Purchase Price:
The amount of money paid for a property.
Amount
of the Mortgage:
The amount of money borrowed from a lending institution
to help pay for a property.
Down
Payment:
The amount of money put forward by the purchaser. It represents
the difference between the purchase price and the amount
of the mortgage loan.
Term:
The length of time which a mortgage agreement covers. Payments
may not fully repay the outstanding principal by the end
of a term because the amortization period is longer.
Amortization
Period:
The number of years it will take to repay a mortgage loan
in full. This period can be greater than the term of the
loan. For example, mortgages often have a five year term
but a 25 year amortization period.
Gross
Debt Service Ratio (GDSR):
The percentage of gross†
annual income required to cover payments associated with
housing (mortgage principal and interest, taxes, secondary
financing, heating and 50% of condominium fees if applicable).
Most lenders have established that GDSR should not exceed
32% of gross annual income.
Total
Debt Service Ratio (TDSR):
The percentage of gross†
annual income required to cover payments associated with
housing and all other debts and obligations, such as payments
on a car loan. Most lenders have established that the TDSR
ratio should not exceed 40%‡
of gross† annual
income.
†
Net income may apply in some circumstances.
‡
The maximum for mortgage approval may vary.
For CMHC’s First Home Loan Insurance Program, the
GDSR requirement is 35%.
Source: Ottawa
Real Estate Board
