• Robert Floris CFP, AMP
    Lead Mortgage Agent
    M08004919
    905-574-9200 Ext. 215

  • What Is The Maximum Mortgage I Can Afford?

  • What Is The Maximum Mortgage I Can AffordWhat Is The Maximum Mortgage I Can Afford?

    This is another question we get a lot in our office, but it’s a loaded one. The reason is that there are many factors that influence the maximum amount: credit, down payment, income, property type, property taxes, condo fees, debts, employment history. The question: “what is the maximum mortgage I can afford” is almost as difficult to answer as “what is the lowest rate I can get”, without getting a little (or a lot) more information of course!

    Credit

    Generally speaking, the lower your credit score or the worse the history, the less you will be approved for. (This also influences the rate, by the way.) So when asking the question what is the maximum mortgage I can afford, you should first ask yourself the question: how is my credit?

    Down Payment

    If you are putting less than 20% down on the mortgage, the stress tests kick in and reduce your affordability. If you are trying to maximize your mortgage, I would strongly suggest that you reach that 20% mark or the amount of mortgage you can afford will plummet immediately. Why? Because you need to prove to the government that you can afford to pay a much higher rate than the ACTUAL rate you will enjoy (the “contract rate”).

    Income

    This one may seem like the most obvious one. The more you make, the more you can afford. Everyone is qualified mainly on their income (offset by their debts) and their credit.

    Property Type

    For example, if you are buying an investment property or renting out a unit in your home, you can use the rental income to help you qualify so that can boost the mortgage amount. However, when it is a non-owner-occupied rental, you will need to come up with 20-25% down.

    Property Taxes & Condo Fees

    I lumped these 2 together because they are both costs of living in the home that are factored into the qualification process. The higher the property taxes, the higher the costs of living and the less you will qualify for. Same with condo fees but they are not as bad – usually lenders will only factor in 50% of the condo fees when qualifying you for a mortgage.

    Debts

    This one is a biggie. You can make piles of income and have amazing credit and a huge down payment, but if you are carrying debt, it will drastically decrease the mortgage amount that you can afford. This is especially true of unsecured debt. Unsecured debt are things like credit cards, personal loans or unsecured lines of credit. The bank hits you hard with this kind of debt. They don’t look at the minimum monthly interest payment. They take 3% of the balance of the debt and consider THAT as the monthly payment. Instalment loans such as student loans and car loans are not as bad because in those cases, they will factor in the actual monthly payment that was agreed upon between you and the lender.

    So please, when trying to maximize your mortgage amount, keep your debts low and your income and credit high! And please be prepared for those questions! If you would like to try different scenarios yourself, you can do so on my mobile app: https://maapp.ca/app/robert-floris

    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.

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