How Much Mortgage Can I Afford?
(IS NOT THE QUESTION YOU SHOULD BE ASKING YOURSELF)
Let’s be real — buying your first home is an exciting yet daunting experience, especially in the hot Canadian real estate market. It’s natural to feel overwhelmed by the range of emotions — from excitement to exhilaration, all the way to apprehension and disappointment — but don’t worry!
At AskAhmad.ca and the Total Mortgage Source, our core mission is to help new home buyers navigate the home-buying process. As established mortgage brokerages working with multiple banks and lending institutions, we know the ins-and-outs of this process inside out and have been helping Canadians achieve their dream of homeownership!
Before you begin searching for the perfect home, it’s important to figure out how much mortgage debt you can take on. In this post, we’ll help you do just that by walking you through the lender evaluation process, showing you how to determine how much mortgage you can afford, and highlighting some other important considerations to keep in mind before you secure your mortgage and ultimately move into your new home.
In Canada, there are several different ways to get a mortgage. The most common way to get a mortgage is through one of the big Canadian banks, but you can also get a mortgage from an independent lender. We work with several lenders in Canada to help you find the right product to meet your needs.
Lenders use a number of factors to decide how much money they will lend you for a mortgage.
Lenders use a variety of factors to determine your borrowing capacity, and rules have become even clearer in recent years. As the Canadian housing market has been rapidly growing over the past few years, the government has introduced a stress test for home buyers—a way for lenders to be confident that if interest rates increase or you lose your job, you can continue making your monthly payments.
The stress test determines how much you can borrow by using a qualifying rate—5.25% as of June 2021—and then determines whether or not you can make your monthly payments at 2% above that amount. So if interest rates increase or you lose your job and can’t pay your mortgage, you’ll be able to keep up with payments because they’re not too high relative to your income and debts.
Borrowers must undergo a stress test to determine how much mortgage they can afford. Lenders also take into account your overall income, your credit score, the size of your down payment and debt and liabilities when calculating how much mortgage you can afford. It is recommended to get pre-approved for a mortgage before looking for a home so that you can look for one that you can afford.
How Do I Figure Out How Much Mortgage I Can Afford?
Your mortgage broker or lender will help you determine how much mortgage you’ll be approved for, but there are other factors you should consider before making your home purchase.
Make sure to consider your other monthly expenses when comparing mortgage payments, along with the cost of land transfer taxes, home inspections and closing costs. You should also plan for upgrades and repairs to your home.
If your finances are in good shape, you may be able to get a mortgage with a higher amount than expected. However, it’s important to be realistic about what you can afford so that you live within your means and can maintain a healthy financial situation.
When you’re ready to buy a home, it’s important to be knowledgeable and prepared. It’s also important to keep your emotions in check when making an offer on a house. That way, if you find yourself in a bidding war, you’ll know what you can afford and won’t end up in a situation that will make it hard to pay your mortgage each month.
How can Ahmad, mortgage specialist at AskAhmad.ca and the Total Mortgage Source 360 Team help you?
Ahmad and his team are industry experts on mortgages. They offer excellent customer service and pride themselves on their ability to help you find the right mortgage product for your needs.
We can offer you some of the most competitive interest rates and mortgage products available because we have access to Canada’s leading lenders, including banks, mortgage firms, trust companies and private lenders.
Want to learn more about how Ahmad can help you secure your mortgage? Reach out today to get the conversation started! Ready to apply for your FREE mortgage pre-approval? Click HERE
Total Mortgage Source 360 FSRA#12151 – Each office is independently owned and operated
Ahmad El-Farram, Mortgage Agent #M21005249
The Mortgage Centre at Total Mortgage Source 360
Your Local Aurora/Newmarket Mortgage Agent
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