Finance Glossary
Clear definitions with examples and related terms. Browse A–Z or filter by topic.
Showing — terms
A
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3‑month interest
A penalty equal to three months of interest, used when IRD doesn’t apply.
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Amortization
The process of paying off debt through scheduled payments of principal and interest over time.
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Amortization period
Total time to fully repay a mortgage, e.g., 25 years.
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Amortization schedule
A table showing each payment’s split between interest and principal and the remaining balance over time.
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APR
Annual Percentage Rate; the yearly cost of borrowing including interest and some fees, expressed as a percentage.
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Asset allocation
How you split investments across asset classes to balance risk and return.
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ATM network
The group of ATMs you can use, often fee‑free, through your bank’s partnerships.
B
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Balance transfer
Moving debt from one account to another, often to a lower promo rate.
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Balance transfer fee
A charge, typically a percentage, applied to the amount transferred.
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Base rate
The standard, non‑promotional interest rate paid on the account.
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Basic Personal Amount (BPA)
A non‑refundable credit that reduces tax for all residents up to a set amount.
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Bond
A fixed‑income security representing a loan to an issuer, paying interest.
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Break‑even (refinance)
The point where refinancing savings exceed costs.
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Broker
A platform or firm that executes trades and holds your investments.
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Budget
A plan for expected income and expenses over a period.
C
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Capital gain
The profit when you sell an investment for more than its cost.
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Capital loss
The loss when you sell an investment for less than its cost.
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Carry‑forward room
Unused contribution room that rolls forward to future years.
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Cash advance
Withdrawing cash from a credit card, usually at a higher interest rate with no grace period.
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Cash advance fee
A fee charged for taking a cash advance.
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CDIC insurance
Deposit protection that insures eligible deposits at member institutions up to $100,000 per category per depositor.
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CDIC insured
Indicates eligible deposits are protected by CDIC up to coverage limits.
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Chequing account
A day‑to‑day bank account for deposits, bill payments, and debit transactions; typically earns little or no interest.
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Closing costs
Fees and expenses due at closing, such as legal, land transfer tax, and adjustments.
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CMHC premium
The insurance premium paid for a CMHC‑insured mortgage, added to the loan or paid upfront.
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Compound interest
Interest earned on both the principal and previously earned interest.
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Contribution room
The amount you are allowed to contribute to a registered account.
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CPP
Canada Pension Plan contributions withheld from employment income.
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CPP2
Additional CPP contributions under the enhanced CPP (second tier).
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Credit score
A numerical measure of your creditworthiness based on your credit history.
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Credit utilization
The percentage of available credit you’re using; lower is generally better.
D
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Debt avalanche
A payoff strategy prioritizing the highest interest rates first to minimize cost.
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Debt snowball
A payoff strategy focusing on the smallest balances first to build momentum.
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Debt‑to‑income (DTI)
A ratio comparing total monthly debt payments to gross monthly income.
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Dividend
A cash or stock distribution paid to shareholders from profits.
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Down payment
The upfront portion of the home price paid from your funds.
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Drawdown
The strategy and process of withdrawing savings to fund retirement.
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DRIP
Dividend Reinvestment Plan; automatically uses dividends to buy more shares.
E
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e‑Transfer fee
A fee charged to send or receive an Interac e‑Transfer when not included in your plan.
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Effective (average) tax rate
Total income tax paid divided by total taxable income, expressed as a percentage.
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EI
Employment Insurance premiums that fund income support benefits.
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Emergency fund
Cash set aside to cover unexpected expenses or loss of income, typically 3–6 months of essential costs.
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Employment amount
A federal non‑refundable credit for employment income.
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ETF
An exchange‑traded fund that pools assets and trades like a stock.
F
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Federal tax
Income tax levied by the Government of Canada.
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FHSA
First Home Savings Account; tax‑deductible contributions and tax‑free qualifying withdrawals.
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FIRE
Financial Independence, Retire Early; a movement focused on high saving and investing.
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Fixed rate
An interest rate that stays the same for the full term.
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Foreign transaction (FX) fee
A surcharge, often 2.5–3%, added to purchases in foreign currencies.
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Fractional shares
Owning less than one full share, enabling small‑dollar investing.
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FX spread (bps)
The difference between buy and sell exchange rates, quoted in basis points.
G
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GIS
Guaranteed Income Supplement; a non‑taxable benefit for low‑income OAS recipients.
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Grace period
Time after the statement date to pay new purchases without interest if you paid in full.
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Gross Debt Service (GDS)
The share of income used for housing costs (mortgage, taxes, heat).
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Gross income
Total income before deductions, taxes, or other withholdings.
H
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HELOC
Home Equity Line of Credit; a revolving credit secured by home equity.
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High‑interest savings (HISA)
A savings account offering a higher interest rate than standard accounts, often with promo periods and conditions.
