MORTGAGE TERMS

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 gross¹ 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 gross¹ 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%² of gross¹ annual income.

1 Net income may apply in some circumstances.
2 The maximum for mortgage approval may vary. For CMHC’s First Home Loan Insurance Program, the GDSR requirement is 35%.