With new mortgage rules in place since October, 2016, housing affordability is even more of a challenge than it was, particularly in areas like Vancouver.
There are, however, actions you can take today to increase your buying power.
To begin with, let’s start with some easy math; for every $100,000 you borrow, the monthly payment is about $450.00.
Based on that, I know that if you make $85,000 a year, regardless of whether your down payment is 5% or 50%, you could potentially afford ( and qualify for ) a $600,000 mortgage. Payment on that mortgage by the way is about $2700 a month, potentially as much as you’re currently paying for rent.
I say potentially, because during the course of our conversation, you tell me about your Audi Q7, which costs you $900 a month. It’s a nice car, but that’s the equivalent of a two hundred thousand dollar reduction in your buying power.
Further on into our conversation, the one that really stings… you have $15,000 in credit card debt.
Unfortunately, that’s another $100000 from the bottom line… your maximum mortgage is now $300,000.
‘Hey, wait a minute! – That’s only fifteen grand, the payments are only $150!’, you say.
Well, that’s correct, except that when creditors are calculating debt servicing, they use a 3% payment (what it actually was back when I had black hair) and poof! The payment is $450.
So, want to increasing your home buying power by $100,000? Eliminate the $15,000 as quick as you can and poof!
( If you want to increase you buying power even further, downsize the vehicle and cut the payments in half – another $100,000 – poof! )
As always, if you have any questions, need help or would like to run through some (real) scenarios, please call or email and poof! – I’ll be there to help.