Halifax Nova Scotia Real Estate
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Halifax Real Estate Information
How Much House Can You Afford?
The amount of loan for which you qualify is based on two different calculations. Using what are known as qualification ratios, lenders evaluate your income and long-term debts to determine a "safe" amount for your mortgage payments. A fairly standard ratio is 28/33. Certain mortgage plans sometimes use more liberal ratios.
How it works: With a 28/33 ratio, you'd be allowed to spend up to 28% of your gross monthly income for mortgage payments.
The lender will then run a different calculation. This one is your loan payment and debt payments combined, which may not exceed 33% of your gross monthly income.
To calculate exactly how much you may borrow, you also need an estimate of current interest rates.
Suppose you had $1,000 a month for mortgage payment; at 7% that would let you borrow about $160,000 on a 30-year loan. At 6% the loan amount would be nearly $175,000. If your rate were 8%, the loan amount would be a bit less than $150,000.
As part of this calculation, you also need to estimate and include the property taxes, homeowner’s insurance, and Homeowner Association fees (if applicable) you might need to pay, which are considered part of your monthly expense.
As a general rule, no more than about one third of assured gross income should go toward the total sum of mortgage payments, property taxes and estimated heating expenses. Also, toward the total of your mortgage and all other payments, such as car loan payments. You can usually borrow up to 90 per cent of the first $180,000 of the property's value, and up to 80 per cent of the remainder. For a $210,000 home, for example, you could borrow $186,000. You would need at least $24,000 as a downpayment. Under Canada Mortgage and Housing Corporation's (CMHC) First Home Loan Insurance program, first-time buyers can borrow up to 95 per cent of a new home's property value, making a minimum downpayment of five per cent depending on the location and the selling price of the home.
Further Information:
Planning Your Home Purchase
Checking Your Credit Rating
Pre-qualification and Pre-approval on a Mortgage
Becoming an Educated Buyer: Research Neighbourhoods
Becoming an Educated Buyer: Your List of Home Requirements
Assess Your Finances: Checklist
Assess Your Finances: Compare buying with renting
Assess Your Finances: Calculating the cost of homeownership
Assess Your Finances: What you can deduct
Interest Rates and How They Change
Closing Costs
Other Closing Costs
Figuring Out Your Monthly Income
Figuring Out Your Monthly Debt
Amount of Your Down Payment
How Much House Can You Afford?