Financial institutions use a formula to determine your maximum mortgage amount based on your ability to repay the loan. I suggest that you contact one of these representatives for a no-cost, assessment before you begin your search for a home. At that time they'll guarantee you a rate for 60 days, even if it goes up. (If it drops, you'll get the lower rate) Check them out. Bank of Montreal
Alberta Treasury Branch
Canada Trust
Royal Bank As a rule, use 32% of your gross monthly income to calculate what the bank will allow to support your mortgage. That is, provided you have no other debt payments. To determine your total allowable debt servicing amount take 40% of your gross monthly income and deduct your other debt payments to arrive at the balance allowable to service your mortgage. Use this table or this mortgage calculator to determine the mortgage amount from the max monthly payment. and you get an idea of what you qualify for.
Of course, you'll require a down payment. The minimum downpayment under CMHC guidelines is 10% of the purchase price or 5% for first-time buyers. CMHC insures a mortgage which is greater than 75% of the value of the home. This insurance protects the lender in the event of default. CMHC charges an insurance fee that varies from 1% to 3% of the mortgage amount and is payable upon registering the mortgage. Since this can amount to a considerable outlay for a new home buyer, CMHC allows you to add this fee to your mortgage amount, if you choose.
To avoid insurance fees, you'll need to provide a down payment of more than 25% or assume an existing mortgage on a property. |
