The New Mortgage Math

mortgage mathHuffington Post recently reported on a calculation by Dominion Lending Centre’s Len Lane, who estimated that someone who earns $85,000, bought a house for $500,000 and has $350 in monthly car payments would need to up their salary by $10,000 to afford the higher interest rates expected to be coming soon.

Due to Canada’s new mortgage rules (Nov 30), insurance is costlier, rates will be higher, causing lending limits to be less.

If you were saving up for that terrific $600,000 home down the block, you may need to get a raise, or start moonlighting.

Also keep in mind that under the new mortgage rules, your Gross Debt Service (GDS) ratio – total housing costs including mortgage, property tax and heating — must not exceed 39 per cent of your gross income. Your Total Debt Service (TDS) ratio, which includes total housing costs plus any other debt payments, must not exceed 44 per cent.

Our advice?

Get a second opinion – talk with a licensed mortgage practitioner in your area, who will let you know exactly what you can afford – now and in the months ahead.