The length of time allotted to paying off a loan – in home-buying terms, the mortgage. Most maximum amortization periods in Canada are 25 years.
GROSS DEBT SERVICE
The gross debt service (GDS) is the percentage of your total monthly income that goes toward housing costs. Canada Mortgage and Housing Corporation (CMHC) recommends your GDS remains at or below 35%.
A mortgage pre-approval helps buyers understand how much they can borrow before going through the mortgage application process. This allows you to make an immediate offer when you find a home, since you know how much you'll be approved for with this lender, and locks in the current interest rate for a period of time insulating you against near-term rate increases.
NOTE: Pre-approvals have a short life span and may need to be updated.
The down payment is the amount of money paid-up front for a property, in order to secure a mortgage. In Canada, the minimum down payment is 5% of the property’s total purchase price. The selling price, minus the deposit and down payment is the amount of the mortgage loan.
The difference between a home’s market value and the amount owing on the mortgage. This is the portion of the home that has been paid for and is officially owned.
A fixed-rate mortgage guarantees your interest rate and for a pre-determined amount of time, typically five years. Your payments stay the same for the mortgage’s term so you will not pay more even if interest rates increase over time. When the term expires, you have the option to stay with the same lender or switch to a different one.
Your interest rate is locked in for a specified period called a term.
VARIABLE RATE MORTGAGE
A variable rate mortgage fluctuates with the prime rate. Your monthly payments remain the same, but the proportion of your payment going toward principal versus interest can change.
Note: The rate of interest you pay may change if rates go up or down.