Mortgage Basics

Morris Home Team - Mortgage Basics

Mortgages - Shop for a Mortgage Before You Shop for a Home

Rate Guarantees

Depending on policy, financial institutions guarantee your interest rate for a selected term from 60 up to 120 days. This time frame must encompass the date set for completion.

How Much Can You Borrow

Lenders follow two affordability rules to determine how much you can pay:

  1. Your monthly housing costs should not exceed 32% of the gross monthly income from all persons on title. Housing costs include principal, interest, taxes and heating expenses. This figure is known as your Gross Debt Service (GDS) ratio. When purchasing a condominium, 50% of the condominium fees are added in the calculation.
  2. Lenders will also want to ensure that your total monthly debt load cannot exceed 40% of the gross monthly income from each person on title. This calculation includes housing costs (including your mortgage) and other debts such as car loans/leases and credit card payments. This figure is your Total Debt Service (TDS) ratio.

Refer to our Mortgage Calculator.

Financing Types

  1. Conventional Mortgage applies when your downpayment is 20% or more of the purchase price.
  2. Hi-Ratio Mortgage applies when your downpayment is less than 20% of the purchase price.

Mortgage Loan Insurance

  1. Required for High Ratio Mortgage - every loan in excess of 80% of the purchase price.
  2. Protects the Lender in the event of buyer default.
  3. Available through your lender from Canada Mortgage and Housing Corporation (CMHC), Genworth Financial or Canada Guarantee.
  4. Premiums are based on the amount of the loan.
  5. Premium costs may be added to your total mortgage payment or paid up front.

Making Use of your RRSP

If you’re eligible, the RRSP Home Buyers’ Plan allows you to withdraw $35,000 each from your RRSP to help you purchase or build a house. Contact the Morris Home Team for eligibility requirements.

Bridge/Interim Financing

Short-term financing to provide a buyer with the downpayment and bridge the gap between the closing date on the purchase of a new home and the closing date on the sale of the current home. The need for this type of financing often results from mismatched closing dates. Certain conditions apply.

Insuring Your Mortgage

Separate from the Mortgage Loan Insurance, it protects your mortgage in the event of a job or life loss and is offered by most financial institutions. Protect your investment.