I
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Insured mortgage
A mortgage protected by default insurance, required for down payments under 20%.
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Interest Rate Differential (IRD)
A penalty based on the rate difference over the remaining term.
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Intro APR
A temporary, lower interest rate offered for a limited period.
L
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LIFT credit (ON)
Ontario Low‑income Individuals and Families Tax (LIFT) credit that reduces provincial tax.
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Loan‑to‑Value (LTV)
The loan amount divided by the property value, expressed as a percentage.
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Lump‑sum prepayment
An extra payment toward principal made outside regular installments.
M
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Marginal tax rate
The tax rate applied to your next dollar of taxable income.
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MER
Management Expense Ratio; the annual fund fee as a percentage of assets.
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Minimum balance
The lowest required balance to waive fees or earn advertised rates.
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Monthly fee
A fixed charge your bank collects each month for your account package.
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Mortgage
A loan secured by real property, repaid over an amortization period.
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Mortgage penalty
A charge for breaking or changing your mortgage before term ends.
N
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Net (take-home) pay
Your pay after taxes and deductions; the amount deposited to your account.
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Network
The payment network a card runs on, such as Visa, Mastercard, or Amex.
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Nominal rate
The stated interest rate not accounting for compounding within the year.
O
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OAS
Old Age Security; a taxable monthly benefit for eligible seniors.
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Ontario Health Premium (OHP)
An income‑based premium paid through Ontario’s tax system.
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Out‑of‑network fee
A fee charged when you use an ATM outside your bank’s network.
P
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Payment frequency
How often you make payments (monthly, bi‑weekly, accelerated, etc.).
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Payment increase
An allowed increase to your regular payment to pay off faster.
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Portability
Moving your mortgage to a new property to keep your rate and terms.
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Posted rate
A lender’s advertised rate, often higher than the discounted rate actually offered.
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Prepayment privilege
The amount you can pay early each year without penalty, typically a percentage.
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Prime rate
A benchmark rate banks use to price variable loans; it moves with central bank policy.
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Promotional rate
A temporary, higher interest rate offered for a limited time to attract deposits.
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Provincial tax
Income tax levied by your province or territory.
Q
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QPIP
Québec Parental Insurance Plan premiums for parental leave benefits.
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QPP
Québec Pension Plan, similar to CPP for Québec workers.
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QPP2
Additional QPP contributions under the enhanced plan.
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Québec abatement
A federal tax reduction for Québec residents recognizing the province’s tax system.
R
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Rate hold
A lender’s guarantee to honour a quoted rate for a set period.
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Re‑advanceable mortgage
A mortgage combined with a line of credit that increases as you pay down principal.
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Real‑time quotes
Market prices updated continuously during trading hours.
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Refinance
Replacing your mortgage with a new one, often to change rate, term, or borrow more.
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Renewal
Negotiating a new term when your current mortgage term ends.
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RESP
Registered Education Savings Plan with government grants for education savings.
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Retirement income
Income sources in retirement, such as OAS, CPP/QPP, pensions, and withdrawals.
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Robo‑advisor
An automated service that builds and rebalances portfolios based on your profile.
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RRIF
Registered Retirement Income Fund; converts RRSP savings into taxable retirement income.
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RRSP
Registered Retirement Savings Plan; contributions are deductible, growth is tax‑deferred.
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RRSP deduction
The tax deduction you claim for RRSP contributions.
S
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Safe withdrawal rate
A rule of thumb for sustainable withdrawals, often around 4% annually.
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Savings account
A bank account for storing cash and earning interest; withdrawals may be limited.
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Smith Manoeuvre
A strategy to make interest tax‑deductible by re‑borrowing against home equity to invest.
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Spread
The difference between two rates, such as a lender’s rate over prime.
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Statement balance
The total you owed on your last statement; paying it avoids interest on purchases.
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Stock
An ownership share in a company with potential dividends and price changes.
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Stress test (qualifying rate)
A higher test rate used to ensure you can afford payments if rates rise.
T
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Take‑home pay
Your net pay after deductions like tax, CPP/QPP, and EI.
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Tax bracket
A range of income taxed at a specified rate in a progressive tax system.
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Tax credit
An amount that directly reduces the tax you owe; may be refundable or non‑refundable.
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Tax deduction
An amount you subtract from income to reduce taxable income.
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Taxable income
The portion of income subject to income tax after allowable deductions.
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Term
The length of a loan or mortgage contract before renewal or maturity.
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TFSA
Tax‑Free Savings Account; investment growth and withdrawals are tax‑free.
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Total Debt Service (TDS)
The share of income used for housing plus other debt payments.
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Trading fee
A commission charged when you buy or sell securities.
V
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Variable rate
An interest rate that can change with the lender’s prime or benchmark.
W
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Welcome bonus
An introductory reward or rate offered to new customers meeting conditions.
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Withholding tax
Tax withheld at source on income or withdrawals, remitted to government.