Here are the 6 Mortgage Terms:
A Homebuyer that purchase a home with a downpayment of less than 20% will have a high-ratio mortgage. All high-ratio mortgages are covered by mortgage loan insurance also known as mortgage insurance.
The three mortgage default insurers in Canada are CMHC, Genworth and Canada Guaranty.
Also known as a conventional mortgage, a low-ratio mortgage is one where the homebuyer has made a downpayment of 20% or more of the home’s purchase price.
Mortgage term refers to the time period covered by your mortgage agreement. The mortgage term can range from 1 to 5 years or more. After each term expires, the balance of the mortgage principal can be repaid in full, or a new mortgage can be renegotiated at current interest rates.
The amortization period refers to the number of years it will take to pay off your mortgage through regular payments. Mortgages are generally amortized over 25 years with an option up to 30 years for conventional mortgages.
Gross debt service (GDS) ratio
GDS refers to the percentage of your household’s gross monthly income that goes toward your housing payments; mortgage (principal + interest), property taxes, heating and, if applicable, 50% of condo fees. Lenders use your GDS and TDS ratios to assess your mortgage application and to determine how much to loan you and what interest rate to apply. Mortgages insured with the premium are required to have a GDS ratio of no greater than 39%.
Total debt service (TDS) ratio
TDS refers to the percentage of your household’s gross monthly income that goes toward housing costs plus other debts and financing such as car loans, loans, credit cards and lines of credit. Housing costs include mortgage payments, property taxes, heating, etc. Banks use this calculation, along with your gross debt service ratio, when assessing your mortgage application. Mortgages that are insured are required to have a TDS of no greater than 44%.
To learn more about mortgage and your options, contact Jacqueline Jeffries at 780.220.5968 or firstname.lastname@example.org. Jacqueline is a licensed mortgage broker with Quantus Mortgage Solutions.