calculator

Before using the calculator, it’s essential to understand key definitions such as “Current Rate“, “Qualification Rate“, “TDS” ratio, and “GDS” ratio. Allow me to elucidate:

1. Current Rate: This refers to the rate offered by the lender for various mortgage types, including purchase, refinance, and renewal. Monthly payments are calculated based on this rate.

2. Qualification Rate: When obtaining an insured mortgage or certain fixed terms under five years, lenders require qualification at a higher rate, known as the “benchmark qualifying rate.” For instance, if you apply for a 2.25% five-year variable mortgage, you may need to qualify at the lender’s posted 5-year rate, typically higher. Qualifying ensures borrowers can manage payments if rates rise.

3. TDS Ratio: Total Debt Service (TDS) encompasses all monthly debts like car payments, credit cards, and loans. The industry standard TDS ratio is 42%, calculated by dividing total monthly debts by gross monthly income.

4. GDS Ratio: This indicates the percentage of income needed for monthly housing costs, including principal, interest, taxes, and heat. Additionally, 50% of condo fees are included if applicable. Multiply this sum by 100 to find your GDS ratio.