Every purchase, no matter how little or large it is, will require a varying amount of time and effort to obtain it. The bigger the investment you make, the more complex the procedures to achieve it. When it comes to purchasing the property of your dreams, you will need lots of time scrutinising it plus a considerable amount of cash to pay for the investment. This is the reason behind why you need to apply for a certain mortgage amount to cover the purchase.
The road to obtaining the mortgage alone is not that easy. You will need to see what fits in your budget specifically now that it is something you should add to your expenses. You might be wondering what factors that mortgage lenders consider when it comes to the amount of mortgage you can qualify for. Here is what you need to know:
Your monthly income
One of the most obvious factors that lenders consider when it comes to knowing how much mortgage you are qualified for is your monthly income. Alongside taking your income into consideration, they will also consider the expenses you have. This is to make sure that there is still something left to you after the mortgage amount has been deducted from your monthly income.
Take for instance you are earning $30,000 a month and your expenses is estimated at around $10,000. The mortgage you want to qualify for will require you to pay $20,000 monthly. Doing the math, there is nothing left for you after the deductions. Therefore, you should not expect to qualify for a mortgage with a $20,000 monthly amortisation.
How much you can contribute to your down payment
The down payment is the amount of cash that you are going to put down in the initial stage in order to obtain a mortgage. In Canada, you will need to pay at least 5% of the total mortgage amount upon availing the loan. Add to this, you will be asked to get mortgage insurance if you are only capable of paying a down payment that is less than 20% of the mortgage amount. Once you have made the down payment, lenders will compute how much you can qualify for. Remember that the higher the down payment you make, the higher the chance you will get the amount of mortgage you are applying for since paying the down payment means lesser risks on the part of the lender.
Mortgage interest rates
Interest rates add up to the amount of your mortgage in that your premiums or monthly amortisations will be added to the total mortgage that you have divided over the term of the loan. Take for instance you want to qualify for a mortgage of $120,000 payable in a year with an interest of 12% per annum. This means that you will pay $10,000 a month for the mortgage itself and an additional of $1,000 for the interest which will sum up to a monthly payment of $11,000. With that amount, the lender will determine if you are qualified or not.
This is just an example though. Interests may depend also on the term of the loan that you are applying for. Terms may vary from a year to five years or more. In Canada, mortgage rates per annum will range between approximately 2.5% for a one-year loan and more than 10% for 10-year mortgages.
Other loans that you have at present
Lenders will always take into account any loans you have at the moment before computing the mortgage amount you are qualified for. They will also exert the effort to find out whether you have defaulted on payments of these loans before they even lend you a mortgage.
After considering all these factors, lenders will now be able to compute the mortgage amount you will be able to qualify for. Mortgage brokers can help you look for the lowest mortgage rates in Quebec to make repaying the loan easier on your part, so why not talk to one of these mortgage brokers before you approach a particular lender?