Determine Your Mortgage Amount With Mortgage Affordability Calculator

The affordability of a mortgage is determined by a number of economic factors, only some of which are within your control, and by Canada's stringent mortgage lending regulations. You have a little more control over the amount of mortgage you might be approved for if you understand how mortgage affordability is calculated.

Some Affordability Factors for Mortgages

·         Your Income

The ability to pay a monthly mortgage on the home you wish to purchase is a requirement for lenders. The sum will change depending on the city. However, your ability to pay off a mortgage each month depends on more than simply your income. It impacts your ability to save a certain amount for a down payment as well.

·         The Down Payment

A minimum down payment of 5% of the purchase price is necessary in Canada when purchasing a home. But only for homes that are worth less than $500,000. You will be required to pay down 5% of the whole amount up to $500,000 and 10% of the total amount over $500,000 for homes valued between $500,000 and $999,999. A down payment of at least 20% is required for homes costing $1 million or more.

To be eligible for a mortgage on the home you desire, you might need to put down a lot more than the statutory 5%, depending on the cost of the property, your income, and the overall condition of your finances. On the other hand, you can qualify for the best mortgage rates and borrow less if you make a higher down payment than is necessary.

·         Mortgage Default Insurance

You will need to get mortgage default insurance, which safeguards your lender in the event that you are unable to make your mortgage payments, if you are unable to put down a 20% down payment on a property.

There's a hidden way that mortgage default insurance erodes affordability. Mortgage default insurance is added to your mortgage, so you also pay interest on your insurance premiums, in contrast to home or auto insurance, which are distinct expenditures from the item being protected.

Another reminder of how much your down payment funds can influence mortgage affordability is that the greater your down payment, the lower your mortgage default insurance payments will be.

·         Mortgage Stress Test

It is necessary to pass the mortgage stress test in order to apply for a new mortgage or to renew your existing loan with a different lender. In reality, you must qualify at 7% even if a lender offers you a 5% five-year fixed mortgage rate. If not, a lower mortgage amount will be provided to you, reducing the amount of home you can purchase.

If you're a first-time home buyer, the stress test is a significant obstacle, particularly in an environment with high mortgage interest rates. However, by locking you into a mortgage you can pay in the event that rates rise more quickly than usual, it's intended to safeguard you.

To make sure you calculate the right mortgage amount, use the BC mortgage affordability calculator available at the Satbir Bhullar website. For more details, contact us today.

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