IK Financial Metarials

Q&A - Top 7 Questions in One Article

IK Financial has been in the business for over 10 years, and we know how challenging and confusing mortgages might be. But don’t worry, you are not alone. We have built a team of professionals that are always available to answer all your questions.

In this article, you can find TOP 7 Mortgage Questions and Answers. If you would like to discuss your mortgage opportunities, we are inviting you to BOOK a complimentary appointment with our team.

What is a Stress test?

The Mortgage Stress Test is a set of rules mandated by the government. The test is used by mortgage lenders to assist in determining if you qualify for a mortgage and if so, how much.

For example, let’s say you are receiving a rate of 3.00% and the Bank of Canada’s benchmark rate is 5.25%. Even if you are receiving a lower rate, your lender must run the affordability calculations using the higher or the two which in this case, would be the benchmark rate of 5.25%.

What’s the maximum mortgage amount for which I can qualify?

To determine the amount for which you will qualify, there are two calculations we will need to complete.

The first is your Gross Debt Service (GDS) ratio. GDS looks at your proposed new housing costs (mortgage payments, taxes, heating costs and 50% of strata/condo fees, if applicable). Generally speaking, this amount should be no more than 35-39% of your gross monthly income. For example, if your gross monthly income is $4,000, you should not be spending more than $1,560 in monthly housing expenses.

Second, we will need to calculate your Total Debt Service (TDS) ratio. The TDS ratio measures your total debt obligations (including housing costs, loans, car payments and credit card bills). Generally speaking, your TDS ratio should be no more than 44% of your gross monthly income. Keep in mind that these numbers are prescribed maximums and that you should strive for lower ratios for a more affordable lifestyle.

Before falling in love with a potential new home, you may want to obtain a pre-approved mortgage. This will help you stay within your price range and spend your time looking at homes you can reasonably afford.

Why do we ask to provide a full documents package? Find out the mortgage process with IK Financial by following the link: What’s Next? The Mortgage Process in a Few Simple Steps.

How much money do I need for a down payment?

The minimum down payment required is 5% of the purchase price of the home up to $500,000.00 and then 10% of the amount over and above the purchase price.  In order to avoid paying mortgage default insurance, you need to have at least a 20% down payment. Larger purchases may require larger down payments.

What will a lender look at when qualifying me for a mortgage?

Most lenders look at five factors when determining whether you qualify for a mortgage:
Income, Debts, Employment History, Credit history and the Value of the Property you are looking to purchase or refinance.

One of the first things a lender will consider is how much of your total income you’ll be spending on housing. This helps the lender decide whether you can comfortably carry the debt. A lender will then look at your monthly obligations, which generally include monthly housing costs, payments on all loans, credit cards, child support, etc. A history of steady employment, usually within the same job for a few years. A short history in your current job shouldn’t prevent you from getting a mortgage, as long as there have been no gaps in income over the past two years. Good credit is also very important in qualifying for a mortgage. The lender will also want to know that the house is worth the price you plan to purchase.

Should I go with a fixed- or variable-rate mortgage?

The answer depends on your risk tolerance and future plans. Speak to our Mortgage Agents to find out the rate and product that will fit your needs.

How much will I have to pay for closing costs?

As a general rule of thumb, it’s recommended that you put aside at least 3-4% of the purchase price (in addition to the down payment) strictly to cover closing costs.

How much will my mortgage payments be?

Mortgage payments vary based on several factors, including: the size of your mortgage; whether you’re paying mortgage default insurance; mortgage amortization; interest rate; and your frequency of payments. This is something that we discuss and finalize once we have completed your application and collected the supporting documentation.

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