With the Spring Market fast approaching I thought I would put together a list of questions that I get asked most often:
1. What’s the best rate I can get?
Your credit score plays a big part in the interest rate for which you will qualify, as the riskier you appear as a borrower, the higher your rate will be. Rate is definitely not the most important aspect of a mortgage, however, as many rock-bottom rates often come from no frills mortgage products. In other words, even if you qualify for the lowest rate, you often have to give up other things such as prepayments and porting privileges when opting for the lowest-rate product.
2. What’s the maximum mortgage amount for which I can qualify?
To determine the amount for which you will qualify, there are two calculations you’ll need to complete. The first is your Gross Debt Service (GDS) ratio. GDS looks at your proposed new housing costs (mortgage payments, taxes, heating costs and 50% of condo fees, if applicable). Generally speaking, this amount should be no more than 35% of your gross monthly income. For example, if your gross monthly income is $4,000, you should not be spending more than $1,400 in monthly housing expenses. Second, you will need to calculate your Total Debt Service (TDS) ratio. The TDS ratio measures your total debt obligations (including housing costs, loans, car payments and credit card bills). Generally speaking, your TDS ratio should be no more than 42% of your gross monthly income. Keep in mind that these numbers are prescribed maximums and that you should strive for lower ratios for a more affordable lifestyle. Before falling in love with a potential new home, you may want to obtain a pre-approved mortgage. This will help you stay within your price range and spend your time looking at homes you can reasonably afford.
3. How much money do I need for a down payment?
If you are thinking of investing in Real Estate any time soon, use this checklist to make sure you are well prepared and most likely to succeed in your Real Estate Endeavours:
☑️ 1. Your Acquisition and Exit Strategies
Why do you really want to invest in Real Estate? What are your short and long term investment goals? Are you planning on buying only one property? Maybe you are considering several different areas? Do you want to finance one property or 5, and over what period of time? You’ll need to have a good idea of your goals before seeking financing. A good team of qualified professionals will be able guide you in drafting your acquisition and exit strategies.
As you know, your variable rate mortgage, line of credit and/or student loans are all based on the Prime Rate and here is your personal update from me on the recent Bank of Canada announcement on changes to their Overnight Rate which in most cases impacts your Prime Rate.
At 10:00 am EST, Wednesday March 4th, 2015 the Bank of Canada maintained their overnight rate which in essence means no change to the interest rate on your variable rate mortgage, line of credit and/or student loans. Of course don’t forget that at the last announcement they did drop their rate by 0.25% BUT the drop on your interest rate was only 0.15%. This is still good news for the amount of interest that you will pay, but we also have to recognize that it is a reflection of the ailing economy.
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