It just got tougher for first time home buyers to qualify for a mortgage
The mortgage qualifying rate is used to qualify all variable mortgages and fixed mortgages of 1-4 year term. The Bank of Canada updates the mortgage qualifying rate (MQR) every Monday at 12:01am. 5 year fixed or longer fixed terms qualify using the contract rate (the actual borrowing rate). Here is an explanation:
Mortgage Qualifying Rate Example
- Household income: $100,000
- Assume 20% downpayment
- Freehold home, no condo fees
- 5 year fixed mortgage 3.19% amortized over 30 years
- 5 year variable mortgage at prime - 0.5% amortized over 30 years
- Mortgage qualifying rate (MQR): 4.99%
Maximum fixed mortgage: $577,000 (Purchase price: $721,250) Maximum variable mortgage: $466,000 (Purchase price: $582,500)
One way to increase the purchase power of a variable or fixed mortgage is obtain a 35 year amortized mortgage. Once the homeowner takes possession of the home, they can set the payment at the 30 year amortization level to avoid paying additional interest over the life of the mortgage.
To find out what you qualify for and a have a winning strategy for bidding wars, please contact Nawar.