Mortgage Affordability 101

Posted by on Wednesday, April 25th, 2018 at 10:00am.

If you're thinking about buying a home, one of the first questions you may ask yourself is: "How much can I afford?".

Read the following mortgage affordability tips before you set out to find the home of your dreams.

 

Consider Your Annual Household Income.

This is a key factor when determining how much of a mortgage you can afford. In addition to calculating your annual household income, consider any income changes that may impact your ability to make your payments. For example, if there are currently two major income sources within your household, would you still be able to afford your mortgage if one was removed? What if a child comes into the picture and your partner decides to become a stay-at-home parent? Consider all factors before deciding.

 

Consider Your Down Payment.

Currently, you are required to have at least a 5% down payment, when buying a house. The size of your down payment is one factor in determining the size of the mortgage you can afford.

 

Consider Your Debt.

When determining "How much I can afford?" one of the other important factors to take into account is the amount of debt you currently have. The lower your debt-to-income ratio, the more money you'll have to put towards your mortgage. In addition, your debt level will also help to determine how large of a mortgage you will qualify for.

 

Consider Your Credit History.

A credit rating is a measure of how dependable you are when it comes to repaying your debts. For example, if you pay your bills on time or if you repay a loan, you will be in good standing with the credit bureau. So, when it’s time to borrow, a lending institution will know that you are credit worthy. Contact one of Canada’s credit bureaus, Equifax Canada or TransUnion Canada, to check your credit report.

 

Consider Your Amortization Period.

If you are simply trying to keep your regular mortgage payments low in order to comfortably fit the payment into your budget, you will probably want to apply for a mortgage with a longer amortization period. However, if you don’t mind a somewhat larger regular mortgage payment in order to save money on interest in the long run, you may want to consider a shorter amortization period.

 

Consider Your Closing Costs.

Closing costs are an often overlooked expense that will definitely help determine how much money you can afford as a down payment. These costs really ought to be considered throughout the entire 

 

Consider Your Additional Expenses.

Lastly, there are a few additional expenses that may impact how much money you have to put towards your mortgage each month. Expenses like property taxes, homeowner’s insurance (such as damage, title etc,) and even things like home maintenance should be factored in before making your final decision. These costs are often overlooked but should be considered before settling on the home of your dreams.

 

Please keep in mind that the information contained within this article is general only. It is not intended as specific investment, financial, accounting, legal, or tax advice for any individual. If you have any questions at all, I would love to hear from you. As always, I am more than happy to offer my advice to you, and to let you know where you stand with your current mortgage possibilities. Feel free to either call me directly, or fill out the form below and I'll get back to you as soon as I can.

Wishing you the very best,

Tiyana Nasiri
CIBC Mobile Mortgage Specialist
Calgary, Alberta

 

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