Applying for a mortgage is a technical process. There are many financial and housing market factors which affect the availability and affordability of mortgages for many people. Basically, if you want to get lowest mortgage rates in Quebec, it would be imperative for you to go through all the technical issues that affect the affordability of a mortgage, and then figure out the maximum that you can borrow.
The goal of doing this is to avoid any potential difficulties you might have, such as having to change your lifestyle dramatically owing to reduced income if most of it goes towards servicing your loans. In addition to that, it ensures that you sign up for a mortgage whose terms allow you to comfortably service it without missing payments. Some of the criteria you can use to determine how much you can afford include:
Your debt to income ratio
When assessing your legibility for mortgages, one of the tools that can be used is a debt to income ratio. This is an assessment of all the debt you currently have (minus the mortgage) against the income that you make every month. When the ratio is very high, it means that most of your income goes towards servicing other debts, which means that taking on another in the form of a mortgage will leave you with very little. This puts you in a precarious position, especially if you have a single source of income which is not particularly guaranteed to last. Most financial experts agree that the ideal debt to income ratio should be a maximum of 0.43.
The front-end ratio
The front-end ratio refers to the percentage of your income before taxes that the housing payments will take up. This means that if you have a higher income, you will have a better chance of affording a larger mortgage, or get one that has lower interest rates and a shorter repayment duration. Most lenders cap the ideal front-end ratio at a maximum of 28%. One way to make this work for you is by increasing your sources of income, such as getting a second online job that gives you consistent income without being too difficult to do.
The back-end ratio
The back-end ratio is similar to the debt ratio, only that it also includes the potential house payments and compares this with your income. Typically, this should not exceed 36% if you are to comfortably service the mortgage and meet other obligations such as car loans and student loans, while still living a comfortable life. It’s important to note that the back-end ratio and all the other ratios are not permanent, and that different lenders will have different approaches when using them to determine how much to lend you.
The way you choose to lead your lifestyle can also affect how much you can get in terms of a mortgage. For instance, if you and your family members are used to a particular type of lifestyle that you are unwilling to change, then you would need to maintain the funding for this type of lifestyle. This means that the monthly mortgage repayments should not eat into the funds set aside for maintaining the lifestyle.
These are just some of the factors that can influence the affordability of a specific mortgage, and also help you to figure out what type of mortgage you can comfortably live with. The main issue is to avoid taking on a mortgage that is far too expensive, since it means that you will be overloaded for a long time to come. Considering these factors and more is therefore wise.