningful. |
| Entitlement | Planning and approval status — zoning, severance, site plan, permits. Land without entitlement may be worth a fraction of land with it, and timelines are not in the borrower's control. |
When a loan goes wrong
| Term | What it means |
|---|---|
| Default | A breach of the loan terms — most often a missed payment, but also unpaid taxes, lapsed insurance or an unregistered further encumbrance. |
| Arrears | Amounts past due. Arrears on property taxes matter as much as arrears on the loan, because tax claims can rank ahead of your charge. |
| Acceleration | Declaring the whole balance immediately due following a default, rather than only the missed payment. |
| Notice of sale | The formal notice given to the borrower and other interested parties before a property is sold under a lender's contractual remedy. Content and timing are set by provincial legislation. |
| Power of sale | A contractual remedy allowing a lender to sell the property, following statutory notice, without a court order. Available in some provinces and not others. |
| Judicial sale | Sale of the property under court supervision. Slower and more expensive than a contractual sale, and the default route in several provinces. |
| Receivership | Appointment of a receiver to take control of the property or the project, used more often on commercial and development files than on residential ones. |
| Deficiency | The shortfall when sale proceeds do not cover what is owed. Whether a lender may pursue a borrower personally for it depends on the province and the circumstances. |
| Enforcement costs | Legal fees, commission, accrued interest, taxes, insurance and maintenance accumulated while an enforcement runs. They are paid from the proceeds ahead of subsequent charges. |
| Workout | A negotiated resolution — a forbearance, a restructured term, an orderly listing — reached instead of enforcement. Frequently recovers more than a forced sale, and takes longer. |
| Impairment | The accounting recognition that a loan is unlikely to be repaid in full. Where impairments appear in a vehicle's statements tells you more than the headline distribution does. |
| Allowance for doubtful accounts (AFDA) | The provision a lender carries against expected non-collection. A vehicle holding an unusually small provision against a book of short, high-coupon mortgages is worth a question. |
| Expected credit loss (ECL) | The forward-looking provisioning model used in current accounting standards. It requires judgment, and the assumptions behind it are a fair thing to ask about. |
| Payout ratio | Distributions divided by income actually earned. A ratio consistently above 100% means distributions are being funded from somewhere other than earnings. |
| Renewal concentration | How much of the book matures in any one period. A large cluster of maturities in a weak market is a liquidity problem waiting for a date. |
| Liquidity mismatch | The structural gap between investors who may want to redeem and mortgages that cannot be sold quickly. Named as a risk in most offering documents and rarely explained in them. |
| Redemption gate | A provision limiting how much may be redeemed in a period, or suspending redemptions altogether. The clause that matters most and is read least. |
| Mortgage administrator | The party that collects payments, maintains the loan file and handles renewals and discharges. A licensed activity in several provinces, and the party whose competence determines what your statement actually reflects. |
This glossary defines terms in plain language for educational purposes. Several entries touch on legislation, provincial rules and tax treatment; those entries describe mechanics only and are not a statement of law. The statutory and regulatory requirements referred to are set out in the relevant legislation and should be confirmed with a qualified professional. No figure, rate or return appears in this glossary, and Lendmax does not publish a rate card.
Most of the unpleasant surprises in this asset class are not caused by a term being hidden. They are caused by a term being read as though it meant the comforting thing rather than the narrow thing.
This article is educational information, not investment, tax or legal advice, and it does not consider any reader's circumstances. Mortgage investments are not guaranteed, they carry no deposit insurance, and principal can be lost. Speak with a Dealing Representative about any specific opportunity.
Questions investors ask
What is the difference between a mortgage and a charge?
In everyday investor conversation they mean the same thing. On a title search in a land titles province the registered instrument is a charge; in Quebec the equivalent instrument is a hypothec, with different enforcement mechanics.
What is the difference between LTV and combined LTV?
LTV measures one loan against the property's value. Combined LTV adds every charge registered against the property. If you hold a second or subsequent charge, combined LTV is the number that describes your actual exposure.
What does an interest reserve tell me about a loan?
That payments arriving in the early months may be funded from money set aside at closing rather than from the borrower's own cash flow. It is a normal feature of construction and land lending, and it means early payment history proves less than it appears to.
Why does a redemption gate matter so much?
Because it determines whether you can actually get your money out when you want it. A gate limits redemptions in a period or suspends them entirely, and it is typically exercised precisely when investors most want to exit.
What does a payout ratio above 100% mean?
That distributions exceeded the income earned in the period, so the excess was funded from capital, reserves or new subscriptions. It can be a timing artefact over one quarter; sustained, it is a question that deserves a direct answer.