• Maximum Mortgage Amount: How Much Can I Afford?

    April 13, 2020
  • Maximum Mortgage Amount: How Much Can I Afford?

    How much of a mortgage can I afford? Great question! This is a common inquiry we receive almost every day. Our Staff has over 33 years of experience to help you better understand the answers to this budgeting response. Below you will understand the factors which help you determine your qualification limit. We hope this article will provide you direction and insight. As always any questions you may still have will be answered by our team in a non-pressured, no obligation way. It is our way to help you whether you use our services or not.

    In this complex Canadian mortgage market, receiving inquiries of how much they qualify on a mortgage limit is a fair and honest question. We want our clients to be the best informed so they are the most comfortable and educated. To determine this, we will ask such questions to better understand your mortgage qualification limit:

    • Is your income stable? Example police constable, teachers
    • What is your current income?
    • What is your income potential?
    • Are you a part-time worker? [if yes they would use a two-year average]
    • How is your credit score?
    • How much debt do you currently have? (Lots of debt suggest you would qualify for less of a mortgage)

    Let’s take an example of a teacher and a $90,000 per year and their partner earns $45,000 with the city of Hamilton. Total income is thus $135,000. Let’s assume the property tax component is $400 per month on the home they are seeking. A heating element is always inside our formula [heating must be included due to banking guidelines]. The last factor is the Canadian stress test which currently stands at 5.05%.

    As of today, the general rule of thumb is the client can afford 4.75 times their salary. In this example, the couple making 135,000 could afford a $641,250 mortgage. This is based on a couple not having any debt.

    What factors may reduce my mortgage affordability?

    • The amount of credit the applicants currently have
    • Higher property taxes on their property they are seeking
    • High condominium fees [if a condominium is purchased]
    • If self-employed the stability of the income
    • If self-employed income can only be used if a two year history exist
    • If self employed line 150 on your taxes will demonstrate what you were declaring for income
    • If part time, a two-year average will be needed in order for income to be used in your affordability.
    • Part-time income must have a growing average

    What if my income is lower or my credit is poor? Can I still get a mortgage?

    This is another excellent question we receive and one in which we receive quite often at Robert Floris’ Mortgage Architects Office.The general answer is yes. We have had numerous clients who we have assisted and were able to get them a mortgage. With these clients having weaker credit scores are income, they are paying higher rates and in some cases lender fees [in most cases lender fees are 1% of the amount borrowed]. Our philosophy is that the subprime products are excellent only if you Have an exit strategy. What determines an exit strategy? A strategy to get back with the prime lenders for example:

    • Your credit will improve in a year or two
    • Your income will improve in a year or two
    • You’re outside that will reduce in a year or two

    We want to fix these areas to have the goal of eventually getting our valued client with the best lenders. We are very proud of our work in this mortgage lending criteria. Why? Not only do we educate, but we get to celebrate with our clients when they achieve their financial goals. The downside of these types of lenders is that the mortgage rates will be higher and in some cases the amount required to qualify will be lower.

    In conclusion, when answering how much someone can afford on a Canadian mortgage, we can refine our answers when we truly get the accurate components of the particular situation. Other items we converse with is the lifestyle you were seeking. Can you still save and how you view your future not only in terms of income but with lifestyle goals as well? We hope you learned how your mortgage affordability works. The great part is their help by reaching out to our dedicated team. Our goal is to be the most helpful staff without any obligation or whether you use our services to finance.

    Robert Floris is a Mortgage Broker. His office is located at 651 Fennell Avenue East in Hamilton, Ontario. If you would like to speak with Robert, he can be reached at 905-574-9200 #215. Alternatively, you can contact Robert here.

    If you would like to apply for a mortgage online, please follow this link.

    If you would like to see our Google reviews or leave one yourself, you can do so here.

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