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Glossary Of Mortgage Terms

Glossary Of Mortgage Terms & Financing Terms:

Amortization Period: The time it takes to pay off your mortgage in full. Typical Amortization period is 25 years.

Appraised Value: The estimate of the value of your home and is done by a certified appraiser.

T1 Generals: A document you or your accountant submits to the CRA when filing your taxes.

Notice of Assessments (NOA): A document from the Canada Revenue Agency (CRA) stating whether you owe money or will receive a refund. Received after filing your taxes.

Underwriter: A professional who is employed by the lender to review your mortgage application, once your mortgage broker has submitted it.

Closing Costs: Costs incurred when purchasing a home. These include, but are not limited to, the following: lawyer fees, property taxes, home inspection, appraisal, etc.

Traditional Sources of Down Payment: This includes personal savings, non-repayable gift from an immediate family member, RRSPs, investments, or proceeds from sale of property.

Gross Debt Service Ratio (GDS): A financial metric used to qualify borrowers for a mortgage. This ratio typically has to be below 39% for insured mortgages or lower depending on the nature of the property and application. For example, no more than 39% of your household income can go towards your mortgage payments, property taxes, heating and condo fees (if applicable).

Total Debt Service Ratio (TDS): A financial metric used to qualify borrowers for a mortgage. This ratio typically has to be below 44% for insured mortgages and possibly lower depending on credit score and down payment. For example, no more than 44% of your household income can go towards your mortgage payments, property taxes, heating, condo fees (if applicable) and any other debts you may have (credit cards, student loans, car loans, lines of credit, etc.)

Stress Test: A test that came into effect on January 1, 2018, to determine whether a homebuyer would be able to afford their mortgage payments in the event of an interest rate increase. To successfully pass the test, borrowers must qualify at a rate of 5.34% or their contract rate + 2%, whichever is higher.

Condition of Financing Date: The date by which need to have financing in place for the home you wish to purchase. This is the date that will be on your “Offer to Purchase” document.