Lenders will base the amount you borrow by a “cash flow” formula. Typically, they will take the mortgage p rincipal and i nterest payments, property t axes and a factor for h eating cost ( Called PITH ) and divide this amount by your income to get a ratio. This is called the gross debt service ratio, which can normally not exceed 32%. Then the lender will perform another ratio by combining the PITH and any other credit payments that you may have, including credit cards, loans etc. This figure is then divided by your income to get a ratio called the total debt service ratio, which can normally not exceed 40%.
If you determine how much of a mortgage you can afford, you can shop for homes within your price range.
Hi Ratio Financing. -Anything less than 25% down is considered a high ratio mortgage. The funds are still lent by traditional lenders, but the mortgage must be insured either through CMHC or GE Capital. There is an insurance fee based on the amount and level of financing, however, this amount can be added to the mortgage. This insurance is merely to cover the lender in cases of default but has its’ advantages as you can now buy homes with Zero downpayment. Typically, borrowers put at least 5% down, but as the 100% financing is a relatively new program, there are only a few lenders that have this option. Please also note that, typically you will need to demonstrate that you have at least 1.5% of the purchase price to cover closing costs.
1. CMHC/GE application fee. $165 is charged to cover their application/appraisal fee. 2. Appraisal cost. If you are getting a conventional mortgage or merely want an independent appraisal, the cost will vary depending on location, size of the property etc. Typically the cost in BC is around $225. 3. Land Transfer Tax. A provincial tax is payable at closing for non first time buyers. The amount is 1% of the first $200,000 and 2% on any amount of purchase price above this. There are some conditions on the exemption so please consult your notary/lawyer to confirm if you qualify. 4. Survey/Title insurance. A survey is usually required to verify that the foundation of the property is built within the lot boundaries. A typical cost for this is around $300 but check with the seller to see if they already have one. They are normally valid for 15 years. If a survey is unavailable, most lenders will accept title insurance instead. This will cost around $200 but we recommend that you discuss this with your notary/lawyer to see which option would be most suitable for you. 5. Legal Fees. You will need a lawyer/notary to register your mortgage and transfer the title into your name. This cost will vary, but typically would be in the range of $600 to $800.
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