Mortgage - Key Points to Know

How much is My Down Payment?

*Most loans today require a down payment of between 5.0% and 20% of price

*If you are able to come up with 20-25% down you will eliminate the need for ‘mortgage
  insurance’**

*Down payment cannot be borrowed, but can be gifted (require a letter from gift giver)

Qualifying for a Loan:

Key factors to secure a home loan are: Credit, Assets, Income and Debt Ratios.

Affordability is assessed by your Gross Debt Service ratio and Total Debt Service ratio.

Gross Debt Service (GDS) ratio: home-ownership costs relative to household income. (Costs - mortgage payments, property taxes, heating and, if applicable, 50% of condo fees)

Total Debt Service (TDS) ratio: home-ownership costs relative to household income plus debt payments
(credit cards, lines of credit, student loans, car loans, etc.).

Monthly Mortgage Payment Include (PITI)
The principal on the loan (P)
The interest on the loan (I)
Property taxes (T) (optional- can opt to pay separately but is included in qualification)
Default Mortgage Insurance (Less than 20% down)

**Mortgage default insurance

*Mandatory in Canada for down payments between 5% and 19.99%.

*Protects lenders in the event a borrower stops making payment and defaults on their mortgage loan.

*The premium is calculated as a percentage of your total mortgage amount and generally ranges from0.60% to 4.00%. The exact percentage depends on your down  payment size:
  Less than 10% down: 4.00% premium
  10% to 14.99% down: 3.10% premium
  15% to 19.99% down: 2.80% premium [1]

*Allows Canadians to purchase with minimum of 5% down

*Allows lenders to offer lower mortgage rates when mortgages are protected by mortgage default insurance

*The risk of default is passed along to the mortgage insurer

Amortization: Maximum amortization is 25 years (up to 30 years for eligible first-time buyers or new builds).

Minimum Down Payment: For homes under $500,000, the minimum is 5%. For homes between $500,000 and $1.5 million, it is 5% on the first $500,000 and 10% on the portion above $500,000.

https://www.canadaguaranty.ca/what-is-mortgage-insurance/

Melody Gilmore | The Realty Firm Inc. | 519-317-0940 | melody@melodygilmore.com