Anyone contemplating the purchase of a home should be pre-approved for a mortgage. It only takes a few minutes with our mortgage application and you’ll be approved within hours.
There are two important things about having a pre-approval:
- It locks you into at least a 3 to 4 month rate guarantee, which protects you in case there is an INCREASE in mortgage rates. Once you have your rate you can relax because if rates go up you’re protected, if they go lower we’ll always get you the best available rate up to the day that you take the mortgage money.
- The other feature is that it allows you to move quicker on purchasing your home. This is especially true when the real estate market is hot. When vendors have more than one or two interested parties that may want to purchase their home, you don’t have a chance if you’re not prepared with your mortgage financing.
First time buyers should always be pre-approved. Not only for the above reasons but we’ll run through all the fine print of mortgages to ease your mind about the different products, rates and terms, so you can rest assure that you are making the right choice. Your pre-approval will be treated the same way as if you had purchased a home. We’ll always get you the best mortgage that is in the market. Whether or not you ever purchase a home.
If you change your mind or circumstances are such that you do not purchase, the mortgage commitment becomes void with no financial cost to you (contact us). We’ll get your pre-approval fast, within hours of your application.
How Much Can You Afford?
The shortest and best answer to that question is: it depends on a number of factors. The most important are your gross household income, your down payment and the mortgage interest rate. Lenders also consider your assets and liabilities. Your own lifestyle and debt comfort zone also come into play. If you understand these variables, you can examine all your options. You can make the best choice for you and even save money.
Meanwhile, use the table below to get an idea of the maximum home price you can afford and the maximum you can afford to pay in monthly housing costs.
Most lenders follow these two simple rules to determine how much you can afford in monthly housing costs:
The first affordability rule is that your monthly housing costs shouldn’t be more than 32% of your gross monthly income. Housing costs include monthly mortgage principal and interest, taxes and heating expenses known as P.I.T.H. for short. If applicable, this sum also includes half of monthly condominium fees and all of the annual site lease in the case of leasehold tenure. Lenders add up these housing costs to determine what percentage they are of your gross monthly income. This figure is your Gross Debt Service (GDS) ratio.
The second affordability rule is that your entire monthly debt load shouldn’t be more than 40% of your gross monthly income. This includes housing costs and other debts such as car loans and credit card payments. Lenders add up these debts to determine what percentage they are of your gross monthly income. This figure is your Total Debt Service (TDS) ratio.
Based on these ratios, lenders will advise you of the maximum home price they think you can afford.
Keep in mind that most homebuyers today keep their debt ratios comfortably below the maximums prescribed above. The lower your debt load, the more affordable your home and lifestyle will be.
Income, home price and down payment guide
| Household Income | 5% Down Payment | Maximum Home Price | 10% Down Payment | Maximum Home Price | 25% Down Payment | Maximum Home Price |
|---|---|---|---|---|---|---|
| $25,000 | $3,000 | $60,000 | $6,300 | $63,000 | $18,900 | $73,600 |
| $30,000 | $3,900 | $78,000 | $8,200 | $82,000 | $24,70 | $98,800 |
| $35,000 | $4,800 | $96,000 | $10,100 | $101,000 | $30,300 | $121,200 |
| $40,000 | $5,700 | $114,000 | $12,000 | $120,000 | $36,000 | $144,000 |
| $45,000 | $6,600 | $132,000 | $13,900 | $139,000 | $41,700 | $166,800 |
| $50,000 | $7,500 | $150,000 | $15,800 | $158,000 | $47,400 | $189,600 |
| $60,000 | $9,300 | $186,000 | $19,600 | $196,000 | $58,800 | $235,200 |
| $70,000 | $11,050 | $221,000 | $23,400 | $234,000 | $70,100 | $280,400 |
| $80,000 | $12,500 | $250,000 | $27,200 | $272,000 | $81,500 | $326,000 |
| $90,000 | $12,500 | $250,000 | $31,000 | $310,000 | $92,800 | $371,200 |
| $100,000 | $12,500 | $250,000 | $34,800 | $348,000 | $104,300 | $417,200 |
Figures are rounded to the nearest $100.
This table gives you an idea of the maximum home price you can afford. These estimates take into account household income and the percentage down payment you have. They assume a mortgage interest rate of 8%, average tax and heating costs in Canada, and the mortgage an average Canadian would qualify for based on a 32% debt service ratio. Please note that for loans greater than 90% of the value of the home, a maximum house price may apply, based upon the price levels in your community. Contact us for the maximum price in your area.