Figuring out how much mortgage you can afford can feel confusing, but it doesn’t have to be. Lenders use simple rules to decide how much you can safely borrow. Here’s an easy breakdown.
What Lenders Look At
Lenders check how much of your income goes toward:
- Housing costs like your mortgage, heat, property taxes and condo fees
- Other debts like car loans, credit cards and lines of credit
These numbers are called GDS and TDS.
- GDS should be 39 percent or lower
- TDS should be 44 percent or lower
The Stress Test
You must also qualify at a higher “stress test” rate. Even if your rate is around 4 percent, lenders test you using a rate in the 6 percent range. This can lower the amount you qualify for.
Your Down Payment Matters
Your down payment helps decide:
- If your mortgage is insured
- What price range you can shop in
- What rates you may get
Less than 20 percent down means an insured mortgage. Twenty percent or more gives you uninsured options.
What Income Counts?
Lenders like steady income such as:
- Salary
- Hourly with guaranteed hours
They may also use overtime, bonuses or commission if you’ve earned them consistently for two years. Self employed income needs extra documents like tax returns.
How to Get Your Affordable Amount
To estimate what you can afford, look at:
- Your income
- Your monthly debts
- Your down payment
Or skip the guessing and reach out to me. I run these numbers every day and can give you a clear, easy answer. Just because a lender says you can borrow a certain amount doesn’t mean you should. You still need to feel comfortable with the payment and your lifestyle. The right mortgage should support the life you want, today and in the future.
Have Questions or Want a Free Affordability Check? I’m here to help you feel confident and stress free.
To learn more about renewing your mortgage, please reach out to Patricia 403.875.2969
Visit our website at www.unbeatablemortgages.ca
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Patricia McKean, a Lead Planner with the Unbeatable Mortgage Team at Mortgage Architects in Olds, has over 20 years of experience in lending and has been successful in helping a number of our rural clients obtain mortgages in Alberta.
Mortgage Architects
Olds, Alberta
d. 403.875.2969 p. 403.637.0140 f. 866.465.2870
patricia.mckean@mtgarc.ca
PatriciaMcKean.ca