The Lender’s Equations: How Much Mortgage will you Qualify for?

GDS and TDS debt service ratios.

Knowing how much you can reasonably, comfortably and responsibly contribute to home ownership is paramount in your making a wise and sound investment on your Canadian property. The big four factors that generally contribute to this mortgage amount are:

  1. Monthly income generated
  2. The amount you can contribute to your down payment
  3. The mortgage interest rates and term you qualify for
  4. Other financial commitments or debts you are obliged to pay

Lenders basically use two rules to determine the mortgage you are eligible to be funded to receive, in addition to examining your credit history and FICO score:

  1. Gross Debt Service Ratio (GDS)
  2. Total Debt Service Ratio (TDS)

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Refinance and Consolidate Your Mortgage

Refinance / Consolidate
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The Dirty “R” Word

If the word “Recession” fills you with unease, you’re not alone. The word doesn’t sit well with many people. Unless you are in the rare circumstance of having just come into a gratuitous fortune, or you are employed in a sector of the economy that has somehow been unaffected by it, a recession will to affect you. Even then, depending on the severity of the recession, unaffected sectors can be effected by proxy.

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Mortgage calculators can help homeowners pay off mortgages before the average age

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A poll found that the average age a Canadian person will be before paying off their full mortgage is 57, according to St. Lawrence EMC. This is up a few years compared to age 55 a similar poll conducted in 2012 found. Canadians are making positive changes to speed up mortgage payments, but it may actually be their non-mortgage debt that determines how quickly they can become mortgage free.

St. Lawrence EMC said that the poll found that residents in British Columbia had the longest repayment expectation at 59 years, and 50 percent of Canadians that own homes said since they first took out their mortgage, their non-mortgage debt has increased. Canadian homeowners also said that lack of funds keeps them from making lump sum payments. Continue reading

Canadians more optimistic regarding household debt

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A report from PricewaterhouseCoopers spotlights new trends in Canadian views on debt, as well as the impact of mortgage restrictions on the real estate market.

Data from The Tide Turns: Canadians, Debt and Retail Lending study shows that more Canadians are comfortable with the amount of debt they're carrying, and they're also more focused on reducing it. Of 1,228 Canadians surveyed, 57 percent felt their debt level was about right. This marks a decrease from 59 percent during the previous year.

Meanwhile, 66 percent of respondents indicated that they plan on reducing their debt this year. This represents a 3 percent increase from last year.

Additionally, Canadians remain optimistic regarding the economy and their own financial situations. More than half (55 percent) of respondents said they think the nation's economy will remain stable or grow. Nearly half (46 percent) believe their income will rise over the next five years. Continue reading

Over Half of Canadian Retirees Are in Debt, but That Doesn’t Have to Include You

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A recent poll done by CIBC and Harris/Decima has found that 59% of Canadian retirees are still in debt. Worse yet, the poll finds that 55% of people that carry debt into retirement have seen their debt levels either increase or remain unchanged over the past year.

As you can imagine, it only becomes more difficult to repay your debt once you have lost the bulk of your income due to retirement. So it stands to reason that every effort should be made to repay your debt before retirement, right? Easier said than done, of course, but it is possible. The earlier you start paying down your debt the better, but there are options, even if you are on the cusp of retirement. Continue reading

Canadians saving more, paying off mortgages faster

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Who says Canadians can't save?

According to an article from The Globe and Mail, the Canadian personal savings rate is twice that of our neighbors to the south, and nearly six times higher than it was 10 years ago.

"All the talk about the Canadian household being tapped out or out of shape is a bit overdone," Doug Porter, chief economist at BMO Nesbitt Burns, told the news source.

Data from Statistics Canada shows that the savings rate during the first quarter of 2013 was 5.5 percent, up from 5.4 percent during the final three months of 2012. That may not seem like a large improvement, but it's important to keep in mind that the original forecast for the savings rate during the fourth quarter of last year was 3.8 percent, according to Statscan. Continue reading

Possibility of rate increase looms

Among all the ups and downs in Canada's housing market over the last few months, one thing has remained certain: Mortgage rates are low. This has spurred homebuyers and homeowners alike to obtain new mortgages or refinance their current ones, offsetting the cooldown in sales due to Finance Minister Jim Flaherty's restrictions on government-backed mortgages.

However, some industry observers are exploring the possibility that rates may be rising sooner rather than later.

"If you're house hunting or thinking of refinancing, and you don't have a mortgage rate hold, consider getting one," writes Rob McLister for Canadian Mortgage Trends. "Canada's 5-year bond yield just pierced a three-month high. That means – barring a big reversal – there's a good likelihood that fixed rates will ratchet higher. (Bond yields steer fixed mortgage pricing, most of the time.)"

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Many urban Canadians opt for condos

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Home sales may be slowing down, but a report from the Bank of Montreal shows that plenty of Canadians are looking to enter the condominium market.

The BMO Housing Confidence Report is based on survey responses from homeowners in four of Canada's major cities: Toronto, Vancouver, Calgary and Montreal. The goal of the survey was to examine buyer intentions regarding the next five years.

In Toronto, nearly one-third (31 percent) of respondents said they plan to purchase a condo in the next five years. This represents an increase of 11 points from the fall. Meanwhile, in Vancouver, buyer intention regarding condos has fallen five points during the same time period, with only 28 percent of respondents saying they planned to buy a condo in the next five years. Continue reading

Mortgage rates present opportunity

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Historically low mortgage rates are continuing to make homeownership affordable for Canadians, according to the Royal Bank of Canada.

Data from the RBC's Housing Trends and Affordability report shows that low mortgage rates are keeping Canadian homeowners from entering dangerously unaffordable territory. Additionally, the report stated that rate increases are likely not on the horizon.

"Exceptionally low mortgage rates have been the main factor preventing affordability from reaching dangerous levels in recent years; yet, we believe that the likelihood of a surge in rates is slim at this stage," the report stated.

Continued low mortgage rates are good news for Canadians, especially as a report from the Certified General Accountants Association of Canada shows that while many Canadians are satisfied with their finances, they're not necessarily keeping on top of them. Continue reading

OSFI considers shortening amortization rates

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Reports out of Ottawa could spell big changes for mortgage borrowers concerning amortization rates, according to The Globe and Mail.

Apparently The Office of the Superintendent of Financial Institutions Canada (OSFI) is weighing the pros and cons of uninsured mortgages of more than 25 years. Brock Kruger, OSFI spokesman, has attributed this attention to the high levels of debt carried by many Canadian households, among other matters.

"We are working to determine the desirability of some changes given current conditions in housing markets and recent trends in household indebtedness," Kruger told The Globe and Mail.

Considering the fact that Finance Minister Jim Flaherty tightened mortgage rules four times in as many years, the most recent being in July 2012, it's not far-fetched to think this attention from OSFI could result in further restrictions on home loans Continue reading