Mortgage Terminology – Part 2
These are some of the common terms you will see used when you are purchasing a home and getting a mortgage. Learning what they mean will help you avoid misunderstandings and make better decisions.
Condo Maintenance Fee (Strata Fees)– Condo fees are generally charged monthly and usually include charges for maintenance of common areas, exterior maintenance and the cost of any amenities offered by the community. In British Columbia condominiums are referred to as “strata.” When calculating the maximum mortgage you can qualify for, it’s a good idea to add 50% of your condominium fee to your Gross Debt Service.
Goods and Services Tax (GST) – This is a tax charged on many new home purchases. Generally there is a 5% GST on new homes. In some provinces, a Harmonized (HST) and/or a Provincial Sales Tax (PST) are also applied either in place of or in addition to the GST on new home purchases. In some cases, low- to moderate- income home owners may be eligible for a rebate to partially offset these fees. We’re experts in understanding how any or all of these taxes apply to your situation. Call us for information on these taxes and all your mortgage needs.
Gross Debt Service Ratio (GDSR) – The Gross Debt Service Ratio is a comparison of the total cost of your monthly mortgage payment (including taxes and heating) to your gross (pre-tax) monthly income. Lenders recommend that these monthly payments not exceed 32%-35% of your gross monthly income.
Total Debt Service Ratio (TDSR) – The Total Debt Service Ratio considers all monthly debts, including mortgage payments, car loans, credit card debt, etc., and compares the total to your gross monthly income. Total monthly debt payments should not exceed 40%-44% of your monthly income.
As always before purchasing a home, consult with a reputable and lisenced mortgage broker before making your buying decisions. Call us at Averbach Mortgages for unbiased advice.
