INTRODUCTION TO MORTGAGES

Mortgage information and terminology

Conventional Mortgage (Uninsured)
The mortgage amount does not exceed 80% of the property’s value. The purchaser is supplying a minimum of 20% of the property’s value for a down payment.

Hi-Ratio (Insured)
The mortgage amount exceeds 80% to 95% of the property’s value. In these cases all lenders will require the mortgage to be insured (for default purposes) C.M.H.C./Genworth

CMHC Info/Programme

C.M.H.C. – Canada Mortgage & Housing Corporation
A government run program insuring mortgages under the National Housing Act. (Commonly known as N.H.A. Mortgages).

Mortgage Insurance
If your down payment is less than 20% of the purchase price, an nsurance premium on the mortgage amount is required (this premium may be added to the mortgage amount).

C.M.H.C./Genworth also charges a premium based on the following loan to values:
Up to 85% – 2.80%,  Up to 90% – 3.10% Up to 95% – 4.00%

For Example: $100,000 Purchase Price
$5,000 Down Payment
$95,000 Mortgage Required (95% of L/V)
$95,000 X 4.00% = $3,800 Mortgage Insurance Fee

$95,000 + $3,800 = $98,800 -Total Mortgage Amount

Sales Tax
Effective July 1/93 an 8% sales tax is payable to the government through your lender at time of closing. ( I.E. $3,800 X 8% = $304.00 )

G.D.S.R. (Gross Debt Service Ratio)
The total of your principle, interest, taxes, heat, 1/2 condo fees, and payments cannot exceed 32% of your gross family income.

T.D.S.R. (Total Debt Service Ratio)
The total of your G.D.S. payments plus any personal loans and outstanding credits card payments cannot exceed 44% of your gross family income.

Term
Length of time that your mortgage agreement covers, from 6 months to 10 years & for which your interest rate is guaranteed.

Amortization
Actual number of years it takes to pay off the entire mortgage.(Now up to 30 Years)

Other Costs to Purchase A Home

Down Payment
Minimum of 5% of the purchase price.

Appraisal Fee
Required by the lending institution to ensure the property is sufficient security for the mortgage advance. Typical charge is $275(plus H.S.T.). Completed by independent, accredited appraiser.

Inspection Fee
Completed by Building Inspector. Suggested if the home you are purchasing is older, or if newly constructed by a builder who is not under a warranty program. Typical charge @ $275-$300.

Legal Fees
Includes Lawyers’ fee for service (ranges from approximately $399-$600) plus any disbursements & G.S.T. required to register your mortgage including Sheriffs Certificate, search on title etc. Typical cost around $450-$550.

Land Transfer Tax
A tax equal to 1% of the purchase price on every purchase and collected upon closing by the Lawyer.

Tax Adjustments
You will be responsible for paying the property taxes for the portion of the year which you own the property.

Home Insurance
You are responsible for arranging insurance on your new home in the event of fire or other damage.

Life Insurance 
Available at your option through the mortgage lender to cover the amount of the mortgage in the event of the death of you or your spouse.

Moving Costs
Dependent on how far, how much and who is helping you move.