No confusing jargon. Every term that trips people up, explained simply - so you walk into the room as the smartest person in it.
A federal rule: you must prove you could still afford payments at your rate + 2% (or 5.25%, whichever is higher). It’s why your approved amount is lower than the raw math suggests.
Gross & Total Debt Service ratios. Lenders cap housing costs at ~39% of income (GDS) and all debts at ~44% (TDS). These ratios decide your maximum mortgage.
Mandatory mortgage default insurance when you put less than 20% down. It protects the lender (not you) and the premium is added to your loan.
The total time to pay off your mortgage - usually 25 or 30 years. Longer amortization = smaller payments but more interest overall.
Fixed locks your rate for the term; variable moves with the Bank of Canada. Fixed = certainty, variable = potential savings if rates fall.
The length of your current mortgage contract (commonly 5 years) - different from amortization. At term end you renew at new rates.
Your upfront cash. Minimum is 5% up to $500k, 10% on the portion above, and 20% over $1M. More down means a smaller loan and possibly no CMHC.
A provincial (and in Toronto, municipal) tax paid on closing. First-time buyers can claim rebates up to $4,000 (ON) plus $4,475 (Toronto).
One-time costs beyond your down payment - legal fees, title insurance, land transfer tax, inspection. Budget roughly 1.5–4% of the price.
First Home Savings Account. Contributions are tax-deductible and withdrawals for a first home are tax-free - up to $40,000 lifetime.
Lets first-time buyers withdraw up to $60,000 from an RRSP tax-free for a down payment, repaid over 15 years.
An offer with conditions (financing, inspection) that must be met before it’s firm. Protects you from buying blind.
Net operating income ÷ property price. A quick measure of a rental’s return before financing. Higher cap rate = more income per dollar invested.
Rent left over after mortgage and all expenses. Positive cash flow means the property pays you each month; negative means you feed it.
Debt Service Coverage Ratio - net income ÷ mortgage payments. Lenders typically want 1.20+ to approve a rental, meaning income covers debt 1.2×.
Annual rent ÷ purchase price. A fast way to compare neighbourhoods. 5%+ gross yield is strong in most Ontario markets.
Annual cash flow ÷ the actual cash you invested (down payment + reno). Shows the return on the money you personally put in.
Buy, Renovate, Rent, Refinance, Repeat - a strategy to recycle your down payment into the next property by pulling out forced equity.
Selling your pre-construction contract to another buyer before the building closes. Profit is usually taxable income and HST can apply.
Your main home’s capital gain is tax-free when you sell. Convert it to a rental and future gains (from that date) become taxable.
Your home’s value minus what you still owe. It’s the cash you’d walk away with (after selling costs) or borrow against.
When a lender sells a home after the owner defaults. These can list below market - a common source of motivated deals.
A short-term loan that covers the gap when your new home closes before your old one sells.
A lender’s conditional commitment to a mortgage amount and rate hold. It tells you your budget and strengthens your offers.
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