| Purchasing a home can often be an overwhelming | | | | line or credit cards The maximum TDSR is 44% of |
| experience for many people, especially a 1st time | | | | gross income. |
| home buyer. In this edition, I will cover some terms | | | | A Conventional mortgage is a loan where the LTV |
| commonly heard and used in the financial world. | | | | does not exceed 80% of the purchase prince and the |
| Although the subject can be dry, the information can | | | | client must give a minimum 20% as a down payment. |
| be invaluable. | | | | Alternately a high ratio mortgage is a loan that can go |
| To begin with, "LTV" (Loan to Value) is the amount of | | | | up to 95% LTV. This comes with a cost, and it is in the |
| the loan requested in comparison to the value of the | | | | form of a mortgage insurance premium. This insurance |
| property. "NOA" (Notice of Assessment) is the | | | | premium is levied by an insurance provider such as |
| document issued to you from the "CRA" (Canada | | | | CMHC, Genworth or AIG and it is added to your |
| Revenue Agency), once your yearly income tax return | | | | requested mortgage total. Applicants who have less |
| is completed and submitted. | | | | than a 20% down payment must pay for this premium. |
| "GDSR & TDSR". (Gross Debt Service Ratio | | | | This is implemented to safeguard the lender. The |
| & Total Debt Service Ratio), these two combined | | | | reason being, if you were to go into default in your |
| with your credit score are the determining factors in | | | | mortgage payments, the lender would be reimbursed |
| how much money you are able to borrow, as they are | | | | by the insurer. |
| a measure of your total gross household income. I will | | | | Finally, Credit Rating. This is a score or point system |
| talk about credit into more details in a later editorial but | | | | that is given to you based on your ability to manage |
| for the time being, the higher your credit, the better so | | | | your credit. The Equifax credit rating ranges from 300 |
| you need to pay your bills on time. | | | | to 900 and most people are around the 700 mark. |
| "GDSR" includes the monthly principal and interest | | | | Generally, for Self Employed people, the minimum |
| portion of the mortgage payment, the monthly | | | | score is 700. For salaried people and in order to obtain |
| property tax payment, a reasonable monthly heat | | | | the best products & rates you need 680+. Once |
| estimation and when applicable, half the monthly strata | | | | your score is below the 680 mark, some restrictions |
| condo fee. Depending on the lender and insurer, this | | | | start to come into play until we hit the 600 mark |
| ratio ranges from 28% to 35% and can often be | | | | where things begin to be more difficult and expensive |
| disregarded. The "TDSR" is a combination of the GDS | | | | and you require more down payments as lenders will |
| components plus any other monthly obligations you | | | | lend less money. |
| may have such as a car payment, student loan, credit | | | | |