This article is meant to inform you on the basic mortgage terms I use in my day-to-day work environment.
Conventional Mortgage (Uninsured)
The mortgage amount does not exceed 80% of the property’s value. Therefore, purchaser is supplying a minimum of 20% of the purchase price as a down payment.
Hi-Ratio (Insured)
The mortgage amount exceeds 80% of the property value. Purchasor is supplying a down payment of 5% to 20% of the purchase price. Lenders will require the mortgage to be insured to provide them with default insurance.
Gross Debt Service Ratio – GDS
The total of your Principle + Interest + Propety taxes (PIT), + 1/2 condo fees + heating costs. This value should not normally exceed 32% of your gross incomes.
Total Debt Service Ratio – TDS
The total of your above payments from GDS + payments to personal loans, credit cards, line of credits should not normally exceed 40% of your gross incomes.
Term
Fixed rate mortgages range from 6 month to 10 years – Interest rate will not change during term. With variable rate mortgages the interest rate will change based on changes to your Lenders Prime Rate, which are effected by the Bank of Canada’s Prime rate.
Amortization
The actual number of years that it takes to pay off your entire mortgage. Can be up to 25 years on hi-ratio (insured) mortgages and up to 35 years on conventional (uninsured) mortgages.
Mortgage Insurance (C.M.H.C./Genworth/CG)
Premiums are charged and added to your mortgage based on the loan to value ratio.
NOTE: Loan to value is based on the lower of the purchase price or the appraised value.
For example:
- $200,000.00 – Purchase price
- ($10,000 00) – less 5% Down Payment
- $190,000 00 – Mortgage Required (95% LTV)
- $7,600.00 – plus 4.00%
- = $197,600.00 – Total Mortgage Advance