Understanding Mortgages – Simple & Clear
Buying a home is exciting — but understanding your mortgage is what puts you in control.
A mortgage is a loan from a bank or lender that helps you purchase a property. Instead of saving the full purchase price, you provide a down payment and borrow the rest. You then repay the lender over time with interest.
The home itself is used as security for the loan.
Your mortgage payment includes:
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Principal (the amount you borrowed)
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Interest (the cost of borrowing)
The 3 Key Areas That Determine Your Approval
When qualifying for a mortgage, lenders focus on three main factors:
1️⃣ Down Payment
2️⃣ Credit Score
3️⃣ Income
Let’s break them down.
Down Payment – How Much Do You Need?
In Canada, the minimum down payment depends on the purchase price:
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5% on the first $500,000
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10% on the portion between $500,000–$999,999
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20% minimum for homes $1 million or more
Example:
If you buy a $600,000 home:
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5% of first $500,000 = $25,000
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10% of remaining $100,000 = $10,000
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Total minimum down payment = $35,000
Types of Mortgages: High-Ratio vs. Conventional
High-Ratio Mortgage
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Down payment is less than 20%
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Mortgage insurance is required (CMHC or other insurer)
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Insurance protects the lender, not the buyer
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Allows buyers to enter the market sooner
Conventional Mortgage
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Down payment is 20% or more
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No mortgage insurance required
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Lower overall borrowing cost
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More equity from day one
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Simple Difference:
Less than 20% down = High-Ratio (insured)
20% or more down = Conventional (not insured)
Credit Score – Your Financial Reputation
Your credit score shows lenders how responsibly you manage debt.
Generally:
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680+ = Strong approval range
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600–679 = May still qualify
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Below 600 = Limited options (alternative lenders may apply)
A higher score can mean better rates and stronger approval.
3️⃣ Income – Can You Afford the Payments?
Lenders use two important ratios to determine affordability:
GDS (Gross Debt Service Ratio)
GDS measures:
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Mortgage payment
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Property taxes
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Heating costs
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50% of condo fees (if applicable)
Your GDS should generally be under 39% of your gross income.
TDS (Total Debt Service Ratio)
TDS includes everything in GDS PLUS:
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Car loans
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Credit cards
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Student loans
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Lines of credit
Your TDS should generally be under 44% of your gross income.
Example:
If your household earns $100,000 per year:
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Maximum GDS = $39,000 per year toward housing
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Maximum TDS = $44,000 per year toward total debts
This helps determine how much home you qualify for.
Other Important Mortgage Terms
Mortgage Term
The length of time your rate and conditions are locked in (often 5 years).
Amortization
The total time to pay off your mortgage (usually 25 or 30 years).
Longer amortization = lower monthly payments
Shorter amortization = less interest paid overall
Payment Frequency Options
You can choose:
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Monthly
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Bi-weekly
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Accelerated bi-weekly
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Weekly
Accelerated bi-weekly or weekly payments help you pay off your mortgage faster and reduce interest costs over time.
Building Equity
Equity is the difference between your home’s value and what you owe.
You build equity by:
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Making payments
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Paying down principal faster
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Increasing property value
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Market appreciation
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My Role in the Process
Understanding mortgages is powerful — but strategy is everything.
I work closely with trusted mortgage professionals to ensure:
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You’re properly pre-approved
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Your mortgage is structured correctly
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You qualify comfortably
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You position yourself to win in today’s market
Because buying a home isn’t just about getting approved.
It’s about building long-term wealth — and making it happen.
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