Calculating a mortgage: how to buy a home you can afford? - Mortgage Guys
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Calculating a mortgage: how to buy a home you can afford?

If you hold a good job and have decent earnings, you shouldn’t have any problem obtaining a mortgage for a new home in Canada. Of course, you won’t be entitled to an unlimited amount, so calculating exactly how pricy home you could buy is the most sensitive part of the plan. The upper limit of your mortgage is influenced by several factors, mostly by your ability to meet your monthly obligations. In case you are not familiar with mortgage regulations in detail, here is a quick overview of relevant factors you should know when you want to use the mortgage calculator Guelph:

The law won’t let you borrow too much

The Canadian government doesn’t want its citizens to be overburdened with debt, which is why it limits the maximum size of a mortgage based on regular monthly income. Canada’s Mortgage and Housing Corporation will not recommend exceeding 32% of monthly house income to service a mortgage, although in certain cases it is possible to get loans of more than 40% approved. In turn, this prevents you to exceed a certain limit when choosing your next home.

Larger down payment opens up more funding

Another key parameter that impacts the size of your new loan is the amount of cash you can put down at signing. The minimum down payment for cheaper homes is 5% in Canada, while properties worth more than 1 million dollars must be sold with a down payment of at least 20%. If you are able to go beyond the legal minimums, lenders will likely be more eager to approve applications for high-value homes.

Existing debts weigh down your options

Banks will take any existing obligations into account when deciding on the maximum value you can get, so it is highly advisable to have a clean slate when you are asking for a mortgage. Not only that the monthly amount you already owe will be calculated into your mortgage limit, but your credit history also plays a huge role in the decision-making process.

Should you settle for less than the maximum?

The fact that you can borrow more doesn’t imply that you absolutely have to. If you can find a property that meets your requirements and costs less than your maximum mortgage, you should probably be content to get it now and think about upgrading later. Paying back a mortgage is a heavy responsibility, and you don’t need to make it any worse by spending lavishly on a larger home than you can use.