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Montreal Mortgages: How Much House Can You Afford
How much house you can afford depends on many things. Montreal mortgages vary greatly and the type you get will affect your home choice. But, if you´re a first-time homebuyer, the excitement of looking for your first home overshadows any talk of mortgages.
Montreal Mortgages: Why You Should Not Look at Houses First When You are Ready to Buy
When you´re shopping for a house in Montreal, the first thing you should do is familiarize yourself with the various types of Montreal mortgages. Why?
Because you may not be able to afford the house you fell in love with if you go looking for the house first. Montreal mortgages run the gamut - open mortgages, closed mortgages, variable-rate mortgages, etc.
So, you need to know how much you can afford before so you can stay within your price range when shopping for Montreal mortgages. This way, you don´t waste anyone´s time, eg, the real estate agent, the mortgage broker and perhaps most importantly -- your time.
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Montreal Mortgages: The First Step in Determining How Much You Can Afford
The first thing a mortgage broker is going to assess before they shop your application to the Montreal mortgages market is your debt to income ratio. What is this?
This is simply an assessment of the percentage of debt you have compared to your income. This is the quickest way for mortgage brokers to determine if it´s worth it to shop your application to the Montreal mortgages market.
If your ratio is too high, you won´t be approved for a mortgage. How high is too high? Most Montreal mortgages are granted when the debt-to-income ratio is 36% or lower.
Montreal Mortgages: How to Calculate Your Debt-to-Income Ratio
Figuring out your debt-to-income ratio is pretty straightforward when applying for Montreal mortgages. Here´s an example:
Multiply monthly gross income (of all applicants) by .36 percent.
E.g.: let´s say your monthly gross income is $5,000.
(Monthly Gross Income) x .36 (Ideal Debt-to-Income Ratio) = $1,800
Subtract Monthly Debt Obligations:
Let´s supposed that your monthly debt obligations come to $567/month. So, you would subtract $567 from $1,800.
$1,800 (Amount left to pay debts) - $567 (monthly debt obligations, excluding mortgage) = $1,233
The number just above ($1,233) is your maximum allowable mortgage payment.
Important note about "extras" when applying for Montreal mortgages: When figuring your maximum monthly allowable mortgage payment, include all taxes and insurance besides just your mortgage payment (:e.g., private mortgage insurance, property taxes, homeowners insurance, etc.). These alone can add up to a few hundred dollars.
Some Montreal mortgages experts advise you to calculate 15-20% for these extra monthly mortgage expenses to be on the safe side.
Mortgage interest rates are subject to change without notice. We attempt to maintain accuracy on our website, however, mortgage information on this website should be used only as a guideline. Please consult a mortgage professional before taking any action.