Ever wonder how much income you would need to make in a year to qualify for a certain amount of a mortgage/loan?Â
Check out this link https://www.teamrahul.ca/mortgage-calculator and you will be able to run various scenarios, to give you a better idea of where you stand financially in this rate/housing market.Â
This blog is designed to help you navigate the Required Income Tool, and understand what type of information is needed for each section of the tool. Feel free to open another tab, and follow along with this blog, as you fill out each section.
1. Mortgage Amount:Â See a house that you love and its posted at $600,000? Plug that in. This number will change depending on the property of interest. Â
2. Monthly Debt Payments: This is the section where you need to include any/all debts owing currently. This could include, but not limited to:Â
- vehicle paymentsÂ
- student loansÂ
- fixed rate loansÂ
- line of creditsÂ
- credit cards
- alimony
*** Do not include your mortgage payment in here, this is already calculated by the system & shown on the right of your screen.
3. Home Expenses:Â This section allots for expenses directly associated with the property of interest.Â
- Property tax is inevitable, no matter the type of property.Â
- Condo fees, if applicable can be added hereÂ
- Your broker will allot of heating fees as well - typically this is 0.6*the square footage of the house. It is important to note that this is simply the amount that needs to be accounted for in your mortgage application, it does not necessarily reflect the true cost of your heating expenses.Â
4. Affordability Level:Â As the tool says, this section allows you to understand how much disposable income is allocated to the mortgage payments, direct home expenses and debt payment. It looks at TDS/GDS which are key indicators Brokers and Banks look at while assessing your application and overall affordability.
5. Rate:Â This will depend on your intensions with the property of interest. Different rate and term options are available and can be tailored to your individual needs.Â
- Fixed
- VariableÂ
- TermÂ
6. Amortization: 25 year amortization is arguably the most common option, however, if you are a first time home buyer, you may be able to stretch your mortgage out to 30 years, if you qualify under the new government policy, OR if you have a 20% down payment, you can also stretch the amortization longer than 25 years.Â
7. Add Rental Income:Â If you already own a property and plan on renting out a unit, you can fill that out here! The monthly/yearly rental income will help offset the cost of the existing mortgage on the property, or if there is not a mortgage on the property, it can help offset outside debts as well - contributing to your overall annual gross income.Â
Important Things to Note:
Income calculated in GROSS.Â
Although you rate will differ depending on rate/term/amortization, the stress test is what is used to calculate your mortgage affordability and ultimately how much income you require for the mortgage amount your interested in.
There may be different policies with different lenders, it's always best to consult your broker if you are unsure!