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Joe & Rose Scalabrelli Sales Representatives
Re/Max Hallmark Realty, Brokerage 6 Locations to serve you better! Tel: 416-494-7653 Email: jscalabrelli@trebnet.com Each office independently owned and operated Buying a
home - Listings
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Toronto-Properties.ca Your source for residential real estate information in the Greater Toronto Area... Mortgage Financing
We have a few mortgage brokers that we use frequently due to their excellent service & levels of experience in the business. They are:
Paula Smith of TD Canada Trust, 416-738-9656. She's an excellent mortgage specialist and comes highly recommended. Contact her for a diverse list of services, and rates.
Wayne Cull of Crescent Mortgages, 416-321-1999. He's a mortgage broker with many years of experience, and offers a wide range of services to help get you into home ownership. Contact him for more information. Pre-approved mortgage loansBefore you start looking for a home it is a good idea to equip yourself with a Pre-approved Mortgage Loan. It is an indispensable financial tool which determines in advance the maximum mortgage a financial institution will grant you. It also protects you against possible interest rate increases. Once your application has been approved, you will be guaranteed a rate of interest for a certain period of time (e.g., 60 days). If when you sign the loan agreement the current interest rate is lower than when you obtained your pre-authorization, you will automatically benefit from the lower rate of interest. There are no fees associated with applying for a Pre-Approved Mortgage Loan. We can arrange an appointment at your convenience with our mortgage department. Our experts will determine for you the maximum amount you can borrow, based on your ability to repay. How do they calculate my maximum borrowing capacity?When applying for a mortgage or a pre-approval, lenders evaluate your borrowing capacity and your ability to repay based on two calculations - the GDS and TDS ratios. These ratios are based on the ratios currently used by the Canada Mortgage & Housing Corporation for first time home buyers. GDS (Gross Debt Service) RatioThe GDS Ratio is the allowable debt sum of mortgage principal, interest, property tax, heat and 1/2 of monthly maintenance fees (if any). Your GDS ratio must not exceed 32% of your gross annual house hold income before deductions. For example: 32% of 40,000 (salary/year) = $12,800 / year, or 1,066.67 per month. Therefore, if you made 40,000 per year, and had no other debts or loans, you could afford to pay $1066.67 / month. From there, they plug that number into the current interest rate factor to determine your borrowing power. Interest rate factors can be found in any mortgage rate book, or any local financial institution. The factor for an interest rate of 6.75% amortized over 25 years is .006850496. Therefore, $1066.67 divided by .006850496 equals $155,709.15. Your total mortgage amount is $155,709.15 plus whatever down payment you have. In the past couple of years, banks have come up with ways to allow you to buy with 0% down payment. This is a good alternative for people who have no other choice, but the bottom line is this: you'll generally get a better interest rate if you can come up with 5% or more, and you'll also save on mortgage insurance costs. Contact us anytime for further information on how this works. TDS (Total Debt Service) RatioThe TDS Ratio is the allowable debt sum of mortgage principal, interest, property tax, heat AND ALL OTHER LIABILITIES such as credit loans (including car loans), credit lines, and credit cards. Your TDS must not exceed 40% of your gross annual income before deductions. For example: 40% of $40,000 (salary/year) = $16,000 per annum, or $1,333.33 / month. Take all your monthly loan payments, and subtract them from the $1,333.33 per month. What's left is how much per month you can afford to repay a mortgage. So if you only had a car payment of $200/month and no other loans, your monthly payment potential is $1133.33 / month. Calculate the rest the same as TDS. $1133.67 divided by .006850496 equals $165,489.60. Now you may be wondering why a person who makes $40k per year with a car payment can afford to borrow more money than someone who doesn't have a car payment! The truth is, you can't. You have to plug both of these ratios into your scenario, and the lower amount of your two answers is the maximum amount you can borrow. If you are confused by all this, don't fret, this isn't something you need to do on your own, it's just an FYI. It's a financial lenders job and/or realtor's job to determine what you can afford to spend, and what you are willing to spend! |
