Mortgage Affordability In Ontario

In Ontario, just like in other places, mortgage affordability is determined by various factors. One of the most crucial aspects is your income and employment stability. Lenders want to ensure that you have a stable source of income to make your mortgage payments.

Typically, lenders follow a guideline known as the Gross Debt Service (GDS) ratio. This ratio calculates the percentage of your income that can be allocated towards housing-related costs, including mortgage payments, property taxes, heating expenses, and sometimes even condo fees. In Ontario, lenders typically look for a GDS ratio of 32% or lower.

Another important factor is the Total Debt Service (TDS) ratio. This ratio takes into account all your debts, including credit card payments, car loans, and other monthly obligations, in addition to housing costs. In Ontario, lenders usually prefer a TDS ratio of 40% or lower.

To determine your mortgage affordability, lenders will consider your credit score and history. A good credit score indicates that you have a history of paying your debts on time, which makes you a more reliable borrower. Lenders may also consider your employment history and any outstanding loans you might have.

The size of the down payment is another crucial factor. In Ontario, the minimum down payment required is generally 5% of the purchase price of the home. However, if your down payment is less than 20%, you'll need to obtain mortgage insurance from the Canada Mortgage and Housing Corporation (CMHC) or other approved mortgage insurers.

Interest rates play a significant role in determining mortgage affordability too. The interest rate affects your monthly mortgage payment. Higher interest rates mean higher monthly payments, and vice versa. It's important to keep an eye on the prevailing interest rates when considering buying a home.

Finally, the price of the home you wish to buy is a key factor. The more expensive the house, the larger the mortgage amount may be required. It's important to consider your budget and ensure that you're comfortable with the monthly mortgage payments based on your income and other financial commitments.

David Bui

Mortgage Broker

[email protected]

647-234-3867

Loyalmortgage.ca

Mortgage Central Nationwide #12785