While I can’t pick a number out of a hat, I can tell you a little bit about the “magic” that goes into determining your maximum monthly payment. OSFI and lenders are wary of the risk involved with all types of lending (including mortgages). What this means for you is that they use some very specific formulas to decide if (and how much) they will give to you, the borrower.
Two of the most important formulas(ratios) are:
Gross Debt Service (GDS): The percentage of your monthly income that is needed to pay for your monthly housing costs (mortgage payments, property taxes, heat and 50% of any condo fees)
Total Debt Service (TDS): The percentage of your monthly income that is needed to cover your housing costs (GDS), as well as any other monthly liabilities you may have (such as credit card payments, car payments, student loans, etc.).
These numbers indicate the amount of your income that goes to covering your living expenses and your debts. This is important to you as well as your lender to ensure you aren’t overspending or living beyond your means. We'll spend time getting to know you and understanding these “magic” GDS/TDS ratios inside and out so that you are able to make informed decisions about how much to borrow. We use the ratios as an indicator of the maximum mortgage payments you can carry comfortably, given your own unique personal situation.
While each lender has unique guidelines for how high your ratios may go, try my Free Calculators today for more insight into how much you could qualify for. The rule of thumb is that no more than between 35-44% of your income should go to all of your various monthly payments.
Tags: qualify, mortgage qualifying, affordability